Communication from the Commission on the application of State aid rules to public service broadcasting (Text with EEA relevance)
Date: 2001-11-15
Institutions: European Commission
Subjects: State aid, application of EU law, broadcasting, control of State aid, public service

15.11.2001

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Official Journal of the European Communities

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Communication from the Commission on the application of State aid rules to public service
broadcasting

(2001/C 320/04)

(Text with EEA relevance)

1. INTRODUCTION AND SCOPE OF THE COMMUNICATION

1. Over the last two decades, broadcasting has undergone
important changes. The abolition of monopolies,
the
emergence of new players and rapid technological devel-
opments have fundamentally altered the competitive
environment. Television broadcasting was traditionally a
reserved activity. Since its inception, it has mostly been
provided by public undertakings under a monopoly
regime, mainly as a consequence of the limited availability
of broadcasting frequencies and the high barriers to entry.

2.

In the 1970s, however, economic and technological devel-
opments made it increasingly possible for Member States
to allow other operators to broadcast. Member States have
therefore decided to introduce competition in the market.
This has led to a wider choice for consumers, as many
additional channels and new services became available; it
has also favoured the emergence and growth of strong
European operators, the development of new technologies,
and a larger degree of pluralism in the sector. Whilst
opening the market
to competition, Member States
considered that public service broadcasting ought to be
maintained, as a way to ensure the coverage of a
that
number of areas and the satisfaction of needs
private operators would not necessarily fulfil
to the
optimal extent.

3. The increased competition, together with the presence of
State-funded operators, has also led to growing concerns
for a level playing field, which have been brought to the
Commission’s attention by private operators. The vast
the
majority of
infringements of
Article 87 of
the EC Treaty in relation to the public
funding schemes established in favour of public service
broadcasters.

complaints

allege

4. This Communication sets out the principles to be followed
by the Commission in the application of Articles 87 and
86(2), of the EC Treaty to State funding of public service
broadcasting. This will make the Commission’s policy in
this area as transparent as possible.

such as freedom of expression and the right of reply, pluralism,
protection of copyright, promotion of cultural and linguistic
human dignity,
diversity,
consumer protection(cid:146) (1).

protection of minors

and

of

6. Public service broadcasting, although having a clear
economic relevance,
is not comparable to a public
service in any other economic sector. There is no other
service that at the same time has access to such a wide
it with so much
sector of
information and content, and by doing so conveys and
influences both individual and public opinion.

the population, provides

7. As stated by the high-level group on audiovisual policy
chaired then by Commissioner Oreja, public service broad-
casting (cid:145)has an important role to play in promoting cultural
diversity in each country, in providing educational programming,
in guaranteeing
in objectively
pluralism and in supplying, democratically and free-of-charge,
quality entertainment(cid:146) (2).

informing public

opinion,

8. Furthermore, broadcasting is generally perceived as a very
reliable source of information and represents, for a not
inconsiderable proportion of
the main
source of information. It thus enriches public debate and
ultimately ensures that all citizens participate to a fair
degree in public life.

the population,

9. The role of the public service (3) in general is recognised
by the Treaty. The key provision in this respect is Article
86(2), which reads as follows:

(cid:145)Undertakings entrusted with the operation of services of general
economic interest or having the character of a revenue-producing
monopoly shall be subject to the rules contained in this Treaty,
in so far as the
in particular to the rules on competition,
application of such rules does not obstruct the performance, in
law or in fact, of the particular tasks assigned to them. The
development of trade must not be affected to such an extent as
would be contrary to the interests of the Community(cid:146).

2. THE ROLE OF PUBLIC SERVICE BROADCASTING

5. As stated by the recent Commission communication on
services of general interest in Europe: (cid:145)The broadcast media
play a central role in the functioning of modern democratic
societies, in particular in the development and transmission of
social values. Therefore, the broadcasting sector has, since its
inception, been subject
to specific regulation in the general
interest. This regulation has been based on common values,

(1) COM(2000) 580 final, p. 35.
(2) (cid:145)The digital age European audiovisual policy. Report

high-level group on audiovisual policy(cid:146), 1998.

from the

(3) For the purpose of the present communication, and in accordance
with Article 16 of
the EC Treaty and the declaration (No 13)
annexed to the final act of Amsterdam, the term (cid:145)public service(cid:146)
as of the Protocol on the system of public broadcasting in the
Member States has
referring to the term
(cid:145)service of general economic interest(cid:146) used in Article 86(2).

to be intended as

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10. This provision is confirmed by Article 16 of the EC Treaty,
concerning services of general economic interest, which
was introduced by the Amsterdam Treaty and entered
into force on 1 May 1999 (cid:151) Article 16 states:

(cid:145)Without prejudice to Articles 73, 86 and 87, and given the
place occupied by services of general economic interest in the
shared values of the Union as well as their role in promoting
social and territorial cohesion, the Community and the Member
States, each within their respective powers and within the scope
of application of this Treaty, shall take care that such services
operate on the basis of principles and conditions which enable
them to fulfil their missions(cid:146).

11. The interpretation of these principles in the light of the
particular nature of the broadcasting sector is outlined in
the interpretative protocol on the system of public broad-
casting in the Member States, annexed to the EC Treaty,
(hereinafter referred to as (cid:145)the Protocol(cid:146)), which, after
considering (cid:145)that
the system of public broadcasting in the
Member States is directly related to the democratic, social and
cultural needs of each society and to the need to preserve media
pluralism(cid:146), states that:

the Treaty

(cid:145)The provisions of
establishing the European
Community shall be without prejudice to the competence of
Member States to provide for the funding of public service
broadcasting insofar as such funding is granted to broadcasting
organisations for the fulfilment of the public service remit as
conferred, defined and organised by each Member State, and
insofar as such funding does not affect trading conditions and
competition in the Community to an extent which would be
contrary to the common interest, while the realisation of the
remit of that public service shall be taken into account(cid:146).

public

service

broadcasting,

the Council and of

the Governments of

12. The importance of public service broadcasting for social,
democratic and cultural life in the Union was also reaf-
firmed in the Resolution of
the
Representatives of
the Member
States, Meeting within the Council of 25 January 1999
concerning
(hereinafter
referred to as (cid:145)the Resolution(cid:146)). As underlined by the
Resolution:
(cid:145)Broad public access, without discrimination and
on the basis of equal opportunities, to various channels and
services is a necessary precondition for fulfilling the special obli-
gation of public service broadcasting(cid:146). Moreover, public service
from technological progress(cid:146),
broadcasting needs to (cid:145)benefit
bring (cid:145)the public the benefits of
the new audiovisual and
and to
information services
undertake (cid:145)the development and diversification of activities in
the digital age(cid:146). Finally,
(cid:145)public service broadcasting must be
able to continue to provide a wide range of programming in
accordance with its remit as defined by the Member States in
is
order
legitimate for public service broadcasting to seek to reach wide
audiences(cid:146) (4).

to address society as a whole;

the new technologies(cid:146)

in this context

and

it

13. Given these characteristics, which are peculiar to the
broadcasting
service mandate
a
encompassing (cid:145)a wide range of programming in accordance

sector,

public

(4) OJ C 30, 5.2.1999, p. 1.

with its remit(cid:146), as stated by the Resolution, can in principle be
considered as legitimate, as aiming at a balanced and
varied programming, capable of preserving a certain
level of audience for public broadcasters and, thus, of
the
ensuring the accomplishment of
fulfilment of the democratic, social and cultural needs of
the society and the guaranteeing of pluralism.

the mandate,

i.e.

14.

It should be noted that commercial broadcasters, of whom
a number are subject to public service requirements, also
play a role in achieving the objectives of the Protocol to
the extent
they contribute to pluralism, enrich
cultural and political debate and widen the choice of
programmes.

that

3. THE LEGAL CONTEXT

economic

to services of general

15. The application of State aid rules to public service broad-
casting has to take into account a wide number of
different elements. The EC Treaty includes Articles 87
and 88 on State aid and Article 86(2) on the application
of the rules of the Treaty and the competition rules, in
particular,
interest.
Whereas the Treaty of Amsterdam introduced a specific
provision (Article 16) on services of general economic
interest and an interpretative protocol on the system of
public service broadcasting, the Treaty of Maastricht had
already introduced an article which defines the role of the
Community in the field of culture (Article 151) and a
possible compatibility clause for State aid aimed at
(Article 87(3)(d)). The European
promoting
Parliament and the Council have adopted Directive
89/552/EEC of 3 October 1989 on the coordination of
certain provisions laid down by law, regulation or admin-
istrative action in Member States concerning the pursuit of
television broadcasting activities (5). The Commission has
adopted Directive 80/723/EEC of 25 June 1980 on the
transparency of
relations between Member
States and public undertakings as well as on financial
transparency within certain undertakings (6). These rules
are interpreted by the Court of Justice and the Court of
First
Instance. The Commission has also adopted the
communication mentioned in point 5 and adopted
several communications on the application of the State
aid rules.

financial

culture

4. APPLICABILITY OF ARTICLE 87(1)

4.1. The State aid character of State financing of public

service broadcasters

16. Article 87(1) states: (cid:145)Save as otherwise provided in this Treaty,
any aid granted by a Member State or through State resources
in any form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the production
of certain goods shall, insofar as it affects trade between Member
States, be incompatible with the common market(cid:146).

(5) OJ L 298, 17.10.1989, p. 23, as amended by Directive 97/36/EC (OJ

L 202, 30.7.1997, p. 60).

(6) OJ L 195, 29.7.1980, p. 35, as

last amended by Directive

2000/52/EC (OJ L 193, 29.7.2000, p. 75).

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17. The effect of State intervention, not its purpose,

in any assessment of

is the
decisive element
its State aid
content under Article 87(1). State financing of public
service broadcasters is normally to be regarded as State
aid, inasmuch as it meets the above criteria. Public service
broadcasters are normally financed out of the State budget
or through a levy on TV-set holders. In certain specific
circumstances, the State makes capital injections or debt
cancellations in favour of public service broadcasters.
These financial measures are normally attributable to the
public authorities and involve the transfer of State
resources. Moreover,
such
measures fail
to satisfy the market economy investor
test,
in accordance with the (cid:145)Application of Articles 92
authorities(cid:146)
the EEC Treaty to public
and 93 of
holdings’ (7) and the Commission communication to the
Member States on the (cid:145)Application of Articles 92 and 93
of
the EEC Treaty and of Article 5 of Commission
Directive 80/723/EEC to public undertakings in the manu-
facturing sector(cid:146) (8), they favour in most cases only certain
broadcasters
competition.
Naturally,
the existence of State aid will have to be
assessed on a case by case basis, and depends also on
the specific nature of the funding (9).

and to the

and may

thereby

distort

extent

that

18. As the Court of Justice has observed: (cid:145)When aid granted by
the State or through State resources strengthens the position of
an undertaking compared with other undertakings competing in
intra-Community trade the latter must be regarded as affected by
that aid(cid:146) (10). Thus, State financing of public service broad-
casters can generally be considered to affect trade between
Member States. This is clearly the position as regards the
acquisition and sale of programme rights, which often
takes place at an international level. Advertising, too, in
the case of public broadcasters who are allowed to sell
advertising space, has a cross-border effect, especially for
homogeneous linguistic areas across national boundaries.
Moreover, the ownership structure of commercial broad-
casters may extend to more than one Member State.

19. According to the case-law of the Court (11), any transfer of
State resources to a certain undertaking (cid:151) also when
covering net costs of public service obligations (cid:151) has
to be regarded as State aid (provided that all
the
conditions for the application of Article 87(1) are fulfilled).

(7) Bulletin EC 9-1984.
(8) OJ C 307, 13.11.1993, p. 3.
(9) Aid NN 88/98,

(cid:145)Financing of a 24-hour advertising-free news
channel with licence fee by the BBC(cid:146), OJ C 78, 18.3.2000, p. 6
and aid NN 70/98,
(cid:145)State aid to public broadcasting channels
(cid:145)Kinderkanal and Phoenix(cid:146) (cid:146) (OJ C 238, 21. 8.1999, p. 3).

(10) Cases 730/79, Philip Morris Holland v Commission [1980] ECR
Italy v Commission [1991] ECR
2671, paragraph 11; C-303/88,
I-1433, paragraph 27; C-156/98, Germany v Commission [2000]
ECR I-6857, paragraph 33.

(11) Cases T-106/95, FFSA and Others v Commission [1997] ECR II-229;
T-46/97, SIC v Commission, [2000] ECR II-2125 and C-332/98,
France v Commission, [2000] ECR I-4833.

4.2. Nature of the aid: existing aid as opposed to new aid

20. The funding schemes currently in place in most of the
Member States were introduced a long time ago. As a
first
the Commission must determine
whether these schemes may be regarded as (cid:145)existing aid(cid:146)
within the meaning of Article 88(1).

therefore,

step,

21. Existing aid is regulated by Article 88(1), which states that:
(cid:145)The Commission shall, in cooperation with Member States, keep
under constant review all systems of aid existing in those States.
It shall propose to the latter any appropriate measures required
the
by the progressive development or by the functioning of
common market(cid:146).

22. Pursuant to Article 1(b)(i) of Council Regulation (EC) No
659/1999 of 22 March 1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (12),
existing aid includes (cid:145). . . all aid which existed prior to the
entry into force of the Treaty in the respective Member States,
that is to say, aid schemes and individual aid which were put
into effect before, and are still applicable after, the entry into
force of the Treaty(cid:146).

23. Pursuant to Article 1(b)(v), existing aid also includes (cid:145)aid
which is deemed to be an existing aid because it can be estab-
lished that at the time it was put into effect it did not constitute
an aid, and subsequently became an aid due to the evolution of
the common market and without having been altered by the
Member State(cid:146).

24.

the

the Court (13),

the
In accordance with the case-law of
Commission must verify whether or not
legal
framework under which the aid is granted has changed
since its introduction. The Commission must take into
account all the legal and economic elements related to
the broadcasting system of a given Member State.
Although the legal and economic elements relevant for
such an assessment present common features in all or
the Commission believes that a
most Member States,
case by case approach is the most appropriate (14).

5. ASSESSMENT OF THE COMPATIBILITY OF STATE AID

UNDER ARTICLES 87(2) AND 87(3)

25. State aid to public broadcasters must be examined by the
Commission in order to determine whether or not it can
be found compatible with the common market. The
derogations listed in Article 87(2) and Article 87(3) can
be applied.

(12) OJ L 83, 27.3.1999, p. 1.
(13) Case C-44/93, Namur-Les Assurances du CrØdit SA v Office National

du Ducroire and the Belgian State [1994] ECR I-3829.

(14) As concerns recent Commission practice in this field, see footnote

9.

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26.

the Treaty,

the
In accordance with Article 151(4) of
Community is to take cultural aspects into account in its
action under other provisions of the Treaty, in particular
in order to respect and to promote the diversity of its
the Treaty
cultures. Accordingly, Article 87(3)(d) of
allows the Commission to regard aid to promote culture
as compatible with the common market where such aid
does not affect trading conditions and competition in the
Community to an extent that is contrary to the common
interest. It is the Commission’s task to decide on the actual
application of that provision in the same way as for the
other exemption clauses in Article 87(3).
It should be
recalled that the provisions granting exemption from the
prohibition of State aid have to be applied strictly.
Therefore, the notion of (cid:145)culture(cid:146) within the meaning of
Article 87(3)(d) must be interpreted restrictively. As stated
by the Commission in its Kinderkanal and Phoenix decision,
the educational and democratic needs of a Member State
have to be regarded as distinct from the promotion of
culture (15). In this respect,
it should be noted that the
Protocol distinguishes between the cultural,
the social
and the democratic needs of each society. Education
may, of course, have a cultural aspect.

27. State aid to public service broadcasters often does not
differentiate between those three needs. Consequently,
unless a Member State provides for the separate definition
and the separate funding of State aid to promote culture
such aid cannot generally be approved under
alone,
Article 87(3)(d).
It can normally be assessed, however,
on the basis of Article 86(2) concerning services of
general economic interest.
In any event, whatever the
the substantive
legal base for assessing compatibility,
analysis would be conducted by the Commission on the
basis of the same criteria, namely those set out in this
communication.

6. ASSESSMENT OF THE COMPATIBILITY OF STATE AID

UNDER ARTICLE 86(2)

28. The role of services of general economic interest

in
attaining the fundamental objectives of
the European
Union has been fully acknowledged by the Commission
in its communication on services of general
interest in
Europe, mentioned in point 5.

29. The Court has consistently held that Article 86 provides
for a derogation and must therefore be interpreted restric-
tively. The Court has clarified that in order for a measure
to benefit from such a derogation, it is necessary that all
the following conditions be fulfilled:

(i) the service in question must be a service of general
economic interest and clearly defined as such by the
Member State (definition);

(ii) the undertaking in question must be

explicitly
entrusted by the Member State with the provision
of that service (entrustment);

(15) See footnote 9.

(iii) the application of the competition rules of the Treaty
(in this case, the ban on State aid) must obstruct the
performance of the particular tasks assigned to the
undertaking and the exemption from such rules
trade to an
must not affect
extent that would be contrary to the interests of the
Community (proportionality test).

the development of

30.

It is for the Commission, as guardian of the Treaty, to
assess whether these criteria are satisfied.

31.

remit as

In the specific case of public broadcasting the above
approach has to be adapted in the light of the interpre-
tative provisions of the Protocol, which refers to the (cid:145)public
conferred, defined and organised by each
service
(definition and entrustment) and provides
Member State(cid:146)
for a derogation from the Treaty rules in the case of the
funding of public service broadcasting (cid:145)in so far as such
funding is granted to broadcasting organisations
the
fulfilment of
. . . and . . . does not
the public service remit
affect trading conditions and competition in the Community to
an extent which would be contrary to the common interest, while
the realisation of the remit of that public service shall be taken
into account(cid:146) (proportionality).

for

6.1. Definition of public service remit

32.

In order to meet the condition mentioned in point 29(i)
for application of Article 86(2), it is necessary to establish
an official definition of the public service mandate. Only
legal
then can the Commission assess with sufficient
certainty whether the derogation under Article 86(2)
is
applicable.

level. Generally speaking,

33. Definition of the public service mandate falls within the
competence of the Member States, which can decide at
national, regional or local
in
exercising that competence, account must be taken of
the Community concept of (cid:145)services of general economic
interest(cid:146). However, given the specific nature of the broad-
casting sector, a (cid:145)wide(cid:146) definition, entrusting a given broad-
caster with the task of providing balanced and varied
programming in accordance with the
remit, while
preserving a certain level of audience, may be considered,
in view of the interpretative provisions of the Protocol,
legitimate under Article 86(2). Such a definition would be
consistent with the objective of fulfilling the democratic,
social and cultural needs of a particular society and guar-
anteeing pluralism,
and linguistic
diversity.

including cultural

34. Similarly, the public service remit might include certain
services that are not (cid:145)programmes(cid:146) in the traditional sense,
such as on-line information services, to the extent that
while taking into account the development and diversifi-
cation of activities in the digital age, they are addressing
the same democratic, social and cultural needs of
the
society in question.

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35. Whenever

is
the scope of
extended to cover new services
the definition and
entrustment act should be modified accordingly, within
the limits of Article 86(2).

the public service remit

example, by legislation,

(for
reference).

contract or

terms of

respect

task is

to verify whether or not
36. The Commission’s
the Treaty provisions (16). As
Member States
regards the definition of the public service in the broad-
casting sector, the role of the Commission is limited to
checking for manifest error. It is not for the Commission
to decide whether a programme is to be provided as a
service of general economic interest, nor to question the
nature or the quality of a certain product. The definition
of the public service remit would, however, be in manifest
error if it included activities that could not reasonably be
considered to meet (cid:151) in the wording of the Protocol (cid:151)
the (cid:145)democratic, social and cultural needs of each society(cid:146). That
would normally be
case of
it must be
e-commerce,
recalled that
the
services offered to the public in the general interest. The
question of the definition of the public service remit must
not be confused with the question of
the financing
mechanism chosen to provide these services. Therefore,
whilst
perform
public
commercial activities
the sale of advertising
space in order to obtain revenue, such activities cannot
normally be viewed as part of the public service remit.

for example.
the public service remit describes

the position in the
In this context,

broadcasters may

such as

service

37. The definition of the public service mandate should be as
precise as possible. It should leave no doubt as to whether
a certain activity performed by the entrusted operator is
intended by the Member State to be included in the public
service remit or not. Without a clear and precise definition
of the obligations imposed upon the public service broad-
caster, the Commission would not be able to carry out its
tasks under Article 86(2) and, therefore, could not grant
any exemption under that provision.

38. Clear identification of the activities covered by the public
for non-public service

is also important
service remit
operators, so that they can plan their activities.

39. Finally, the terms of the public service remit should be
precise, so that Member States’ authorities can effectively
monitor compliance, as described in the following chapter.

6.2. Entrustment and supervision

40.

In order to benefit
from the exemption under Article
86(2), the public service remit should be entrusted to
one or more undertakings by means of an official act

41.

It

is

It is not sufficient, however, that the public service broad-
caster be formally entrusted with the provision of a well-
defined public service. It is also necessary that the public
service be actually supplied as provided for in the formal
agreement between the State and the entrusted under-
taking.
therefore desirable that an appropriate
authority or appointed body monitor its application. The
need for such an appropriate authority or body in charge
of supervision is apparent in the case of quality standards
imposed on the entrusted operator. In accordance with the
Commission communication on the principles
and
guidelines for the Community’s audiovisual policy in the
digital era (17), it is not for the Commission to judge on
the fulfilment of quality standards: it must be able to rely
on appropriate supervision by the Member States.

42.

It is within the competence of the Member State to choose
the mechanism to ensure effective supervision of
the
fulfilment of the public service obligations. The role of
such a body would seem to be effective only if
the
authority is independent from the entrusted undertaking.

43.

In the absence of sufficient and reliable indications that
the public service is actually supplied as mandated, the
Commission would not be able to carry out
its tasks
under Article 86(2) and, therefore, could not grant any
exemption under that provision.

6.3. Funding of public service broadcasting and the

proportionality test

6.3.1. The choice of funding

44. Public service duties may be either quantitative or quali-
tative or both. Whatever their form, they could justify
compensation, as long as they entail supplementary costs
that the broadcaster would normally not have incurred.

45. Funding

schemes
can be divided into two broad
(cid:145)single-funding(cid:146) and (cid:145)dual-funding(cid:146). The (cid:145)single-
categories:
funding(cid:146) category comprises those systems in which public
financed only through public
service broadcasting is
funds,
systems
form.
comprise a wide range of schemes, where public service
broadcasting is financed by different combinations of State
funds and revenues from commercial activities, such as the
sale of advertising space or programmes.

in whatever

(cid:145)Dual-funding(cid:146)

(16) See Case C-179/90, Merci convenzionali porto di Genova SpA v Sider-

urgica Gabrielli SpA [1991] ECR I-5889.

(17) COM(1999) 657 final, section 3(6).

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46. As stated by the Protocol:

of

shall

public

funding

broadcasting

(cid:145)The choice of

(cid:145)The provisions of

the European Community

the Treaty
establishing
be without
prejudice to the competence of Member States to provide for
. . .(cid:146). The
the
service
Commission communication on services of general
interest in Europe, mentioned in point 5, further clarifies
that:
the financing scheme falls within the
competence of
can be no
objection in principle to the choice of a dual financing scheme
(combining public funds and advertising revenues) rather than a
single
long as
competition in the relevant markets (e.g. advertising, acquisition
and/or sale of programmes) is not affected to an extent which is
contrary to the Community interest(cid:146) (18).

the Member State, and there

funding scheme

(solely public

funds) as

that

47. While Member States are free to choose the means of
financing public service broadcasting,
the Commission
the derogation
has to verify, under Article 86(2),
from the normal application of the competition rules for
the performance of
the service of general economic
interest does not affect competition in the common
market in a disproportionate manner. The test is of a
the measure
(cid:145)negative(cid:146) nature:
adopted is not disproportionate. The aid should also not
affect the development of trade to such an extent as would
be contrary to the interests of the Community.

examines whether

it

this approach also for public
48. The Protocol confirms
funding should not
service broadcasting,
(cid:145)affect
trading conditions and competition in the Community
to an extent which would be contrary to the common interest,
while the realisation of the remit of that public service shall be
taken into account(cid:146).

stating that

6.3.2. Transparency requirements for the State aid assessment

49. The above-described assessment by the Commission
requires a clear and precise definition of
the public
service remit and a clear and appropriate separation
between public service activities and non-public service
activities. Separation of accounts between these two
level to
spheres is normally already required at national
ensure transparency and accountability when using public
funds. A separation of accounts is necessary to allow the
Commission to carry out its proportionality test. It will
provide the Commission with a tool for examining alleged
cross-subsidisation and for defending justified compen-
sation payments
tasks.
Only on the basis of proper cost and revenue allocation
can it be determined whether the public financing is
actually limited to the net costs of
the public service
remit and thus acceptable under Article 86(2) and the
Protocol.

for general economic interest

50. The transparency requirements in the financial relations
between public authorities and public undertakings and
within undertakings granted special or exclusive rights

(18) See footnote 1, p. 36.

or entrusted with the operation of a service of general
economic interest, are indicated in Directive 80/723/EEC.

51. The Member States have been required by Directive
80/723/EEC to take the measures necessary to ensure (cid:151)
in the case of any undertaking granted special or exclusive
rights or entrusted with the operation of a service of
general economic interest and receiving State aid in any
form whatsoever and which carries out other activities,
that is to say, non-public service activities (cid:151) that:
(a)
the internal accounts corresponding to different activities,
i. e. public service and non-public service activities, are
separate; (b) all costs and revenues are correctly assigned
or allocated on the basis of consistently applied and
objectively justifiable cost accounting principles; and (c)
the
to which
separate accounts are maintained are clearly established.

cost-accounting principles

according

52. The general

transparency requirements apply also to
broadcasters as indicated in the fifth recital of Directive
2000/52/EC. The new requirements apply to public
service broadcasters, in so far as they are beneficiaries of
State aid and they are entrusted with the operation of a
service of general economic interest, for which the State
aid was not fixed for an appropriate period following an
open, transparent and non-discriminatory procedure. The
obligation of separation of accounts does not apply to
public service broadcasters whose activities are limited
to the provision of services of general economic interest
and which do not operate activities outside the scope of
those services.

53.

In the broadcasting sector, separation of accounts poses no
particular problem on the revenue side, but may not be
straightforward or, indeed, feasible on the cost side. This is
due to the fact that, in the broadcasting sector, Member
States may consider the whole programming of the broad-
casters as covered by the public service remit, while at the
In
same time allowing for its commercial exploitation.
other words, different activities share the same inputs to
a large extent.

54. For these reasons, the Commission considers that, on the
revenue side, broadcasting operators should give a detailed
account of the sources and amount of all income accruing
from the performance of non-public service activities.

55. On the expenditure side, costs specific to the non-public
service activity should be clearly identified. In addition,
whenever the same resources (cid:151) personnel, equipment,
fixed installation etc. (cid:151) are used to perform public
service and non-public service tasks, their costs should
be allocated on the basis of the difference in the firm’s
total
service
and without
activities (19).

costs with

non-public

(19) This implies reference to the hypothetical situation in which the
non-public service activities were to be discontinued: the costs that
would be so avoided represent the amount of common costs to be
allocated to non-public service activities.

15.11.2001

EN

Official Journal of the European Communities

C 320/11

56. The above implies that, contrary to the approach generally
adopted in other utilities sectors, costs that are entirely
attributable to public service activities, while benefiting
also commercial activities, need not be apportioned
between the two and can be entirely allocated to public
service. This could be the case,
for example, with the
production costs of a programme which is shown as
part of the public service remit but is also sold to other
broadcasters. The main example, however, would be that
of audience, which is generated both to fulfil the public
service remit and to sell advertising space. It is considered
that a full distribution of these costs between the two
activities
risks being arbitrary and not meaningful.
However, cost allocation from the point of view of trans-
parency of accounts should not be confused with cost
recovery in the definition of pricing policies. The latter
issue is addressed in point 58.

6.3.3. Proportionality

57.

In carrying out the proportionality test, the Commission
starts from the consideration that the State funding is
normally necessary for the undertaking to carry out its
public service tasks. However,
in order to satisfy this
test,
it is necessary that the State aid does not exceed
the net costs of the public service mission, taking also
into account other direct or indirect revenues derived
from the public service mission. For this reason, the net
benefit that non-public service activities derive from the
public service activity will be taken into account
in
assessing the proportionality of the aid.

58. On the other hand, there might be market distortions
which are not necessary for the fulfilment of the public
service mission. For example, a public service broadcaster,
in so far as lower revenues are covered by the State aid,
might be tempted to depress the prices of advertising or
other non-public service activities on the market, so as to
reduce the revenue of competitors. Such conduct,
if
demonstrated, could not be considered as intrinsic to the
public service mission attributed to the broadcaster.
Whenever a public service broadcaster undercuts prices
in non-public service activities below what is necessary
an efficient
to recover
commercial operator
situation would
normally have to recover, such practice would indicate

stand-alone
in a

costs
similar

that

the

the presence of overcompensation of public service obli-
gations and would in any event (cid:145)affect trading conditions and
competition in the Community to an extent which would be
common interest(cid:146) and thus infringe the
contrary to the
Protocol.

59. Accordingly, in carrying out the proportionality test, the
Commission will consider whether or not any distortion
of competition arising from the aid can be justified in
terms of
the need to perform the public service as
defined by the Member State and to provide for its
funding. When necessary the Commission will also take
action in the light of other Treaty provisions.

60. The analysis of the effects of State aid on competition and
development of trade will inevitably have to be based on
the specific characteristics of each situation. The actual
competitive structure and other characteristics of each of
the markets cannot be described in the present communi-
cation, as they are generally quite different from each
other. For the same reason, this Communication cannot
ex ante define the conditions under which the prices of the
public service broadcasters are in line with the principles
explained in point 58. Therefore the assessment under
Article 86(2) of the compatibility of State aid to public
broadcasters can finally only be made on a case by case
basis, according to Commission practice.

61.

In its assessment, the Commission will take into account
the fact that, to the extent that State aid is necessary to
carry out the public service obligation, the system as a
whole might also have the positive effect of maintaining
an alternative
relevant
markets (20). However,
to be balanced
against possible negative effects of
such as
preventing other operators from entering these markets,
thereby allowing a more oligopolistic market structure, or
leading to possible anti-competitive behaviour of public
service operators in the relevant markets.

supply
this effect has

source of

in some

the aid,

62. The Commission will also take into account the difficulty
the
some smaller Member States may have to collect
necessary funds,
the public
service are, ceteris paribus, higher (21).

if costs per inhabitant of

(20) This does not mean that State aid can be justified as a tool, which
increases supply and competition in a market. State aid which
allows an operator to stay in the market in spite of its recurrent
losses causes a major distortion of competition, as it leads in the
long run to higher inefficiency, smaller supply and higher prices
for consumers. Lifting legal and economic barriers to entry,
ensuring an effective anti-trust policy and promoting pluralism
are more effective instruments in this respect. Natural monopolies
are normally subject to regulation.

(21) Similar difficulties may also be encountered when public service
broadcasting is addressed to linguistic minorities or to local needs.