2002/821/EC: Commission decision of 15 January 2002 on the State aid implemented by Germany for Pollmeier GmbH, Malchow (Text with EEA relevance.) (notified under document number C(2001) 4447)
Date: 2002-01-15
Institutions: European Commission
Subjects: Germany, State aid, control of State aid, infringement of EU law, small and medium-sized enterprises

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COMMISSION DECISION

of 15 January 2002

on the State aid implemented by Germany for Pollmeier GmbH, Malchow

(notified under document number C(2001) 4447)

(Only the German text is authentic)

(Text with EEA relevance)

(2002/821/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

1994 in Case C-47/91, (3), the Commission requested
Germany by letter dated 17 April 2000 to provide all
information necessary to assess whether
the aid
measures granted to Pollmeier GmbH, Malchow, and
Pollmeier GmbH & Co. KG, Kässlitz, fell under a scheme
previously approved by the Commission.

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

(3)

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

Whereas:

1. PROCEDURE

(1)

In 1999, following a series of complaints related to State
aid granted to companies of the Pollmeier group, the
Commission requested Germany to provide it with all
information necessary to examine whether the measures
in question were compatible with the common market.
The measures related to State aid granted to Pollmeier
GmbH, Malchow, and Pollmeier GmbH & Co. KG,
Kässlitz, for the construction of a second sawmill in
Malchow (Mecklenburg-Western Pomerania) and a third
sawmill in Kässlitz (Thuringia). The information pro-
vided by Germany was incomplete, however, and insuf-
ficient to allay the Commission’s doubts as to whether
the measures had been granted in accordance with
previously authorised schemes.

(2)

Pursuant
to Article 10(3) 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 (2) and in line with the judgment of the Court of
Justice of the European Communities of 5 October

(4)

(5)

(6)

By letter dated 22 May 2000 (received on 29 May), the
annexes to which were received separately on 16 June
2000, and finally by supplementary letter dated 9 August
2000 (received on 11 August), Germany provided
the requested information, on the basis of which the
Commission is deciding whether the beneficiaries of the
measures are to be viewed as SMEs within the meaning
of the Community guidelines on State aid for small
and medium-sized enterprises (SMEs) (4) (Community
guidelines) and Commission recommendation of 3 April
1996 concerning the definition of small and medium-
sized enterprises (5) (the recommendation) and thus are
entitled to receive the maximum permissible aid intensity
of 50 % gross in the assisted areas where the two projects
are located.

The Commission informed Germany by letter dated
13 March 2001 that it had decided to initiate the
procedure provided for in Article 88(2) of the EC Treaty
in respect of the aid and at the same time to require the
provision
accordance with
Article 10(3) of Council Regulation (EC) No 659/1999.

information

of

in

Germany responded to the initiation of proceedings and
the request for the provision of information by letter
dated 15 May 2001.

The Commission’s decision initiating proceedings was
published in the Official Journal of the European Communi-
ties (6). At the same time, the Commission called on
interested parties to submit their comments.

( 1) OJ C 166, 9.6.2001, p. 5.
( 2) OJ L 83, 27.3.1999, p. 1.

(3) Italy v Commission [1994] ECR I-4635.
(4) OJ C 213, 23.7.1996, p. 4.
(5) OJ L 107, 30.4.1996, p. 4.
(6) See footnote 1.

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(7)

The comments which the Commission received from
interested parties were forwarded to Germany, which
submitted its comments in this regard by letter dated
30 August 2001.

2. DESCRIPTION OF THE AID

2.1. The beneficiary

2.1.1. The development of the Pollmeier group

(8)

(9)

Pollmeier GmbH, Malchow, the legal person granted the
aid, is a company of the Pollmeier group. Formed in the
mid-1980s by Ralf Pollmeier in Rietberg (North Rhine-
Westphalia), the Pollmeier group supplies the German,
European and Asian furniture markets with edge-glued
panels from various plants in Germany and the United
States.

The first company in the Pollmeier group, Pollmeier
GmbH Holzverarbeitungsbetrieb, Rietberg, which was
formed in 1987, was active in the further processing of
German edge-glued panels for the furniture industry.
The Pollmeier group has developed strongly since the
start of the 1990s. In 1994 and 1998, Ralf Pollmeier
decided to set up two hardwood sawmills, one in
Creuzburg (Thuringia) under the name ‘Pollmeier Mas-
sivholz GmbH & Co. KG’ and another in Malchow
(Mecklenburg-Western Pomerania) under
the name
‘Pollmeier GmbH, Malchow’.

(10)

In 1999, Ralf Pollmeier decided to focus his activity on
the operation of the sawmills and to relinquish the
entrepreneurial management of the downstream wood-
processing business. In July 1999, the first company

formed by Ralf Pollmeier, Pollmeier GmbH Holzverar-
beitungsbetrieb, Rietberg, sold all its assets and liabilities
except for the holdings in the two hardwood sawmills
to a newly formed company, Pollmeier Leimholz GmbH.
The name ‘Pollmeier GmbH Holzverarbeitungsbetrieb,
Rietberg’ was changed to ‘Pollmeier Massivholz GmbH’.
This company today manages all central
functions
for the sawmills, such as centralised round timber
purchasing, centralised sales, personnel management
and accounting.

(11) The legal structure of the individual sawmill companies
was also reorganised. Pollmeier Massivholz GmbH & Co.
KG was renamed ‘Pollmeier Creuzburg GmbH & Co.
KG’, while Pollmeier GmbH, Malchow, was renamed
‘Pollmeier Malchow GmbH & Co. KG’. A further sawmill
was established in Kässlitz under the name ‘Pollmeier
Kässlitz GmbH & Co. KG’.

(12)

(13)

For stock purposes, a new company was formed under
the name ‘Pollmeier Support GmbH & Co. KG’. Another
new company was likewise formed: Pollmeier Duisburg
GmbH & Co. KG, which does not so far have any
business activity. All these companies belong to Pollmei-
er Massivholz GmbH and are managed by companies
belonging to Pollmeier Massivholz GmbH.

In 2000, Pollmeier Support GmbH & Co. KG took over
the business of a mechanical engineering company
which had gone into bankruptcy, changing its name
into ‘Hanses Sägewerkstechnik GmbH & Co. KG’. In
addition to this company, Ralf Pollmeier formed another
company to wind up existing contracts under the name
‘JH Maschinenbau GmbH’; Ralf Pollmeier holds all the
shares in the latter company.

(14) The following diagrams illustrate the structural develop-

ment of the Pollmeier group.

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(15) The various group companies and their respective

shareholders:

Pollmeier Massivholz GmbH & Co. KG, Creuzburg (Thur-
ingia)

Pollmeier GmbH, Holzverarbeitungsbetrieb, Rietberg
(North Rhine-Westphalia)

Name changed as of July 1999 to ‘Pollmeier Massivholz
GmbH, Creuzburg’ (Thuringia)

As of 1999,
Creuzburg’

‘Pollmeier Creuzburg GmbH & Co. KG,

Year

Shares held
by Ralf Pollmeier

Other shareholders: Pollmeier
GmbH,
Holzverarbeitungsbetrieb,
Rietberg

Shares held by Ralf Pollmeier

1996

40 %

Year

1996

1997

1998

1999

100 %

100 %

100 %

100 %

1997

40 %

1998

40 %

1999

40 %

60 %

60 %

60 %

60 %

2000

0 %

100 %

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Pollmeier GmbH, Malchow,
Pomerania)

(Mecklenburg-Western

JH Maschinenbau GmbH

As of 1999,
Malchow’

‘Pollmeier Malchow GmbH & Co. KG,

Year

2000

Shares held by Ralf Pollmeier

100 %

Year

1998

1999

2000

Shares held by Pollmeier Massivholz GmbH,
Creuzburg (formerly, Pollmeier GmbH,
Holzverarbeitungsbetrieb, Rietberg)

100 %

100 %

100 %

Pollmeier Kässlitz GmbH & Co. KG, Kässlitz (Thuringia)

Year

1999

2000

Shares held by Pollmeier Massivholz GmbH,
Creuzburg (formerly, Pollmeier GmbH,
Holzverarbeitungsbetrieb, Rietberg)

100 %

100 %

Pollmeier Leimholz GmbH, Rietberg (North Rhine-
Westphalia)

Year

Shares held

Shares held by
by Ralf Pollmeier Doris Tegelkamp Marlene Pollmeier

Shares held by

1999

24 %

2000

24 %

38 %

38 %

38 %

38 %

Inland Wood Specialties, LP, Spokane, United States of
America

Year

Shares held by Ralf
Pollmeier

Other shareholders

1996

74,25 %

24,75 %: Ekkehard Poll-
meier

Pollmeier Duisburg GmbH & Co. KG, Duisburg

1997

74,25 %

24,75 %: Ekkehard Poll-
meier

Year

2000

Shares held by Pollmeier Massivholz GmbH,
Creuzburg (formerly, Pollmeier GmbH,
Holzverarbeitungsbetrieb, Rietberg)

100 %

Until 1 June
1998

74,25 %

24,74 %: Ekkehard Poll-
meier

1 June 1998/
31 December
1998

23,25 %

Pollmeier Support GmbH & Co. KG, Rietberg

As of 2000, ‘Hanses Sägewerkstechnik GmbH & Co. KG,
Meschede’

1999

23,25 %

Year

Shares held by Pollmeier
Massivholz GmbH,
Creuzburg (formerly
Pollmeier GmbH,
Holzverarbeitungsbetrieb,
Rietberg)

1999

100 %

Shares held by Josef Hanses

2000

75,4 %

24,6 %

2000

23,25 %

24,75 %: Ekkehard Poll-
meier
41 %: Doris Tegelkamp
10 %: John Gottwald

1 %: IWS, Inc

24,75 %: Ekkehard Poll-
meier
41 %: Doris Tegelkamp
10 %: John Gottwald

1 %: IWS, Inc

24.75 %: Ekkehard Poll-
meier
41 %: Doris Tegelkamp

10 %: John Gottwald
1 %: INWS, Inc

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2.1.2.

Economic integration of the individual group enter-
prises

(16) On the web site of the Pollmeier group, the various
group companies,
including the United States-based
Inland Wood Specialties LP (IWS), are described as
‘production sites’. The activity of the group is described
as the supply of the German, European and Asian
furniture industry with top-quality edge-glued panels
from plants in Germany and the United States of
America. IWS products were distributed in Europe until
17 July 1999 by Pollmeier GmbH Holzverarbeitungs-
betrieb Rietberg on the basis of a commercial agency
agreement and thereafter by Pollmeier Leimholz GmbH,
Rietberg.

(17)

Prior to 1 June 1998, all companies of the Pollmeier
group were controlled directly or indirectly by Ralf
Pollmeier via Pollmeier GmbH Holzverarbeitungsbe-
trieb, Rietberg. Active on the same market and controlled
by the same person, the companies did not enjoy any
economic autonomy and are therefore to be viewed as
forming a single economic unit. Pollmeier GmbH,
Malchow, cannot therefore be considered separately, at
least until 1 June 1998.

(18) On 1 June 1998, Ralf Pollmeier sold 51 % of the shares
in IWS to his sister, Doris Tegelkamp, and to John
Gottwald. As of this date, he has held only 23,25 % of
the IWS shares. IWS is still described as a production
site of the Pollmeier group, its products being distributed
until 17 July 1999 by Pollmeier GmbH, Holzverarbei-
tungsbetrieb, Rietberg.

2.2. The measures

2.2.1. Measures for Pollmeier GmbH, Malchow

(19) The Ministry of Economic Affairs of

the Land of
Mecklenburg-Western Pomerania decided on 2 Septem-
ber 1998 to grant Pollmeier GmbH, Malchow, invest-
ment aid for the construction of a second sawmill in
Malchow under the 27th outline plan, approved by the
Commission, for the joint Federal Government/Länder
scheme for improving regional economic structures
(1998 to 2002) (7) (hereinafter, the 27th outline plan).
This decision was modified on 12 May 1999. The
sawmill
is located in an assisted area covered by
Article 87(3)(a) of the EC Treaty.

(20) The grant amounts to a maximum of DEM 16 384 600
(EUR 8 377 313), which corresponds to 30,23 % gross
of the eligible investment cost of DEM 54,2 million
(EUR 27,7 million). According to Germany, the aid was
granted contingent on the creation of 80 jobs. The
investment project commenced on 1 June 1998 and was
to be concluded by 31 May 2001.

(21) Moreover, pursuant to the Investment Allowance Law
of 1999 (8), a supplementary investment allowance of
DEM 9,3 million (EUR 4,75 million) was granted,
corresponding to 17,15 % gross of the eligible invest-
ment cost.

(22) On 27 January 1999, Pollmeier GmbH, Malchow,
further received a loan assisted out of ERP resources
from IKB Deutsche Industriebank AG, North Rhine-
Westphalia Branch in the amount of DEM 5 million
(EUR 2,55 million) at an interest rate of 3,75 % p.a. The
interest subsidy corresponds to an aid element of 0,80 %
gross.

(23) The overall aid intensity for the measures described in

recitals 19 to 22 is thus 48,18 % gross.

(24) On 29 July 1999, Pollmeier GmbH, Malchow, requested
further aid in the amount of DEM 7,5 million
(EUR 3,58 million) for investments in additional facilities
for wood processing and the refining of sawmill products
totalling DEM 25 million (EUR 12,78 million). Germany
emphasises that no decision has been made on the
granting of the investment aid, which will have to be
decided on under the then applicable outline plan for
the joint Federal Government/Länder scheme (probably
the 29th plan) and would correspond to an aid intensity
of 30 % gross. This also applies to the granting of a
supplementary investment allowance in the amount of
DEM 4,5 million (EUR 2,3 million), which would
correspond to an aid intensity of 18 % gross. Germany
has not yet decided on the application, as it confirmed
in its response to the initiation of the proceedings.

(25) The aid intensity for these measures amounts to 48 %

gross.

(26) The investment project, which began on 2 January 2000
and is to be completed on 1 January 2003, is linked to
the creation of 25 jobs.

( 7) OJ C 166, 12.6.1999, p. 9.

(8) SG (98) D 12438, 30.12.1998.

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2.2.2. Measures for Pollmeier GmbH & Co. KG, Kässlitz

to the condition inter alia that the beneficiaries fulfilled
the definition of an SME set out in the recommendation
and the Community guidelines.

(27) By decision of 3 April 2000, Germany decided to grant
Pollmeier GmbH & Co. KG, Kässlitz, under the 27th
outline plan,
investment aid in the amount of
DEM 19,03 million (EUR 9,73 million), corresponding
to 21,65 % of
the eligible investment costs of
DEM 87,88 million (EUR 44,93 million). Moreover, the
finance plan foresaw a further investment allowance
under the Investment Allowance Law of 1999 in the
amount of DEM 19 136 250 (EUR 9,78 million), which
corresponded to a planned gross aid intensity of
21,75 %. The overall aid intensity for the abovemen-
tioned measures thus amounted to 43,4 % gross.

(28) The purpose of the measures was to create new sawmill
and wood-processing capacities in Kässlitz (Hellingen),
i.e. at a site which is located within an assisted area
covered by Article 87(3)(a) of the EC Treaty. According
to Germany, the granting of aid was linked to the
creation of 180 jobs and 20 trainee places. The invest-
ment period was specified as being from 1 December
1999 to 30 November 2002.

(29)

In its reply to the initiation of proceedings, Germany
informed the Commission that Pollmeier GmbH & Co.
KG, Kässlitz, had not been granted any aid. The firm had
withdrawn its application, whereupon the decision to
grant investment aid was revoked.

2.3. Grounds for initiating the procedure

(30) The Commission harboured doubts as to whether the
aid recipient could be considered an SME and whether
the aid as a whole was covered by approved aid schemes.
Despite the information submitted by Germany in
response to the order to provide information (9), these
doubts could not be allayed.

(31)

In order to be entitled to the granted aid with gross aid
intensities of 48,18 %, 48 % and 43,4 %, Pollmeier
GmbH, Malchow, and Pollmeier GmbH & Co. KG,
Kässlitz, had to be genuine SMEs. They thus had to fulfil
all the criteria set out in the Community guidelines. The
regional aid schemes under which the State aid was
granted or was to be granted had been approved subject

(32) The issue at stake was in particular whether the legal
companies to which the various aid measures were
granted could be considered in isolation as the benefici-
aries of
the respective aid measures. The issue in
particular was whether the companies form independent
economic units or whether the beneficiary enterprise
also included other companies belonging to the Pollmei-
er group, in which case a ‘single economic unit’ within
the meaning of case-law would be concerned (10). The
doubts related in particular to the relations of the new
sawmill companies to Inland Wood Specialties (United
States of America) and the degree of their integration
with this company. All of these companies are directly
or indirectly related to each other through the person of
Ralf Pollmeier and his companies. The extent of the
enterprise which was the recipient of the granted aid has
first to be defined before the Commission can assess
whether the beneficiaries of the aid comply with the
definition of an SME.

(33) The still incomplete information provided by Germany
concerning the companies belonging to the Pollmeier
group did not allow the Commission to conclusively
rule on the SME status of the beneficiaries and conse-
quently on whether the aid granted to Pollmeier GmbH,
Malchow, and to Pollmeier GmbH & Co. KG, Kässlitz,
were covered by regional aid schemes previously
approved by the Commission or whether it lay at least
in part outside the approved schemes and was thus to
be viewed as new aid. The Commission also had doubts
on the compatibility of the entire aid package with the
common market.

(34)

For this reason, the Commission decided to initiate
proceedings under Article 88(2) of the EC Treaty and
to order the provision of
to
Article 10(3) of Regulation (EC) No 659/1999.

information pursuant

3. COMMENTS FROM INTERESTED PARTIES

(35) After

initiating the proceedings,

the Commission
received comments from one national association rep-
resenting the sawmill and wood industry and from
Pollmeier GmbH, Malchow (now Pollmeier Malchow
GmbH & Co. KG).

( 9) Pursuant to Article 10(3) of Regulation (EC) No 659/1999 and
the judgment in Case C-47/91, Italy v Commission [1994] ECR
I-4635.

(10) See Judgment of the Court of Justice of 14.11.1984 in Case 323/

82 Intermills v Commission [1984] ECR 3809.

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(36) The Association of the German Sawmill and Wood
Industry informed the Commission that the building
permit for the Kässlitz mill had been issued on 2 July
2001. It was further pointed out that the shareholders
of the United States company Inland Wood Specialties
LP, Spokane,
included a sister and brother of Ralf
Pollmeier. The Association stated that expansion invest-
ment of DEM 40 million had not been taken into
account by the Commission and that additional aid
measures might have been granted for this project.
Finally,
it was mentioned that, according to several
forestry administrations, Pollmeier pays for beechwood
purchases in all Länder with a guarantee from the Land
of Thuringia.

(41)

Finally, Pollmeier GmbH, Malchow, emphasised that the
Group’s sawmills did not compete with other European
sawmills and that their activity has therefore not limited
the sales opportunities of other European sawmills.

4. COMMENTS FROM GERMANY

(42) Germany responded to the initiation of proceedings by
letter dated 15 May 2001, providing the Commission
with the requested information.

(37) The beneficiary Pollmeier GmbH, Malchow, also sent
the Commission comments. The firm referred to the
grounds for constructing the Malchow sawmill, the aim
of which was to revive the German sawmill industry.

(43)

(38) The comments may be summarised as follows: the
Pollmeier sawmills have no effect on other sawmills in
Europe. Pollmeier products compete almost exclusively
with imports from the United States, and more than
55 % of Pollmeier sawmill production is exported to
third countries. The investments carried out by the
Pollmeier group have a substantial regional
impact.
The mills process exclusively deciduous trees, mainly
beechwood. They are the only sawmills in Europe which
work with the latest American computer-controlled
cutting technology and are therefore able to compete
with other sawmills outside Europe. Thanks to this
technology, the Pollmeier sawmills are able to process
various wood qualities in an optimal fashion and to
cover the various segments of the quality spectrum with
the consistent production quality of their products.

(39)

Pollmeier GmbH, Malchow, also emphasised the positive
effect of
the firm’s sawmills on the upstream raw
material market. It sent the Commission statements
from several suppliers in which they stated that the
market
for beechwood has developed significantly
thanks to the Pollmeier sawmills, which constitute a
steady buyer of
In
the demand for C and D categories of
particular,
beechwood has increased substantially. The Pollmeier
sawmills are moreover prepared to purchase lower
quality wood, while other buyers are always searching
for higher quality wood. This has the consequence that
the forestry administrations are increasingly able to
finance themselves autonomously and are thus less
dependent on public resources.

large quantities of beechwood.

(40) The Pollmeier sawmills also have an impact on their
buyer markets. As the only sawmills in Europe which
are able to offer their buyers a wide selection of
various wood qualities, they offer the European furniture
industry an alternative to American products and thus
the opportunity to save transport costs. This reinforces
the competitiveness of the European furniture industry.

In its response to the initiation of proceedings, Germany
initially informed the Commission that only Pollmeier
GmbH, Malchow, had received State aid. The decision to
grant aid to Pollmeier GmbH & Co. KG, Kässlitz, had
been revoked, and no decision had yet to be made on
the aid for the expansion of the operations of Pollmeier
GmbH, Malchow.

(44) Germany provided detailed explanations on the develop-
ment of the Pollmeier group from the construction of
the first wood processing plant (edge-glued wood) in
Rietberg to the group’s reorientation towards sawmills.
Germany further provided detailed information on the
German beechwood market and the heavy competition
from United States plants, explaining the grounds for
the reorientation towards sawmills. Germany further
provided information on the economic relevance of the
Creuzburg and Malchow sawmills and on the turnover
of the Pollmeier sawmills. Germany argued that the
Pollmeier sawmills do not compete with other European
sawmills, but exclusively with sawmills in the United
States; their production therefore is not at the expense
of European competitors. Their creation has enabled
regions with structural problems to develop positively.

(45) Germany also provided a description of the corporate
structure of the Pollmeier group, including the relevant
financial figures. Regarding the issue of the SME status
of Pollmeier GmbH, Malchow, Germany again stated
that the enterprise met the conditions set out in the
definition of an SME. According to Germany’s argumen-
tation, to assess the SME status of Pollmeier GmbH,
Malchow,
it must be examined whether its parent
company, Pollmeier GmbH, Holzverarbeitungsbetrieb,
Rietberg, met the SME criteria. Given that Pollmeier
GmbH, Holzverarbeitungsbetrieb, Rietberg, holds a
majority share in Pollmeier GmbH, Malchow, and
Pollmeier Massivholz GmbH & Co. KG, the relevant
financial
these three companies must be
cumulated. The figures show that Pollmeier GmbH
Holzverarbeitungsbetrieb, Rietberg, met the SME criteria
in the period from 1996 to 1998. Given that Pollmeier
GmbH Holzverarbeitungsbetrieb, Rietberg, belongs to a
natural person, it also meets the independence criterion
specified in the definition of an SME.

figures of

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(46) Germany takes the view that the data for the American
firm Inland Wood Specialties, Spokane, United States of
America (IWS) should not be cumulated with those of
the other Pollmeier companies. The only connection
between the company granted the aid,
i.e. Pollmeier
GmbH, Malchow, and IWS consists in the natural
person Ralf Pollmeier. Because the SME criteria are not
applicable to natural persons, no connection within
the meaning of Article 1(4) of
the annex to the
recommendation exists.

(47) Germany adds that in any case, even if the IWS data
were cumulated with those of the other branches, 1998
and not 1997 had to be taken as the reference year for
consideration of the enterprise’s SME status, given that
the final decision of the Land (Mecklenburg-Western
Pomerania) on the granting of the aid was made in
1999. On 1 June 1998, Ralf Pollmeier sold 51 % of the
shares in IWS and now holds only 23,25 % of the IWS
shares. Because this results in a holding of less than
25 %, the IWS data should not be cumulated.

(48) Germany further argues that, even if 1997 were to be
viewed as the reference year, the principle would have
to apply that any sale of corporate shares made after the
approval of the last accounting period, but prior to the
decision granting the aid would have to be taken into
consideration when applying Article 1(4) of the annex
to the recommendation.

(49) According to Germany’s argumentation, this principle
results
from Article 5 of Council Regulation
(EEC) No 4064/89 of 21 December 1989 on the control
of concentrations between undertakings (11), as last
amended by Regulation (EC) No 1310/97 (12), and from
recital 27 of the Commission Notice on calculation of
turnover under Council Regulation (EEC) No 4064/89
on the control of concentrations between undertak-
ings (13). A confirmation of
interpretation of
Article 5 of Regulation (EEC) No 4064/89 may be found
in the judgment of
the Court of First Instance of
24 March 1994 in Case T-3/93 Air France v Commission
(Air France judgment) (14).

this

(50) Germany argues that this principle should be adopted
when considering the data on turnover, the balance
sheet total and the number of employees in the last
approved accounting period. In the present case, the sale
of the majority of shares in IWS by Ralf Pollmeier should

( 11) OJ L 395, 30.12.1989, p. 1, revised version in OJ L 257,

21.9.1990, p. 13.

( 12) OJ L 180, 9.7.1997, p. 1.
( 13) OJ C 66, 2.3.1998 p. 25.
( 14) [1994] ECR II-121.

be taken into consideration, given that it took place
before the decision to grant the aid. Consequently, the
IWS data should not be cumulated with those of the
other Pollmeier companies.

(51) The fact that the various shareholders of IWS all belong
to the same family cannot, according to Germany,
serve as proof that Ralf Pollmeier controls IWS. Such
argumentation would contradict the meaning of the
SME rules.

(52) Germany concludes that Pollmeier GmbH, Malchow, is
an SME and that the granted aid is thus covered by
approved aid schemes.

(53) Germany stated in response to the comments from third
the Association of the
parties, particularly those of
German Sawmill and Wood Industry, that no aid had
been granted for the project in Kässlitz. The guarantee
mentioned by the Association represented a normal
business practice where wood buyers provide bank
guarantees in the amount of the purchase price — this
was also stipulated in the general terms and conditions
for sales and payment. The guarantee was granted by
the buyer’s company bank. Germany confirmed that no
guarantee had been granted under the Land guarantee
programme.

5. ASSESSMENT

(54) After the proceedings had been initiated, Germany
confirmed that Pollmeier GmbH & Co. KG, Kässlitz, was
not granted any aid. The aid requested by Pollmeier
GmbH, Malchow, to expand its product range, i.e. for
wood processing and the refining of sawmill products,
was not approved, according to the information pro-
vided by the German authorities, and therefore likewise
does not constitute part of the subject of this Decision.
The project was also not notified and thus not covered
by this Decision.

(55) According to Germany, the aid to Pollmeier GmbH,
Malchow, was granted under approved aid schemes.

(56) The aid granted to Pollmeier GmbH, Malchow,

in
1998/1999 to construct a sawmill in Malchow, which
corresponded to a total aid intensity of 48,18 % gross,
was allegedly granted under regional schemes previously
approved by the Commission (15).

(15) 27th framework plan, Investment Allowance Law, ERP resources.

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(57)

Pursuant to Article 87(1) of the EC 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 is incompatible with
the common market insofar as it affects trade between
Member States. The aid for Pollmeier GmbH, Malchow,
was granted through State resources. The measures
distort or threaten to distort competition because they
were granted to an undertaking producing certain goods,
thus granting this undertaking an advantage over its
competitors. Trade between Member States is affected
because the production sector in which Pollmeier is
active extends across the Community.

(58) Germany did not dispute that the measures granted to
the undertaking were in the nature of aid.
In its
comments when the proceedings were initiated, Pollmei-
er GmbH, Malchow, argued that it does not compete
with European sawmills. The Commission notes that
even if Pollmeier’s production largely competes with
United States sawmills, this does not mean that the aid
granted to Pollmeier GmbH, Malchow, does not distort
or threaten to distort competition within the Com-
munity. Milling and initial treatment in the wood sector
is engaged in across the Community, with significant
production in Austria, Finland and Sweden. These
countries are also highly active on Community and
export markets and thus compete with Pollmeier GmbH,
Malchow.

(59) The Commission notes that the measures were granted
in disadvantaged regions covered by Article 87(3)(a) of
the EC Treaty. The Commission further notes that the
maximum permissible gross aid intensity under the
programmes applicable in these regions was 35 % and
50 % for large enterprises and SMEs respectively. These
percentages are ceilings to be applied to the total aid
granted if aid is granted concurrently under several
regional schemes or from local, regional, national or
Community resources.

(60)

In view of the gross intensity of the measures (48,18 %),
the aid granted to Pollmeier GmbH, Malchow, presup-
the SME criteria
poses that the recipient
defined in the applicable Community guidelines and the
recommendation when the programme was approved.

firm met

5.1. The definition of an SME

(61)

Small and medium-sized enterprises (SMEs) are defined
as enterprises which:

— have fewer than 250 employees,

— have

an

annual

exceeding
EUR 40 million or an annual balance sheet total
not exceeding EUR 27 million,

turnover

not

— conform to the independence criterion (16).

(62)

(63)

(64)

Pursuant to Article 1(3) of the annex to the recommen-
dation, independent enterprises are enterprises which
are not owned as to 25 % or more of the capital or the
voting rights by one enterprise, or jointly by several
enterprises, falling outside the definition of an SME or a
small enterprise.

In this context, the Commission recalls its policy towards
small and medium-sized enterprises which is aimed at
aiding SMEs through targeted incentives to overcome a
series of handicaps. As explained in point 1.2 of the
Community guidelines, one of the main such handicaps
is the difficulty in obtaining capital and credit and access
to information, notably regarding new technology and
potential markets, and the fact that the introduction of
new regulatory arrangements often entails higher costs
for SMEs.

Support for SMEs (e.g. by increasing the aid permissible
for them) is therefore not only justified by the contri-
bution which these enterprises make towards achieving
the goals sought in the general interest, but also by the
necessity of offering them, in the light of their positive
role, compensation for the handicaps they must over-
come. It must be ensured, however, that the benefit is in
fact only granted to enterprises suffering from these
handicaps. In particular, the SME definition used must
circumscribe small and medium-sized enterprises so
that only those enterprises which generate the desired
positive externalities and which must overcome the
abovementioned handicaps are encompassed by the
term. The definition should therefore not include the
many larger companies which do not necessarily pro-
duce such positive external effects or which do not have
to contend with the handicaps typically faced by SMEs.
Aid granted to such companies is liable to lead to further
distortion of competition and intra-Community trade.

(16) This is the definition of an SME given in Article 1(1) of the

Annex to the recommendation.

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(65) This principle is stated in recital 22 of the recommen-

dation, which reads as follows:

‘Whereas, therefore, fairly strict criteria must be
laid down for defining SMEs if the measures aimed
at them are genuinely to benefit the enterprises for
which size represents a handicap.’

(66) The Commission stresses in particular the need to ensure
that circumvention of the independence criterion is
avoided. In order to ensure that only genuine SMEs are
included, the Community guidelines specify that legal
arrangements in which SMEs form an economic group
much stronger than an individual SME must be elimin-
ated.

5.2. The status of the aid beneficiary

(67) Article 87(1) of the EC Treaty refers to the concept of
undertaking to define the beneficiary of aid. As con-
the concept of
firmed by the Court of
undertaking may not be limited to one distinct legal
entity, but may encompass a group of companies. For
the purposes of competition law, undertakings are to be

Justice (17),

equated with ‘economic units’. It is therefore necessary
to examine various factors, such as the distribution of
shares, the identity of the managing directors, and the
degree of economic integration.

(68) According to the recommendation,

in determining
whether the undertaking benefiting from aid is an SME,
the reference year is that of the last approved accounting
period. Article 1(6) of the annex to the recommendation
states that an enterprise which exceeds or falls below the
employee thresholds or financial ceilings at the final
balance sheet date acquires or loses the status of an
‘SME’ only if the phenomenon is repeated over two
consecutive financial years.

(69) The original allocation decision on the investment aid
was made in 1998. The Commission assumed when
initiating the proceedings that 1998 should be viewed
as the year in which the aid was granted and that 1997
should be viewed as a reference year for application of
the definition of an SME. Germany argued that 1999
was the year of the grant, because the allocation decision
was substantially amended. This position contradicts the
principle asserted by Germany in other cases (18), namely
that amendment of an allocation decision does not
legally constitute a new decision. The amendment serves
only to adapt the amount of aid, since other aid granted
in the same project is to be considered.

(70) The Commission is of the opinion that 1998 is to be viewed as the year of the grant. Accordingly,
the reference data for the beneficiary should be the number of employees and the financial data
from 1997 and 1996. For the two financial years preceding the decision to grant the aid, the
relevant data from the four companies of the Pollmeier group reveal the following picture:

Name

Number
of employees

Annual turnover
(in EUR million)

Balance sheet total
(in EUR million)

1996

1997

1996

1997

1996

1997

Pollmeier GmbH, Rietberg

120

103

20,34

19,56

6,98

7,25

Pollmeier Massivholz GmbH & Co. KG Creuz-
burg

59

93

1,41

16,42

12,03

15,73

Inland Wood Specialties LP, Spokane, United
States of America

236

260

23,05

30,75

4,25

6,21

Total

415

456

44,80

66,73

23,53

29,19

( 17)

Judgment of 14.11.1984 in Case 323/82 Intermills v Com-
mission [1984] ECR, 3809.

(18) Position of Germany in Case 41/2001, State aid for Klausner

Nordic Timber GmbH & Co KG.

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(71) The Commission is of the opinion that, contrary to Germany’s comments, IWS, the United States-
based company, must be considered when defining the beneficiary. In 1996 and 1997 the
beneficiary enterprise consisted of Pollmeier GmbH Holzverarbeitungsbetrieb, Rietberg, Pollmeier
Massivholz GmbH & Co. KG, Creuzburg, and IWS. All of these companies are directly or indirectly
controlled by Ralf Pollmeier and are engaged in the same or parallel economic activities. One can
therefore conclude that they are economically integrated. None of these companies can be said to
form an independent economic unit. The degree of economic integration is sufficiently high to
conclude that IWS forms an economic unit together with the two European Pollmeier sawmills.

(72)

If one considers 1996 and 1997, it is evident that the beneficiary was not an SME in 1998. In 1996
the cumulated number of employees was 416 and the cumulated annual turnover EUR 44,8 million,
thus exceeding the SME thresholds. In 1997 the beneficiary had 465 employees, annual turnover
of EUR 66,73 million and a balance sheet total of EUR 29,19 million. The data of the beneficiary
exceeded the SME thresholds in 1997. Accordingly, the beneficiary exceeded the SME thresholds in
two consecutive financial years.

(73)

If the Commission were to accept Germany’s argument and take 1999 as the year of the grant,
1998 would be the reference year. For the two financial years preceding the decision to grant the
aid, the relevant data from the companies of the Pollmeier Group reveal the following picture:

Name

Number
of employees

Annual turnover
(in EUR million)

Balance sheet total
(in EUR million)

1997

1998

1997

1998

1997

1998

Pollmeier Holzverarbeitungsbetrieb, Rietberg
As of 1999: Pollmeier Massivholz GmbH

103

79

19,56

15,16

7,25

6,48

Pollmeier Massivholz GmbH & Co. KG Creuz-
burg
As of 1999: Pollmeier Creuzburg GmbH & Co.
KG

Pollmeier GmbH, Malchow
As of 1999: Pollmeier Malchow GmbH & Co.
KG

93

160

16,42

29,91

15,73

15,95

—

0

—

0

n.a.

2,57

Inland Wood Specialties LP, Spokane

260

113

30,75

21,09

6,21

4,91

Total (without IWS)

196

239

35,98

45,07

22,98

25

Total (with IWS)

456

371

66,73

66,16

29,19

29,91

(74)

If one considers the number of employees and the
financial data of the beneficiary, the data from the three
companies of the Pollmeier Group must be cumulated
for 1997. In 1997, the beneficiary had 456 employees,
annual turnover of EUR 66,73 million and a balance
sheet total of EUR 29,19 million. The data for the
beneficiary thus exceed the thresholds stipulated in the
definition of an SME.

we restrict ourselves to the European companies, includ-
ing Pollmeier GmbH, Malchow, and do not add the
employees and financial data of IWS, a total of 239
employees, turnover of EUR 45,07 million and a balance
sheet total of EUR 25,1 million result for the beneficiary
in 1998. The beneficiary would thereby have fallen
below the thresholds in the definition of an SME in
1998.

(75)

Pollmeier GmbH, Malchow, was formed in 1998. On
1 June 1998, the structure of the group changed insofar
as Ralf Pollmeier sold 51 % of the shares in IWS and has
since then only held 23,25 % of the IWS shares. Even if

(76) Article 1(6) of

the annex to the recommendation

expressly states, however:

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‘Where, at the final balance sheet date, an enterprise
exceeds or falls below the employee thresholds or
financial ceilings, this is to result in its acquiring or
losing the status of SME only if the phenomenon is
repeated over two consecutive financial years.’

year. The Commission therefore concludes that the aid
beneficiary does not formally comply with the SME
definition and that it cannot be seen as suffering from
the handicaps to SMEs.

(77) At the final balance sheet date, the beneficiary was below
the thresholds for employees, turnover and the balance
sheet total. However, this phenomenon was not repeated
over two consecutive financial years, since in 1997
the enterprise’s figures were still above the applicable
employee thresholds and financial ceilings.

(78)

In 1996,

In 1998, the beneficiary did not qualify as an SME, since
the SME thresholds had been exceeded in the two
the cumulated workforce
preceding years.
amounted to 416 and the cumulated turnover
to
EUR 44,8 million. Consequently, the beneficiary did not
possesses SME status in 1998, nor did not it acquire
such status in 1999. The beneficiary was thus still a large
company when the aid was granted in 1999.

(79) Germany has argued that the change in ownership of
IWS which occurred on 1 June 1998 should be taken
into account when applying the definition of an SME,
since this change was made before the aid was granted.
Germany invokes the Air France judgment as well as
Article 5(4) of Regulation (EEC) No 4046/89, which lays
down the principles of calculation of turnover for the
purposes of merger control. The Commission deems the
Air France judgment to be irrelevant to the assessment
of the present aid. The judgment relates to the sale of a
corporate division before an actual merger. The present
case does not concern the sale of assets, but the change
of the shareholder structure. Germany’s argument is
therefore not relevant if one considers the number of
employees and the financial data of the beneficiary,
defined as the sawmills of the Pollmeier group.

(80) The recommendation stipulates that a company acquires
or loses the status of an SME only if the thresholds are
exceeded or fallen below over two consecutive years. It
is clear that the beneficiary was above the SME thresholds
prior to 1 June 1998. This fact is to be taken into account
when reviewing the SME status of the beneficiary as
required in accordance with Article 1(6) of the annex to
the recommendation. At the time the aid was granted
(i.e. 1999), the data of the beneficiary enterprise had
fallen below the SME thresholds for less than one

(81) Moreover, the change of ownership of IWS occurred on
1 June 1998, three days after 27 May 1998, when
the application for investment aid was submitted by
Pollmeier GmbH, Malchow. A large portion of the shares
of Ralf Pollmeier in IWS were sold to Ralf Pollmeier’s
sister and to John Gottwald, who is not a member of the
Pollmeier family. Since then 89 % of the shares in IWS
have been in the possession of Ralf Pollmeier and
members of his family (his brother and his sister). Since
17 July 1999, Ralf Pollmeier’s sister, Doris Tegelkamp,
has also held 38 % of the newly formed Pollmeier
Leimholz GmbH, Rietberg.

(82) The Commission doubts whether this change of owner-
ship is motivated by any purposes other than the
circumvention of
the SME definition. According to
recital 18 of the recommendation, ‘there is also a need
to rule out legal entities composed of SMEs which form
a grouping whose actual economic power is greater than
that of an SME’. It is one of the Commission’s tasks to
ensure that Community law, in the present case, the
definition of an SME, is not circumvented, and it has
done so in other cases (19).

(83) Neither Germany nor the beneficiary itself have present-
ed any justification for the change in the ownership
structure of the Pollmeier group. Apparently, the only
purpose of this restructuring was to assure that Pollmeier
GmbH, Malchow, would enjoy the advantages granted
to SMEs to offset specific handicaps linked to their size.
A look at the structure of the Pollmeier group, the links
between the shareholders of
the various Pollmeier
companies and the economic links of the various entities
of the group gives the impression that the group does
not suffer from the typical handicaps of SMEs referred
to by the Community guidelines. For example, Pollmeier
GmbH, Malchow, benefits in particular from the market
presence of the other companies of the Pollmeier group
and from the technology of the existing sawmills and
will not therefore have to overcome the (technological
and distributive) obstacles otherwise associated with
entry into the relevant market.

(84) The Commission is moreover of the opinion that, even
if the beneficiary were structurally an SME, it appears
that it does not suffer from the handicaps typical of
SMEs. This reinforces the Commission in its conclusion
that the aid beneficiary is not an SME as defined by the
recommendation.

(19) State aid C 17/2000 for Solar Tech Sprl. Commission Decision

of 15.11.2000.

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5.3. The compatibility of the aid

(85) The aid provided to Pollmeier GmbH, Malchow, with an
aid intensity of 48,18 % was allegedly granted on the
basis of approved aid schemes. For investments in
Mecklenburg-Western Pomerania, the 27th framework
plan provides for a maximum aid intensity for large
companies of 35 % and for SMEs of 50 %. These aid
intensities correspond to the thresholds for regional aid
in the German regional aid map applicable at the time
the aid was granted (20).

(86) Given that the aid beneficiary is a large company, only
35 % of the aid granted complies with the conditions of
the scheme; therefore only aid up to this amount can be
seen as existing aid. The remaining 13,18 % must be
viewed as new aid. Since this new aid was granted
without the Commission’s approval, it is illegal.

(87) The aid was granted for an investment in Mecklenburg-
Western Pomerania. This region is an assisted area under
Article 87(3)(a) of the EC Treaty. In accordance with
point 2 of the guidelines on national regional aid (21)
(hereinafter, the regional guidelines), the guidelines apply
to regional aid granted in every sector of the economy
apart from the sectors to which special rules apply. Since
manufacturing of wood panels is not covered by any
special rules, the aid in question is assessed in accordance
with the provisions of the regional guidelines.

(88) According to the regional guidelines, a derogation from
the incompatibility principle established by Article 87(1)
of the EC Treaty may be granted in respect of regional
aid only if a reasonable equilibrium is guaranteed
between the resulting distortions of competition and the
advantages of the aid in terms of the development of
less-favoured regions. The regional guidelines further
state that an individual ad hoc payment made to a
private firm may have a major impact on competition
in the relevant market, and its effects on regional
development are likely to be too limited. However, ad
hoc aid can nonetheless be viewed as compatible,
provided it does not exceed the regional aid thresholds
approved by the Commission.

(89) The aid in the amount of EUR 3 650 860 represents an
additional aid intensity of 13,18 % above the ceiling
for regional aid to large companies in the Land of
Mecklenburg-Western Pomerania provided for in the
German regional aid map. For the abovementioned
reasons,
the beneficiary is not an SME within the
meaning of the Community guidelines and Commission
Regulation (EC) No 70/2001 of 12 January 2001
concerning the application of Articles 87 and 88 of the
EC Treaty to State aid to small and medium-sized
enterprises (22). The aid ceiling of 35 % authorised by the
Commission was determined with due regard to the
nature and intensity of the regional problems that are
being addressed. The granting of an additional aid
intensity of 13,8 % cannot therefore be justified by any
regional problems.

(90) Germany did not specify any other ground for the
compatibility of the aid that might have applied in the
present case. The exemptions in Articles 87(2) of the EC
Treaty are not applicable in the present case, since the
aid does not have a social character and is not granted
to individual consumers, does not serve to make good
the damage caused by natural disasters or other excep-
tional occurrences, and is not granted to the economy
of certain areas of the Federal Republic of Germany
affected by the division of Germany. The exemption in
Article 87(3)(b) of the EC Treaty is not applicable
because the project obviously does not represent an
important project of common European interest. The
exemption in Article 87(3)(c) of the EC Treaty (insofar
as the development of certain economic activities is
concerned) is likewise not applicable since the aid is
not intended to facilitate the development of certain
economic activities. This provision further requires that
the aid must ‘not adversely affect trading conditions
to an extent contrary to the common interest’. The
Commission is of the opinion that this condition has
not been met. The main effect of the aid is in fact to
promote the competitiveness of the beneficiary in a
production segment in which there is considerable
international
in
Article 87(3)(d) of the EC Treaty is likewise not appli-
cable because the aid clearly does not serve to promote
culture and heritage conservation.

competition.

exemption

The

(91) The additional 13,18 % aid intensity thus does not fulfil
the criteria required in order to be considered compatible
with the common market and has to be recovered from
the beneficiary.

( 20) State aid N 613/96, approved by decision of the Commission on

18 December 1996, OJ C 288, 23.9.1997, p. 3.

( 21) OJ C 74, 10.3.1998, p. 9.

(22) OJ L 10, 13.1.2001, p. 33.

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6. CONCLUSION

(92) The Commission takes not of the revocation of the

decision to grant aid to Pollmeier & Co. KG, Kässlitz.

(93) The Commission finds that Germany has unlawfully
implemented aid of EUR 3 650 860 to Pollmeier GmbH,
Malchow, in breach of Article 88(3) of the EC Treaty.
With due regard to the above considerations,
the
Commission further concludes that the aid in question
the criteria required in order to be
does not fulfil
considered compatible with the common market,

HAS ADOPTED THIS DECISION:

Article 1

2.
Recovery shall be effected without delay and in accord-
ance with the procedures of national law provided that they
allow the immediate and effective execution of the decision.
The aid to be recovered shall include interest from the date on
which it was at the disposal of the beneficiary until the date of
its recovery. Interest shall be calculated on the basis of the
reference rate used for calculating the grant equivalent of
regional aid.

Article 3

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

The State aid which Germany has implemented for Pollmeier
GmbH, Malchow, amounting to EUR 3 650 860 is incompat-
ible with the common market.

Article 4

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 15 January 2002.

Article 2

1.
Germany shall take all measures necessary to recover
from the beneficiary the aid referred to in Article 1 and
unlawfully made available to the beneficiary.

For the Commission

Mario MONTI

Member of the Commission