2001/637/EC: Commission Decision of 18 October 2000 on State aid which the Netherlands is planning to grant to Océ NV for the development of colour ink-jet printers (Text with EEA relevance) (notified under document number C(2000) 3016)
Date: 2000-10-18
Institutions: European Commission
Subjects: Netherlands, State aid, aid to undertakings, control of State aid, printer, research and development

L 223/10

EN

Official Journal of the European Communities

18.8.2001

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 18 October 2000

on State aid which the Netherlands is planning to grant to Océ NV for the development of colour
ink-jet printers

(notified under document number C(2000) 3016)

(Only the Dutch text is authentic)

(Text with EEA relevance)

(2001/637/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 61(1)(a) thereof,

Having called on interested parties to submit their comments,
pursuant to the provisions cited above (1),

Whereas:

I. PROCEDURE

(1)

(2)

(3)

By letter dated 18 December 1996, the Netherlands
notified the Commission of planned aid of EUR 22,7
million to be granted to the company Océ NV for the
development of colour ink-jet printers and associated
technologies (Cobalt). The Netherlands provided the
Commission with further information by letters dated
28 May, 16 September and 22 December 1997, and
during a meeting in Brussels on 10 February 1998.

By letter dated 12 May 1998, the Commission informed
the Netherlands that it had decided to initiate the pro-
cedure laid down in Article 88(2) of the EC Treaty in
respect of the aid.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (2). The Commission called on interested parties to
submit their comments. The Commission received no
comments from interested parties.

(1) OJ C 270, 29.8.1998, p. 2.
(2) See footnote 1.

By letter dated 24 July 1998, the Netherlands responded
to the initiation of the formal investigation procedure
and answered further questions which the Commission
had put on 7 July 1998. On its own initiative, the
Netherlands provided further information in the form of
an expert evaluation report (hereinafter referred to as the
‘second opinion’) on 11 November 1998. Further infor-
mation was sent by letter dated 25 March 1999,
following another meeting with Commission officials on
3 March 1999. By letter dated 6 July 1999, the Nether-
lands sent information which had been presented to
Commission officials during a visit to the R & D prem-
ises of Océ NV on 25 June 1999. Some further docu-
ments were provided on 19 July 1999. At a meeting
held on 29 September 1999, the Netherlands promised
further information, which was sent by letters dated 27
October 1999, 12 November 1999 and, following a
further Commission request on 29 November 1999, by
letter dated 20 December 1999. Confirmation of the
eligible costs was sent by fax on 19 July 2000.

II. DESCRIPTION OF THE AID

(5)

The aid is to be granted by the Dutch Ministry of
Economic Affairs as new individual research and devel-
opment
(R & D) aid for the development of colour
ink-jet printers and associated technologies (Cobalt) to
the company Océ NV, located in Venlo. The proposed
direct grant amounts to EUR 22,7 million (NLG 50
million) for a project which, when notified, was to cover
the period 1997 to 2001 and claimed eligible costs of
EUR 93,6 million.

18.8.2001

EN

Official Journal of the European Communities

L 223/11

The recipient company

face and printhead transport with fast and high precision
carriage movements and reliable ink supply.

(6)

(7)

(8)

(9)

The recipient company Océ NV (hereinafter referred to
as ‘Océ’) is the holding company of the international
Océ Group, which is active in 80 countries. The Group
had an annual turnover of EUR 2,5 and EUR 2,7 billion
in the years 1997 and 1998 respectively (3). It has been
fast-growing in recent years and operates profitably. The
Group employs some 17 000 people. Océ's product
range includes a sophisticated range of copiers and
printers for office and specialised uses, plotter systems,
as well as the corresponding consumables and imaging
supplies,
such as paper and toners. Océ develops,
produces and markets many of its products itself.

Océ's R & D investments have consistently represented
around 6 % of its turnover over the last 10 years. Total
R & D expenditure reached EUR 155 million in 1998,
after strong annual increases since 1996, while spending
stayed constant at around EUR 84 million annually over
the years 1990 to 1995. Océ has 1 500 persons
working in its R & D centres
in the Netherlands,
Germany, France and the United States, most of them
being employed in Venlo within the central operating
company, Océ-Technologies BV.

(10)

(EUR 0,4 million) Front-end issues refer chiefly to devel-
oping a high-speed colour raster processor, a print
strategy to hide tolerances and nozzle failures, and the
colour management.

terms under point 5.9 of

In the original notification, costs in each category were
said to be equally split between the two phases ‘indus-
trial research’ and ‘pre-competitive development activity’
according to the
the
Community framework for State aid for research and
development (the R & D framework) (4). For each of the
five subheadings and for each of the two phases, the
Netherlands presented a short list of activities to be
carried out. By letter dated 28 May 1997, the Nether-
lands amended the breakdown of costs, with EUR 37,2
million qualifying as ‘industrial research’ and EUR 33,1
million as ‘pre-competitive development activity’, and
the five
figures
provided overall cost
subheadings.

for each of

The R & D project

(11) A further eligible cost of EUR 22,7 million was claimed
for the purchase of patents and licences. These were
classified as ‘industrial research’.

The project to be aided concerns the development of
new wide-format colour printers on the basis of piezo
ink-jet
technology using hot-melt polymer inks. The
Netherlands described this new combination of special
inks and specific printheads as a ‘new technology plat-
form’. The specific components to be developed and
their development objectives and envisaged eligible costs
(in brackets) were summarised under the following five
subheadings.

(EUR 15,6 million) Piezo printhead with [...] (*) nozzles,
an integration density of [...] (*) nozzles per inch, high
jetting frequency of [...] (*) kHz, being long-term non-
corrosive at the high operating temperature of 130 °C.
Further objectives relate to short warm-up periods,
clean-keeping, thermal control and ink-handling.

(EUR 31,3 million) Printhead production technology,
the ‘microelectromechanical’ technology.

(EUR 9,7 million) Hot-melt polymer colour inks with
toner-like properties for use on a range of reception
media and controlled viscosity characteristics at
the
operating temperature of 130 °C.

(EUR 13,4 million)
Integration of printer engine and
process, comprising paper-handling, design, user inter-

(12)

(13)

In the original notification, further EUR 9,1 million in
eligible costs were specified for a new building with
laboratories. However, by letter dated 16 September
1997, the Netherlands amended its plans and estimated
the costs of using the building for the project's duration.
Eligible costs for the building were thus scaled back to
EUR 0,6 million.

The sum of these costs is EUR 93,6 million. Expressed
as personnel cost-equivalents,
the original amount,
according to the Netherlands, equals the cost of 1 000
man-years of R & D work, i.e. 200 researchers working
for five years. The proposed aid of EUR 22,7 million
corresponds to an overall aid intensity of 24 % of the
claimed eligible costs.

(14) At the meeting held on 29 September 1999, however,
the Dutch authorities stated that
the Cobalt project
would, because of technical difficulties, cover a longer
period than originally planned and that the costs would
be significantly greater than originally notified. The new
forecast was that the duration would extend to 2003
and that the costs would rise to NLG 209,625 million
(EUR 95,1 million), excluding the cost of purchasing
patents and licences. The proposed aid of EUR 22,7
million would therefore correspond to an aid intensity
of 24 % of the eligible costs indicated.

(3) See under ‘total revenues’
information.
(*) Confidential

in the 1998 annual report of Océ.

(4) OJ C 45, 17.2.1996, p. 6.

L 223/12

EN

Official Journal of the European Communities

18.8.2001

The product markets of the R & D outcome

colour) printing technology in the display graphics
market.

(or

(15) According to the Netherlands, there are two markets for
which the wide format (A0) printers are developed: (1)
the ‘engineering systems’ market, geared mostly towards
printing computer-aided designs (CAD), and (2)
the
‘display graphics’
‘graphic arts’) market, geared
towards printing colour posters, banners and billboards
on various materials, mainly for advertising purposes in
shops, exhibitions, or on the roadside. Both markets
demand printers that are also economical
for small
numbers of prints (short runs). In both markets, digitisa-
tion and colour are growth-determining factors. One
third of Océ's current revenues stem from these two
businesses.

(16)

Engineering systems: According to its 1998 annual
report, Océ has a leading market position in engineering
systems worldwide (printing and copying). In 1998, the
Netherlands stated that Océ's market share was 22 % in
Europe and in the United States, the two most important
markets (5). Its largest competitor, Hewlett Packard, held
a 21 % market-share, while Xerox had 9 %. Growth in
the engineering systems market overall
is fairly flat,
except in the digital segment.

(17) Display graphics: Océ treats this market as a subcategory
of the engineering systems market. Océ holds only ‘a
few percent’ in this market. In the fast-growing display
graphics market, Océ is currently trying to build up a
market position. Its 1998 annual report states that with
its new ink-jet technology Océ is seeking to achieve a
leading position in the high-volume segment of this
market.

Grounds for initiating the procedure under Article
88(2) of the EC Treaty

(18)

The Commission noted that the final printer markets
and the markets for the subcomponents printheads and
inks are highly competitive international markets.
It
there are ongoing R & D and
further observed that
production activities of
suppliers by
competitors in Europe, such as Modular Ink Technology,
Xennia Technology Ltd, Xaar plc, Mutoh Europe NV and
Epson Europe BV.

subcomponent

(19) As regards the type of R & D in the project,

the
Commission doubted that the project could be described
as being ‘industrial research’ and ‘pre-competitive devel-
opment’ activity within the meaning of the R & D frame-
work. This was due to the following reasons.

(20)

The Commission noted that Océ NV had in 1994
received EUR 3,2 million in State aid (aid intensity
31 %; under a Commission approved scheme (6)) for a
similar ink-jet project covering the period 1994 to
1996. The R & D work thus carried out seemed to
issues as described in the
address the same general
present aid proposal and resulted in 20 patents on print-
heads and inks. It also led to a complete ‘test assembly’
(mechanical, electronic and digital parts)
for a wide-
format colour printer in a laboratory environment. In
this regard, the Commission noted that, according to
Annex I
‘pre-
competitive development’ activity excludes the creation
of an initial prototype which can be used commercially,
and excludes demonstration and pilot projects that can
be converted or used for industrial applications or
commercial exploitation. The Commission doubted that
the 1996 test assembly would not already constitute
such a prototype.

to the Community R & D framework,

(21)

The Commission also noted that eligible costs presented
covered 85 % of the total R & D costs, leaving only 15 %
development costs for the phase of preparing series
production and commercialisation of a final product.

(22) Moreover, the Commission could not rule out the pos-
sibility that the new aid proposal corresponded to a
product-development work programme aiming at devel-
oping existing prototypes to maturity and readying them
for series production. In addition, the cost elements of
the project had not been sufficiently justified as R & D
costs eligible for public financing in accordance with
Annex II to the Community R & D framework. In par-
ticular, costs of EUR 22,7 million for the acquisition of
patents and licences raised doubts as to their classi-
fication as ‘industrial research’.

Moreover, the Commission noted that there would be
potentially distortive competition effects with regard to
the secondary markets for printer and imaging supplies
because ink-jet piezo technology is substitutable for
(black) and electrostatic (black and
existing thermal

(23)

Finally, the Commission noted that the project was said
to be dependent on the construction of a 7 650 m2
R & D facility in Venlo with 4 000 m2
to be fully
assigned to the
ink-jet project. The Commission
expressed doubts whether parts of the new facilities
would not already be used for series production of piezo
printhead arrays.

(5) Océ's 1997 annual

report

stated market

shares of over 35 %

(6) PBTS scheme: Programmatische Bedrĳfsgerichte Technologiestimule-

worldwide and 25 % in Europe.

ring (business-oriented technology-stimulation scheme).

18.8.2001

EN

Official Journal of the European Communities

L 223/13

(24) As regards the ‘incentive effect’ of

the project,

the
Commission expressed doubts that the aid would induce
Océ to carry out R & D it would not have anyhow
carried out without the aid. It seemed that in the face of
strong competition the company had adopted the busi-
ness strategy of developing its own ink-jet printheads
and inks. The company,
seemed to be
committed to pursuing the R & D efforts under set
commercial
imperatives and had already begun the
construction of new facilities for the project without the
guarantee of receiving State aid.

therefore,

III. COMMENTS FROM THE NETHERLANDS

(25)

The Netherlands responded by letter dated 24 July 1998
to the initiation of proceedings and to questions the
Commission had asked by letter dated 7 July 1998.
These comments are summarised below. Complemen-
tary information contained in subsequent letters and the
second opinion are specifically indicated.

The activities of other companies with the same
technology

(26)

The R & D and production activities of other companies
it was
described in the Commission decision were,
argued, different from the activities of Océ. Modular Ink
Technology, Xaar plc and Seiko Epson were developing
piezo printheads for liquid inks (solvent and water
based), which, in general, were not suited to combining
the attributes of high-speed and high-quality wide-
format printing on normal paper. The new ink-type was
a determining factor in the entire research.

for

(27) Mutoh (Japan) sold similar printers on the basis of a
licence from Tektronix (USA)
the graphic arts
market. These printers were, however, much slower than
the ones to be developed by Océ, had inferior (i.e. waxy,
not polymer-ink) print quality and were mainly aimed at
the low-volume market. The Belgian subsidiary Mutoh
Europe NV was only an assembly plant
for parts
produced in Japan and thus created little added value in
Europe.

The secondary markets for printers and imaging
supplies

(29) No distortion of competition could occur in these wider
markets because the thermal and electrostatic print tech-
nologies would not be substitutes for the new Océ tech-
nology. This would be so because: (1) colour printing
constituted a completely different product and market
combination than black printing; (2) the display graphics
market uses special paper, while Océ's technology will
use normal paper;
(3) electrostatic printing was, at
present, faster than hot-melt printing for large formats;
(4) thermal-transfer technology is hardly ever used for
large formats.

The type of R & D in the project

(30)

(31)

The Netherlands argued that a comprehensive descrip-
tion of the project and of the terms ‘industrial research’
and ‘pre-competitive development’ was contained in the
original notification and the subsequent correspondence.
The Dutch Government would, in addition, commission
a study so as to allow an independent expert to establish
the R & D project's distance from the market.

In this second opinion,
the author states in general
terms that the project plan would establish which activ-
ities are ‘industrial research’ and which ‘pre-competitive
development’. He states that,
in times of ‘concurrent
engineering’
(all R & D objectives are pursued at the
same time and with a clear market/product orientation),
the borderline between the two terms became somewhat
blurred. However, in his opinion, the facts in the noti-
fication were described as correctly as possible, and the
transition between the two phases would be adequately
stated in the project plan. Moreover, market and product
orientation of R & D should not be misread as prepara-
tion of production.

(32)

later, and in particular during a
The Netherlands
company visit by Commission officials, provided further
explanations and documentation regarding the R & D
nature of the project,
including the demonstration of
several development steps in the research facilities.

(28)

The author of the second opinion considers that there is
no significant ink-jet R & D contribution in Europe and
that production in this field is based mainly on R & D
carried out in the United States and Japan. He considers
the technology to be developed by Océ to be novel,
ground-breaking and of a more generic nature than
other printing technologies.

(33) As regards the low portion of non-eligible R & D costs
remaining after finalisation of the current R & D project,
the Netherlands confirmed that these costs would, as
stated by the Commission, amount
to EUR 15,9
million. They would be part of further non-eligible costs
of EUR 99,8 million required to put the product on the
market.

L 223/14

EN

Official Journal of the European Communities

18.8.2001

Earlier research funding until 1996 (7)

(34) Océ had benefited from public funding in the develop-
ment of piezo ink-jet technologies since 1987. Up to
1996, total aid of EUR 4,2 million was granted for three
projects
PBTS
scheme (8). All of this R & D had to be regarded as a
feasibility study for the current project.

Commission-approved

under

the

(35) Océ had never made an initial laboratory prototype of a
wide-format ink-jet colour printer using hot-melt ink
and piezo printheads. The device at the end of the
PBTS-financed feasibility project had only a 4 × 24
nozzle array and no paper management. At the end of
1997,
ink-jet arrays with 75 nozzles per inch (three
nozzles per millimetre) were made, and the first arrays
of 96 nozzles per inch (four nozzles per millimetre)
were produced at the beginning of 1998. The target was
to produce a 2 × 128 nozzle (five nozzles per millimetre
array) by the end of 1998.

(36)

The author of the second opinion worries that terms
such as ‘prototype’ were not well defined, especially in a
high-tech context, and therefore led to misinterpreta-
tions. In his view, what he read in the project descrip-
tion and what he was shown during his company visit
could not be described as a prototype in the normal
sense of the term.

(39) With regard to the purchase of patents or licences,
details on the intended acquisitions and costs were
included in an annex. During the company visit by
Commission staff on 25 June 1999, the Netherlands
stated that the patents were necessary in order to ensure
that Océ would eventually be able to make commercial
use of its R & D results. They were not needed for the
technical advancement of the R & D project. The author
of the second opinion had earlier come to the same
findings.

Incentive effect

(40) Océ began systematic research into ink-jet technologies
in 1986. Prior to this date only incidental projects on
ink-jet inks were carried out. At the beginning of the
research period, efforts focused mainly on ink formula-
tion for piezoelectric and thermal
ink jets, although
some work was also done on continuous ink-jet tech-
nology.

(41) Additionality of costs was particularly difficult to prove
for R & D projects undertaken by large companies. Océ's
level of research had increased due to the Cobalt project,
measured in increased R & D investments and higher
the
number of
proposed aid would accelerate and intensify the research.
In their letter dated 25 March 1999, the Netherlands
pointed out that due to uncertainty about the granting
of the aid, the number of man-years actually deployed in
the period 1997 to 1999 would be only 270, instead of
the anticipated 475.

researchers employed. Furthermore,

Eligibility and the breakdown of costs

(42)

(37) As regards the breakdown of costs per year, the Nether-
lands at first considered as sufficient the details provided
in an annex to the original notification, in which costs
were calculated as an integral tariff per R & D man-year.
However, following a request by the Commission, the
Netherlands provided, by letters dated 27 October
1999,12 November 1999 and 20 December 1999 add-
itional cost-accounting data and in particular a declara-
tion from an independent accountant. The accountant
certified on the basis of his analysis of real expenditure
for the years 1997 and 1998 that the claimed eligible
costs had been incurred for the Cobalt project and that
the project's cost-accounting was functioning accurately.

The author of the second opinion writes that the rele-
vant sector of microsystems technology is characterised
by continuous
innovation, with rapid performance
increases in products. In his view, every market partici-
pant is forced to undertake major R & D efforts to stay
in the market.

(43) As regards risks, the author of the second opinion holds
that the Cobalt project,
if successful, would mean a
‘quantum leap’ in printing technology, but the project
also involved extremely high risks of failure due to its
technical complexity.

IV. ASSESSMENT OF THE AID

(38)

indeed needed for

The Netherlands revised the costs for the building. The
new laboratory was
the Cobalt
project, but only the temporary use of the building
would be eligible for assistance. There would be no
plans for industrial scale printer production in the new
laboratory and such production would not even be
possible.

(7) A detailed description of

earlier R & D is

included in the

‘assessment’ part of this Decision.

(8) See footnote 6.

Aid within the meaning of Article 87(1) of the EC
Treaty

(44) Article 87(1) of the EC Treaty lays down that, except
where otherwise provided,
aid which distorts or
threatens to distort competition by favouring certain
undertakings or the production of certain goods is, in so
far as it affects trade among Member States, incompat-
ible with the common market.

18.8.2001

EN

Official Journal of the European Communities

L 223/15

(45)

The proposed grant of EUR 22,7 million constitutes aid
within the meaning of Article 87(1) of the EC Treaty as
it would allow the undertaking Océ NV to be relieved,
by means of State resources, of part of costs which it
would normally have to bear itself.

as

regarded

it must

(46) Where financial aid from the State strengthens the posi-
tion of an enterprise in relation to its competitors in the
Community,
affecting
be
competition. Competitors are companies that compete
on the same product markets. Such markets are deter-
mined by demand substitutability of the products (9). In
the case of R & D, the main markets to be examined are
those for the products that are the result of the R & D
and possibly the market for R & D activities itself. The
direct product markets for the result of Océ's R & D will
be CAD printers and the display graphics market. As
there are smaller European competitors on the printer
market and the market
the aid
proposed by the Netherlands for Océ is deemed to
distort competition within the meaning of Article 87(1)
of the EC Treaty.

for R & D activities,

pean interest, does not apply, and the Netherlands has
not attempted to justify its applicability.

(50)

This leaves the exemption set out in Article 87(3)(c) of
the EC Treaty for aid to facilitate the development of
certain economic activities, where such aid does not
adversely affect trading conditions to an extent contrary
to the common interest. Under this Treaty provision, the
Commission has adopted the R & D framework, which
guides its assessment of R & D aids.

(51) When examining whether Article 87(3)(c) of the EC
Treaty is applicable, the Commission, in accordance with
point 3.6 of
the R & D framework, will pay special
attention to the type of research carried out, the aid
beneficiaries, the aid intensity and the accessibility of the
results.

(47) As there is intense trade between Member States in
printers, as well as subcomponents and input materials
and secondary supplies, the Commission considers trade
to be affected by the aid for Océ.

Assessment of the type of research

Exemptions for R & D aid under Article 87(3)(c) of
the EC Treaty

(52) According to point 2.2 of the Community R & D frame-
work, the closer the R & D to the market, the more
significant may be the distortive effect of the State aid
on competition and trade. In order to determine the
closeness to the market of the aided R & D, the Commis-
sion's assessment is guided by a distinction between
‘industrial research’ and ‘pre-
‘fundamental research’,
competitive development activity’.

(48) Article 87(2) and (3) of the EC Treaty contains a number
of exemptions from the principle of incompatibility with
the common market.

(53)

(49) As the proposed aid for Océ is R & D aid,

it is not
covered by the exemptions in Article 87(2). In particular,
the proposed aid is neither (a) aid having a social char-
acter and granted to individual consumers, nor (b) aid to
make good the damage caused by natural disasters or
exceptional occurrences, nor (c) aid granted to the
economy of certain areas of the Federal Republic of
Germany. Furthermore, the aid is not granted in a region
eligible for regional aid under the exemption set out in
Articles 87(3)(a) or (c). Finally, the exemption set out in
Article 87(3)(b), referring to projects of common Euro-

‘Industrial

The Netherlands proposed to grant aid to Océ for the
two phases ‘industrial research’ and ‘pre-competitive
development activity’. Annex I to the Community R & D
framework defines both terms.
research’
means planned research or critical investigation aimed at
the acquisition of new knowledge, the objective being
that such knowledge may be useful in developing new
products, processes or services or in bringing about a
significant improvement in existing products, processes
or services. By ‘pre-competitive development activity’ is
meant the shaping of the results of industrial research
into a plan, arrangement or design for new, altered or
improved products, processes or services, including the
creation of an initial prototype which could not be used
commercially.

(9) As Article 87(1) of the EC Treaty also stipulates ‘potential’ distor-
tion of competition, potential competitors also have to be consi-
dered, which means that the analysis must include the concept of
supply substitutability,
i.e. the ability of other companies to easily
produce (switch to) the product in question. As in the present case
there is in fact actual competition, supply substitutability need not
be examined in detail

in this Decision.

(54) As Annex I clarifies, these definitions are indicative and
are merely designed to help the Member State to formu-
late its notification. The Commission, in its letter to the
Netherlands of 12 May 1998, explicitly recalled that it is
up to the Netherlands to demonstrate that the project to
be aided falls within those definitions.

L 223/16

EN

Official Journal of the European Communities

18.8.2001

(55)

The Netherlands has presented the R & D project under
the five subheadings: (1) piezo printhead; (2) printhead-
production technology; (3) hot-melt inks; (4) integration
of printer design and process; and (5) front-end issues.
For each of these subheadings, the two research phases
‘industrial research’ and ‘pre-competitive development
activity’ were explained by a list of activities. Costs were
specified only per subheading and research phase.

(56) When initiating the formal investigation procedure, the
Commission expressed serious doubts as regards the
Dutch classification in research phases. The Commission
noted that the descriptions of the activities under the
subheadings were not self-explanatory in respect to the
In
terms used in the Community R & D framework.
particular,
‘pre-
competitive development activity’ resembled product-
development activities in the phase of preparing series
production. Examples of items mentioned are: devel-
oping a production cost accounting system; developing
dustproof packaging for inks; regular monitoring of the
print quality and reliability and of working areas; setting-
up of a standard for colour reproduction; and establish-
ment of interface with scanner.

the descriptions of activities under

(57)

The author of the second opinion submitted on 11
November 1998, an expert in the field of microsystems
technology, states that after having seen the project plan
and visited the company he considers the distinction
between ‘industrial research’ and ‘pre-competitive devel-
opment activity’ to have been stated as correctly as
possible in the project plan. The Commission notes that
he provides no definition of the terms used, nor any
specific reference to the use of
in the
Community R & D framework. Furthermore, he writes
that he is not aware of ongoing research in other
companies and relied for judging the state of the art
mostly on the information provided by Océ. He did not
have an overview of the situation of patents in the field.
Finally, he states that,
in the case of ‘concurrent en-
gineering’ (all R & D objectives are pursued at the same
time and with a clear market/product orientation), the
borderline between the two terms becomes somewhat
blurred.

the terms

(58)

The Commission considers the statements of this second
opinion not sufficient to alleviate the doubts it had
issued in the initiation of the formal investigation pro-
In particular, the Commission cannot deduce
cedure.
sufficient evidence from the report
to establish the
distinction between the two research phases ‘industrial
research’ and ‘pre-competitive development activity’
in
the project plan.

(59) As the Netherlands did not clearly establish the type of
R & D to be carried out or the closeness to the market,
the Commission has examined the particular context of
Océ's R & D project. Three crucial factors were evaluated
and will be summarised in turn: (1) earlier R & D carried

out by the company in the field, so as to pinpoint the
beginning of the Cobalt project; (2) the proposed cost
structure of the project, so as to examine the final stages
of the R & D; (3) the technology state of the art, so as to
put Océ's effort into perspective with the general R & D
and product trends in the sector.

Assessment of Océ's earlier R & D in the field

(60) According to the Netherlands, Océ began systematic
technologies in 1986. As from
research into ink-jet
1987, Océ benefited from State aid for the development
of piezo ink-jet technologies, receiving EUR 4,2 million
in subsidies up to 1996. The following is a more
detailed description, as provided by the Netherlands.

(61)

(62)

(63)

In 1987, a subsidy of EUR 0,1 million was paid for a
project entitled ‘Piezoelectric materials for use in ink-jet
multi-nozzle arrays’. The project established specifica-
tions of a piezoelectric material for use in ink-jet arrays
of 16 nozzles per millimetre.

In 1991, a subsidy of EUR 0,9 million was given under
the PBTS scheme for a project entitled ‘New ink-jet
technologies
for colour copying and printing’. The
project focused on the development of a high-density
multi-nozzle array, interactions between the array and
inks, and the development of hot-melt inks and water-
latex inks.

In 1994, a subsidy of EUR 3,2 million was granted for a
project covering the period 1994 to 1996, entitled ‘Ink
jet’, aimed at developing piezo ink-jet technology for use
with hot-melt inks at a temperature of about 120 °C.
The project included finalising work on ink-jet array
designs from a number of variants and test arrays built
to study their jetting behaviour.

(within the

ink channels

Work was carried out on techniques for the production
array) using micro-
of
machining, photolithography and etching processes, and
electro-forming. Joining technologies were developed to
bind piezoelectric materials to one another as well as to
substrates.

Work was carried out on the saw-cutting and casting of
piezo materials, and a definitive selection made of the
piezoelectric material from a preliminary study. Inter-
connections between the piezo elements and the control
electronics were studied and a connection technology
chosen. In 1996, the production of broad test arrays
(with 2 × 128 nozzles) was carried out on a limited
scale.

Work was carried out on the array materials including
permanency of the piezo materials, chemical corrosion
by the ink, and gluing and soldering processes.

18.8.2001

EN

Official Journal of the European Communities

L 223/17

Work was carried out on hot-melt inks including the
development of an ink formulation, interaction of inks
with the printhead, and print and colour quality. New
directions for development of hot-melt inks were identi-
fied.

activities could qualify as ‘industrial research’ within the
meaning of the Community R & D framework.

(69)

The Commission concludes that
the Cobalt project
reaches beyond the achievements of the earlier projects.

(64)

(65)

(66)

(67)

Work was carried out on removing air from the ink
channels in the printhead and ink system. The ink
supply to the array and the heating of the entire print-
head was tested. A total test assembly was built which
could be used to print from a roll over A0 (36-inch)
width. This was full colour printing using four small
arrays.

The Commission notes that by 1996, with public sub-
sidies, the company had developed and integrated key
technologies and printer subcomponents into a labora-
tory printer model. However, the Netherlands specified
that Océ had never made an initial laboratory prototype
of a wide-format ink-jet colour printer using hot-melt
ink and piezo printheads. The device at the end of the
PBTS-financed feasibility project had only a 4 × 24
nozzle array and no paper management.

In assessing the achievements of the earlier project until
1996 as compared with the descriptions provided for
the Cobalt project, the Commission gathered informa-
tion about the situation at the start of the project, so as
to be able to evaluate the additional R & D challenges of
the Cobalt project.

The Netherlands stated that, at the end of 1997, Océ
made ink-jet arrays with 75 nozzles per inch (three
nozzles per millimetre), and the first arrays of 96
nozzles per inch (four nozzles per millimetre) were
produced at the beginning of 1998. On the other hand,
in the Cobalt project was to produce a
the target
2 × 128 nozzle (five nozzles per millimetre array) by the
end of 1998.

(70)

(71)

(72)

(73)

lay,

first,

From the elements provided by the Netherlands, after
comparing the technical features of the projects, the
Commission concluded that the main additional techno-
logical challenges of the Cobalt project over and above
in the complications
the earlier projects
involved in producing higher nozzle densities and in
controlling the cross-talk this engendered between the
nozzles. The second challenge lay in controlling corro-
siveness of materials when subjected to polymer inks at
130 °C. The third challenge was the fact that the tech-
nology must be suitable for application on normal
paper. The fourth challenge lay in cost-effective produc-
tion technology.

(68)

The company visit by Commission officials helped to
confirm the above information on the advancements of
the project and the technological challenges. However, it
did not lead to the conclusion that any of the R & D

Assessment of the cost structure of the overall
project

Considering Océ's earlier R & D results in the field of
wide-format colour piezo ink-jet hot-melt printers, the
Commission proceeds to assess the cost structure of the
Cobalt project in order to pinpoint the phase for which
costs are claimed eligible in the overall product develop-
ment.

In the original notification of 18 December 1996, the
Netherlands stated that
the remaining final product-
development activities would start from the laboratory
models and prototypes and would lead to the definitive
design of
including tooling and other
production means. This phase would cost approximately
EUR 15,9 million.

the printer,

response of 28 May 1997,

The Commission asked for justification why some 80 %
of the total costs were considered eligible for R & D. In
the Netherlands
its
announced new total project costs for the period until
the product was launched on the market. These costs
amounted to EUR 202 million instead of EUR 118
million envisaged in the original scope of the project.
These additional non-eligible costs included investments
in production, marketing and service. The Netherlands
later confirmed these sums: only 15 % additional R & D
costs are projected after
the Cobalt
project. This EUR 15,9 million would fall within the
aforementioned subsequent costs of EUR 99,8 million
before the product is put on the market.

finalisation of

The Commission concludes that the Netherlands intends
to subsidise the project costs up to the point where only
very
still
outstanding before the phase of preparing series produc-
tion and commercialisation of a final product.

limited further development

costs

are

Assessment of the technological state of the art

(74) An analysis of the technological state of the art pursues
two objectives. It can, first, establish the technological
challenges of
the R & D examined, by assessing the
R & D of other companies carrying out comparable
work. Secondly, the analysis considers the R & D work
of competitors in the product market. This examination
helps appreciate the development dynamics of
the
market and thus put Océ's effort into perspective with
the general R & D and product trends in the sector.

L 223/18

EN

Official Journal of the European Communities

18.8.2001

(75) As regards the technological developments, there are several other companies developing hot-melt
piezoelectric printheads and inks, which seem to face comparable technological challenges. The
Netherlands has pointed out that the hot-melt polymer inks of Océ's project had different character-
istics than the resin-based hot-melt inks used by other developers. In particular the corrosiveness of
the inks at temperatures of 130 °C would present additional challenges. However, the Commission
has not received any data to substantiate this claim, although it asked for it. The author of the
second opinion does not comment on this issue.

(76)

From the information at its disposal, the Commission concludes that although the Cobalt project
involves special ink characteristics, it is justified to compare the technological challenges of the
Cobalt project with its closest alternative, the development of other hot-melt printers and printheads.
Hot-melt ink-jet printers were first offered commercially in the mid-1980s (10). Already by 1995,
sophisticated colour hot-melt ink-jet printers based on piezoelectric technology were introduced in
the office printer market (11) (see the Table). The Tektronix and Mutoh printers introduced in 1996
and 1997 are claimed not to need specially coated print media, being able to print on virtually any
media, ranging from vellum to vinyl and canvas. The Mutoh HJ-800 can print a poster (34 inches by
44 inches) at 300 dpi in about 12 minutes (standard mode). The DisplayMaker, available in 1996,
prints a photorealistic poster in about six minutes. The technology continues to evolve rapidly and
print speeds have increased markedly since then (12). Other major developers are the companies
Spectra, Brother and Dataproducts.

Table

Wide-format piezoelectric hot-melt ink-jet colour printers

Company

Product name

Market introduction

Product description
(hot-melt piezo colour ink-jet)

Alpha Merics Corporation Spectrum

End-1995

51-inch print width, 300 dpi (1)

ColorSpan Corporation

DisplayMarker Express

1995/1996

High-speed, 54-inch print width, 307 dpi

Tektronix

Phaser 600

November 1996

36-inch print width, 300 dpi

Mutoh

HJ-800M

March 1997

36-inch print width, 300 dpi

(1) Resolution and thus print quality is measured in dots per inch (dpi).

(77) As regards the market developments, wide-format printers for display graphics applications and
based on liquid inks are at present better established than solid ink-jet printers. Printers based on
piezoelectric ink-jet technologies and those based on thermal piezoelectric ink-jet technologies are
firmly established on the market and compete with each other. As with solid-ink developers,
liquid-ink developers are aiming at comparable product specifications (13).

(10) Howtek's Thermo-Jet and the Pixelmaster.
(11) ‘Color encroaches on the desktop’, Byte, June 1995.
(12) In 1998, Tektronix demonstrated laboratory hot-melt ink printers operating at speeds of up to 100 (small format)
colour pages per minute (press release of 13 October 1998). The latest commercially available small-format solid-ink
printer of Alpha Merics uses resin-based solid-ink sticks and is capable of producing 10 colour pages per minute of
photorealistic prints of up to 1 200 dots per inch (dpi).

(13) One of the first piezoelectric ink-jet printers capable of colour photorealistic printing at 360 dpi was the Cammjet
introduced by Roland in 1996. Rapid evolution in piezoelectric printhead technology is evidenced by the fact that in
1998 the company introduced the Hi-Fi
Jet, a wide-format printer capable of producing photorealistic prints at
1 440 dpi. Several other products are capable of producing 54-inch-wide prints at a resolution of 720 dpi. In terms
of printing speed, several of the current generation of printers can print a poster (34 inches by 44 inches) at a
in about four minutes. The Xerox ColorgrafX Xpress 54, CalComp CrystalJet 7000
resolution of 300 to 360 dpi
Series, Raster Graphics Piezo Print 5000 and ColorPix Pro 54 fall within this group.Products based on thermal
ink-jet technologies became commercially available in the early 1990s. Encad and Hewlett Packard introduced the
first wide-format printers in 1993. The latest products, such as the Encad PRO 600e and HP DesignJet 3500CP, can
print a poster (34 inches by 44 inches) at 600 dpi in about seven minutes (economy mode). Continual advances in
thermal ink-jet technology now means that products with 72-inch print widths and apparent resolution of 1 200 dpi
are on the market (e.g. Colorspan's DisplayMaker Series).

18.8.2001

EN

Official Journal of the European Communities

L 223/19

(78) As regards companies that focus on the main subcomponents, printheads and/or inks, there are
European competitors developing comparable components as marketable products. Modular Ink
Technology (Sweden) develops and manufactures high-performance PiezoJet printheads. In combina-
tion with specially formulated inks, these printheads can be used in numerous printing applications
including wide-format colour graphics printers. For example, PiezoJet printheads are used in the
PiezoPrint 5000 and the VivaGrafX wide-format colour ink-jet printers for graphics applications.
Xaar plc (UK) develops piezo ink-jet printheads and inks that enable high-speed near photorealistic
printing. Through its XaarJet subsidiary, Xaar will manufacture printheads for low-volume specialist
applications and develop inks for printing on a wide variety of materials including paper, board,
plastics and metal. Through its Xaar Technology subsidiary, the company licenses its technology to
volume manufacturers of equipment with a diverse product range, including wide-format colour
printers. Xennia Technology Ltd (UK) is a leading developer of inks for industrial and commercial
ink-jet printing.

(79)

(80)

(81)

The analysis of technology and market trends revealed that the attributes of the hot-melt wide-
format ink-jet printer developed by Océ: (1) describe technological challenges other companies are
faced with in a comparable way, and (2) constitute general product development goals of many
developers of ink-jet printers or subcomponents for colour graphics applications.

Indeed, some of the stated development objectives of the Océ printer are not advanced in compar-
ison to existing technology, for example, the development of ink-jet arrays (2 × 128 nozzles) with an
integration density of four nozzles per millimetre and suitable for use with hot-melt inks. Another
commercially available solid-ink printer for office applications uses new resin-based solid-ink sticks
and has a new printhead with 448 nozzles, evenly split between four process colours. XaarJet offers
70 mm printheads with either 500 or 1 000 nozzles, corresponding to a nozzle density of about
seven and 14 nozzles per millimetre respectively. This is more than three times the nozzle density
that Océ hopes to achieve.

The Commission concludes that the technological challenges faced by the company in many aspects
correspond to the general R & D challenges of competitors, which are all engaged in advancing
related technology. The author of the second opinion confirmed the high development speed in the
sector and that the relevant sector of microsystems technology was characterised by continuous
innovation with rapid performance increases. In his view, confirmed by the Netherlands, every
market participant was forced to undertake substantial efforts to stay in the market.

(82)

The fact that comparable products are already on the market, with main differences being the print
speed and ink characteristics, is an indicator to the Commission that Océ's R & D project is to be
considered close to the market.

Conclusions on the assessment of closeness to the market

(83)

The above assessments reveal that:

(a) Océ made major progress in earlier R & D work on the same subject;

(b) the Netherlands plans to subsidise work until very advanced project stages, covering 85 % of all

costs before the phase of preparing series production and commercialisation;

(c) the technological state of the art of Océ's R & D corresponds to the technological challenges of
other companies, and Océ's Cobalt project corresponds to the general product development
trend in the sector.

L 223/20

EN

Official Journal of the European Communities

18.8.2001

(84)

These elements taken together make the Commission conclude that Océ's development activities are
close to the market within the meaning of point 2.2 of the Community R & D framework. The
assertions of the Netherlands that the development of piezo printheads for use with hot-melt inks is
novel and ground-breaking cannot as such be considered sufficient to classify the R & D as ‘industrial
research’, thus situating it as less close to the market.

(85) However, it is possible to conclude that Océ carries out ‘pre-competitive’ development, because of
the technical challenges of the project, as laid out in recitals 67 and 68 above, in three areas: (1)
increased nozzle densities and their cross-talk; (2) the corrosiveness of polymer inks; (3) the fact that
the technology must be suitable for application on normal paper; and (4) finding cost-effective
production technology. Therefore, the Commission considers that the permissible aid intensity can
be set at at least 25 % for the whole project, since this would be the permissible aid intensity if the
entire Cobalt project consisted of R & D in the phase of ‘pre-competitive development activity’ in
accordance with Annex I to the Community R & D framework.

Assessment of eligible costs

(86) When initiating the investigation procedure, the Commission asked the Netherlands to justify better
the claimed eligible costs of EUR 93,6 million as being eligible costs according to Annex II to the
Community R & D framework, in particular as regards the purchase of patents and licences. As
regards costs for buildings, the Commission wondered whether parts of the new facilities were
destined for the series production of piezo printhead arrays.

(87)

(88)

(89)

(90)

The Netherlands at first responded by referring to the original notification and subsequent letters and
for building and
provided further details only on the costs for patents and licences. Except
patents/licences, the bulk of eligible costs were presented as man-year-equivalents for researchers,
using a methodology similar to one practised for Community Esprit projects. Cost categories
considered in the method were: salaries, other personnel costs, equipment, materials and tools, and
other costs, each expressed as direct and support costs. Annex II
to the Community R & D
framework comprises these cost categories. The Commission therefore considers these cost elements
to constitute eligible costs within the formal meaning of Annex II to the Community R & D
framework.

the Netherlands explained that

For buildings,
there were no plans for industrial-scale printer
production in the new laboratory and that such production would not be possible. During its site
visit on 25 June 1999, the Commission was able to verify to a sufficient extent the actual use of the
facilities. Hence, the Commission considers justified the planned eligible costs of EUR 0,6 million, as
amended by the Netherlands itself.

For the purchase of patents and licences, Annex I to the Community R & D framework specifies that
such costs must be used exclusively for the research activity. The Netherlands has stated that the
patents are not used for the R & D project as such, but rather ensure that later commercial
production is not hindered by unexploitable intellectual property rights. As the costs are incurred to
ensure production, and not for use in research, the Commission considers these costs not justified
under the framework. Consequently, EUR 22,7 million for the purchase of patents and licences are
not eligible for State aid under Article 87(3)(c) of the EC Treaty.

Following a request by the Commission, the Netherlands provided, by letters dated 27 October
1999, 12 November 1999 and 20 December 1999, additional cost-accounting data and in particular
a declaration from an independent accountant. The account certified on the basis of his analysis of
real expenditure for the years 1997 and 1998 that the claimed eligible costs had been incurred only
for the Cobalt project. The independent accountant also certified that the project's costs were
calculated correctly and that the breakdown of costs was made fully in accordance with the Esprit
method, as laid out in the notification.

18.8.2001

EN

Official Journal of the European Communities

L 223/21

(91)

The Dutch authorities also provided information on the new estimates of the project's costs, these
being substantially higher than originally notified. According to the new estimates, the costs will
amount to NLG 209,625 million (EUR 95,1 million), excluding the costs of patents and licences.

(92)

The Commission concludes that, on the basis of the R & D framework, EUR 95,1 million are eligible
for aid.

Assessment of the incentive effect and the necessity of the aid

(93)

(94)

(95)

(96)

The Community R & D framework states under point 6.1 that State aid for R & D should serve as an
incentive for firms to undertake R & D activities in addition to their normal day-to-day operations.
Where the incentive effect is not evident, the Commission may consider such aid less favourably
than it usually does.

Point 6.2 states that in order to verify that the planned aid will induce firms to pursue research
which they would not otherwise have pursued, the Commission must take particular account of
quantifiable factors, market failures, additional costs connected with cross-border cooperation, and
other relevant factors. Quantifiable factors can be changes in R & D spending, the number of people
assigned to R & D activities, and R & D spending as a proportion of total turnover. Proposed aid may
also be permitted if it contributes towards expanding the scope of research or speeding it up. In the
case of
the
Commission will, pursuant to point 6.5 of the framework, attribute particular importance to the
abovementioned conditions. Pursuant to point 6.3 of the framework, the Member State must
demonstrate the project's incentive effect.

individual, close-to-the-market research projects to be undertaken by large firms,

The Netherlands stated that Océ's R & D spending would increase due to the aid, that more people
would be employed and that the aid would accelerate and intensify Océ's R & D efforts. Moreover,
the Netherlands argued that the project bears a high risk of technological and commercial failure.
Finally, the project's role as a partnership catalyst was emphasised.

The Commission notes that Océ's R & D spending and R & D personnel considerably increased in
absolute terms over the last years. R & D expenditure doubled and an average of about 100
additional average man-years of researchers were created, which represents an increase of about
10 %. However, as a share of total company turnover, R & D expenditure has decreased from 6,3 %
to 5,6 %. The Dutch authorities explained this decrease by recent acquisitions of other companies.
This boosted turnover without contributing a corresponding increase in R & D (14). The Netherlands
furthermore pointed out that the entire project is running two years behind its original schedule,
partly because of the ongoing uncertainty about the aid, and that therefore the number of personnel
and the level of R & D expenditure were significantly lower than initially planned.

(97) Although the factual data regarding quantifiable factors do not appear entirely conclusive for
establishing the existence of an incentive effect of the aid, the Commission has to take into account
that, in the case under consideration, such data, based on historical rather than future expected
R & D efforts, could not suffice for the assessment of the incentive effect of aid which has not yet
been paid. The Commission therefore has to look at other relevant factors including market failures,
as mentioned in point 6.2 of the Community R & D framework.

(14) The author of the second opinion believed that around 6 % is the normal share of R & D spending in the micro-

systems technology sector.

L 223/22

EN

Official Journal of the European Communities

18.8.2001

(98) Where a R & D project has high risks of technological failure, the Commission considers it more
probable that companies might engage in the respective R & D only if financially induced to do so.
The Netherlands stated that, at the time of the decision to carry out the Cobalt project, the
technological risks of the project were very high for the company. Part of the current delay in the
project's execution stemmed from actual failures to develop particular components in the way
originally specified and planned. As some significant subprojects are reported to have failed, the
Commission now concludes with hindsight that the project actually bore high technological risks.

(99)

The Netherlands also maintained that the project continues to bear a high commercial risk, which
would relate to the particular characteristics of the market Océ operates in. The market of high-speed
colour printers is dominated by a few large non-European companies. In addition, there are high
barriers to entry due to high upfront R & D costs necessary for the development of any new
competitive product. In this environment, a company such as Océ, which is small in comparison to
its competitors, would bear a particular risk that a research project could ultimately fail, due to the
strength of the established competitors. Indeed, the larger competitors could exercise their market
power to prevent a relatively minor player from developing and marketing successfully technologies
of its own. In the absence of aid, such a risk could dissuade Océ to devote significant resources to a
long-term, risky research project. The aid can thus induce the company to go in its research efforts
beyond what it would normally carry out. On the basis of its own assessments, the Commission can
agree with the Dutch characterisation of the market situation. Moreover, as there is no other
competitor known to develop comparable polymer-based technology, the Commission considers
that Océ's efforts go beyond what is considered normal

in this sector.

(100) Considering the arguments put forward by the Netherlands on quantifiable criteria and in particular
its assessment of other relevant factors, the Commission concludes that aid was necessary for inciting
Océ to carry out the Cobalt project as notified, thus increasing its R & D efforts beyond its normal
day-to-day R & D activities. The incentive effect of the aid has therefore been demonstrated in
accordance with point 6.2 of the Community R & D framework.

V. CONCLUSIONS

(101) The aid proposed for Océ's Cobalt project constitutes aid, would distort competition and would
affect trade within the meaning of Article 87(1) of the EC Treaty. The exemption provided for in
Article 87(3)(c) is applicable in so far as the conditions set out in the Community R & D framework
are fulfilled and where such aid does not adversely affect trading conditions to an extent contrary to
the common interest. The Commission established in accordance with the Community R & D
framework the three main criteria: (1) type of R & D carried out; (2) eligible costs; and (3) incentive
effect of the aid, as follows.

(102) From its assessment of the technical descriptions provided by the Netherlands, its company visit, its
analysis of Océ's earlier R & D, the project's overall cost structure and the general product develop-
ment trends in the sector, the Commission cannot rule out the possibility that some parts of the
R & D carried out qualifies as ‘industrial research’. However, based on the information at its disposal,
the Commission can classify the type of R & D involved in the Cobalt project as at least ‘pre-compet-
itive development activity’ within the meaning of Annex I to the Community R & D framework. The
proposed aid intensity of 24 % of eligible costs can therefore be approved since it is below the
maximum aid intensity allowed for ‘pre-competitive development activity’.

(103) For the eligible costs, the Commission regards the costs as amended in respect of those originally
notified and as later confirmed by an independent accountant as eligible under the provisions of the
Community R & D framework, except for the costs relating to patents and licences. Eligible costs
thus amount to EUR 95,1 million.

18.8.2001

EN

Official Journal of the European Communities

L 223/23

(104) As regards the incentive effect, the Commission considers the incentive effect of the aid demon-

strated in accordance with point 6.2 of the Community R & D framework.

(105) The Commission has to ensure that the aid is correctly used. The Netherlands must therefore strictly
monitor on an annual basis the progress of the project and ensure that all the eligible costs in fact
correspond to expenditure incurred for this project. Furthermore, the Netherlands must in five
consecutive annual reports provide conclusive evidence to the Commission,
including detailed
justifications for payments, demonstrating in particular the exact destination of the aid for the
expenditure actually incurred and the eligible costs of the Cobalt project.

(106) Considering the contribution of R & D to growth, competitiveness and employment

in the
Community, the Commission concludes that the notified aid of EUR 22,7 million will not adversely
affect trading conditions to an extent contrary to the common interest,

HAS ADOPTED THIS DECISION:

Article 1

The aid which the Netherlands is planning to implement for Océ NV, amounting to NLG 50 million
(EUR 22,7 million), for the development of colour ink-jet printers, is compatible with the common market,
subject to the conditions set out in Article 2.

Article 2

The Netherlands shall strictly and on an annual basis monitor the progress of the project and shall ensure
that all eligible costs in fact correspond to expenditure incurred for the Cobalt project. The Netherlands
shall submit at least five consecutive annual reports to the Commission. These reports shall comprise
conclusive and detailed evidence of the exact destination of the aid for expenditure actually incurred and
the eligible costs of the Cobalt project and shall

include detailed financial statements.

The Netherlands shall inform the Commission, within two months of notification of this Decision, of the
measures taken to comply with it.

Article 3

This Decision is addressed to the Kingdom of the Netherlands.

Article 4

Done at Brussels, 18 October 2000.

For the Commission

Mario MONTI

Member of the Commission