2004/339/EC: Commission Decision of 15 October 2003 on the measures implemented by Italy for RAI SpA (notified under document number C(2003) 3528) (Text with EEA relevance)
Date: 2003-10-15
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, television

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 15 October 2003

on the measures implemented by Italy for RAI SpA

(notified under document number C(2003) 3528)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2004/339/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

complaint focused on the licence fee granted to RAI and
on a set of measures adopted by the Italian Government
in the first half of the 1990s in favour of RAI.

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 62(1)(a) thereof,

(2)

The Commission requested information from the Italian
authorities by letters of 15 July and 4 September 1996,
to which the Italian authorities replied by letters of 30
August and 4 November 1996 respectively.

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

(3)

On 23 May 1997 Mediaset took over its complaint as its
own and submitted further documents.

Whereas:

1. PROCEDURE

(1)

By way of a complaint lodged with it on 17 June 1996
by RTI SpA (Reti Televisive Italiane), an undertaking
controlling three Italian national television channels and
belonging to the Mediaset group (2), the Commission
was informed that Italy had implemented a number of
measures in favour of RAI-Radiotelevisione Italiana SpA
(the national public broadcaster, hereinafter RAI). The

(1) OJ C 351, 4.12.1999, p. 20.
(2) In the present decision the Commission will

to the
complainant as
is Mediaset SpA that has
since it
participated in the Commission's State aid investigation and since it
has made the complaint originally lodged by RTI SpA its own.

‘Mediaset'

refer

(4)

(5)

Another letter requesting information was sent by the
Commission to the Italian authorities on 1 July 1998.
The Italian authorities provided some of the information
requested at a meeting on 31 July and by letter of
7 August 1998. Meetings with the complainant were
held on several occasions.

On 19 October 1998 Mediaset
lodged an additional
complaint with the Commission concerning the same
aid measures mentioned in the original complaint.
Mediaset presented further documents by letter of 8
January 1999 and had a meeting at the Commission on
15 February 1999.

(6)

On 3 February 1999 the Commission enjoined Italy to
provide all the information necessary to assess whether

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the measures had to be considered as existing or new
aid (hereinafter
the injunction). This decision was
communicated to Italy by letter of 26 February. Italy
provided some of
information requested and
submitted observations by letter of 26 March. The
information by letter
Commission requested additional
of 28 April, to which the Italian authorities replied by
letter of 16 June.

the

(13)

from Codacons

Late comments were received by letter dated 12 June
2000
for
associations for the protection of the environment and
of the rights of users and consumers).

(Coordination

group

(7)

(8)

(9)

Mediaset wrote to the Commission on 17 May 1999 on
the question of whether
the measures had to be
considered as existing or new aid and had a meeting at
the Commission on 18 May.

By letter dated 27 September 1999, the Commission
informed Italy that
it had decided to initiate the
procedure laid down in Article 88(2) of the EC Treaty in
respect of some of the ad hoc measures indicated by
Mediaset as State aid (hereinafter the decision to initiate
the procedure).

The decision to initiate the procedure was published in
the Official Journal of the European Communities (3). The
Commission invited interested parties to submit their
comments on the measures.

(10)

The Commission received comments from Italy on 2
December 1999.

(11)

The Commission received comments from interested
parties as follows:

(14) Meetings with RAI were held at the Commission on 26

January and 4 December 2000.

(15) A meeting with the Italian authorities was held at the

Commission on 5 June 2000.

complainant

(16) Meetings with Mediaset were held at the Commission
on 20 March 2000, 20 June 2000, 2 May 2001,
20 June 2001 and 25 October 2001 and letters from
dated 8 November 2000 and
the
25 May 2001 were received. At
the meeting on
20 June 2001 Mediaset
submitted a study on the
restructuring of RAI prepared by Charles River
Associates. Mediaset also wrote to the Commission on
12 June 2002 and 20 April 2003.

(17) With the entry into force of the Amsterdam Treaty an
interpretative protocol on the
system of public
broadcasting was annexed to the EC Treaty (hereinafter
the Amsterdam Protocol).

— by letter dated 2 December 1999, comments from
(forwarded to Italy by letter of 6 December

RAI
1999),

(18)

— by letter dated 19 January 2000, comments from

Federazione Radio Televisioni (FRT),

— by letter dated 1 February 2000, comments from

(19)

Association of Commercial Televisions (ACT),

— by letter dated 28 January 2000, comments from

Mediaset.

aid rules

The Commission communication on the application of
service broadcasting (4)
state
(hereinafter the communication) sets out the principles
to be followed by the Commission in applying State aid
rules to State funding of public service broadcasting.

to public

the Commission
the communication,
In the light of
requested new information from Italy by letter dated
Italian
13 September 2002. A meeting with the
authorities was
on
8 December 2002 and some of
information
requested was received on 3 and 11 December 2002.

Commission
the

held

the

at

(12)

Comments from interested parties were forwarded to
Italy by letters of 6 December 1999 and 23 February
2000. Italy was thus given the opportunity to react; its
comments were received by letter dated 5 May 2000.

(20)

The Commission also wrote to the Italian authorities on
14 November 2002 requesting a number of documents.
The Italian authorities replied on 5 May 2003.

(3) See footnote 1.

(4) OJ C 320, 15.11.2001, p. 5.

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2. NATIONAL BACKGROUND

2.1. Historical development of the legal basis for
public service broadcasting in Italy

(21) After 1910 the Italian State reserved for

itself

In 1924 the public

the
exploitation of radiotelegraphic services and the right to
grant concessions and licences to private or public
operators.
radio service was
entrusted on the basis of an exclusive licence to URI,
which subsequently became EIAR and then RAI. From
State monopoly of
1927 the
broadcasting services by reference to their public utility
and their educational, artistic and cultural objectives
that are in the interests of everyone.

law justified

the

(22)

(23)

given

public

service

broadcasting was

In 1948 the Republican Constitution entered into force
and
a
constitutional foundation in the principle of freedom of
speech and in the right of individuals to be informed so
as to be able to participate in the democratic life of the
country. Radio and television broadcasting continued to
be the prerogative of the State on the basis of Article
43 of the Constitution, which refers to essential public
services of overriding general interest. RAI was the sole
concessionaire by virtue of a series of conventions.

It

Law No 103 of 14 April 1975 (Nuove norme in materia
di diffusione radiofonica e televisiva, hereinafter Law
stressed the link
situation.
103/75) codified this
between public service broadcasting, Article 43 of the
Constitution, the concept of essential public service of
overriding general
interest and the State monopoly in
this sector. Article 15 of Law 103/75, which confirms
the substance of Article 7 of Presidential Decree No 180
of 26 January 1952 (hereinafter Decree 180/1952),
provided for RAI to be financed through the licence fee,
advertising and other revenues established pursuant to
the Law.

general

Following

videotapes or

judgment by the Constitutional Court that contributed
substantially to opening up the Italian broadcasting
market to competition. In the case at issue, the Court
held that the monopoly of
local television and radio
broadcasting was unconstitutional, while it confirmed
that the State monopoly of national broadcasting was
legitimate since this was an essential public service of
overriding
Judgment
interest.
No 202/1976 local broadcasters appeared throughout
the country. After a number of years, thanks to the use
they would
of
broadcast the same programme at the same time over a
wide area (so-called syndication). The legality of
the
national broadcasting monopoly was again confirmed
the adoption of an
on a temporary basis (i.e. until
appropriate antitrust law for the broadcasting sector) by
the Constitutional Court
in 1981 with Judgment
No 148/1981, relying on the argument that national
broadcasting constituted an essential public service of
the
overriding general
national monopoly basically existed alongside private
operators that broadcast at national
level through the
syndication system.

interest. During the 1980s

radio connections,

(26)

Law No 223 of 6 August 1990 (Disciplina del sistema
radiotelevisivo pubblico e privato, hereinafter Law
223/90), which is the first general law regulating public
and private broadcasting, took note of and codified the
situation that developed in the broadcasting market
during the 1980s.
It provided for the possibility for
private concessionaires too to engage in broadcasting at
national level (and not only at local level), in addition to
the public service concessionaire.

(27) Other

established the

the Law relate

important provisions of

to
advertising. Article 8(6)
limit on
advertising for RAI and for private concessionaires:
advertising on RAI may not exceed 4 % of its weekly
broadcasting time and 12 % of any hour, while national
private concessionaires cannot exceed 15 % of daily
broadcasting time and 18 % of any hour. Article 8(16)
imposed a ceiling on RAI's advertising revenues that
was removed by Decree-Law 408/1992 with effect from
1 January 1994 (5).

(24)

The broadcasting market changed gradually. During the
the 1970s private operators started
second half of
broadcasting, first at local
level and then at national
level.

2.2. Description of RAI

(25)

The Constitutional Court endorsed this development. It
is not disputed, and it has been stressed by Mediaset
first
Judgment No 202/1976 was
itself,

that

the

(28)

(Unione
RAI was originally set up in 1924 as URI
Radiofonica Italiana) and later transformed into EIAR in
1927, RAI (Radio Audizioni Italia) in 1944 and finally,
RAI-Radiotelevisione Italiana SpA in 1954. It began its

(5) Garante per la radiodiffusione e l'editoria, 1995 report, p. 140.

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television broadcasting activities on 3 January 1954,
with its channel RAI 1, on the basis of Decree 180/1952,
which entrusted RAI with broadcasting. Since 1957 its
broadcasting signal has covered the whole of Italy. In
1961 it launched a second channel, RAI 2, followed in
1979 by a regional channel, RAI 3. Since 1934 radio
broadcasting has been based on a subdivision into three
channels: the Primo, Secondo and Terzo programma.

consists

the company, as described in RAI's
The object of
by-laws,
in broadcasting, distributing and
transferring radio or television programmes and signals
in
over the air, by satellite or by any other means,
establishing, managing, developing and using equipment
and other means for the above activity, in producing,
acquiring and marketing works, programmes
and
services capable of constituting the object of the above
activity and in carrying out any other operations useful
to the conduct of the above activity.

RAI is a public limited company of national importance
within the meaning of Article 2461 of the Italian Civil
Code. In the period covered by the present decision, its
is held entirely by the public sector (6).
share capital
Even though RAI
is
is a public limited company,
subject to specific regulations. For instance, it is subject
to supervision by and directives of the Italian Parliament
by way of a dedicated parliamentary commission and,
entry into force of Law No 203 of
since
25 June 1993, RAI's board of directors has been
appointed by the Presidents of the two chambers of
Parliament.

the

it

for

also be used

The Convention between the State
and RAI of
1 August 1988 (approved by DPR No 367 of that same
date and hereinafter the 1988 Convention) lays down
that RAI is to operate at least three radio channels and
three television channels. One of the television channels
may
subregional
broadcasting. The Convention between the State and
RAI of 1994 (approved by the DPR of 28 March 1994
and hereinafter the 1994 Convention) contains similar
provisions, with RAI being required to operate three
radio channels and three television channels as well as
to devise the necessary means for linking production
and distribution. One of the television channels may
also be used for regional or subregional broadcasting.

regional or

commercial

From 1992 to 1995 RAI was entrusted with the
provision of public service broadcasting. It also carried
falling within the
out
definition of public service, essentially through separate
legal entities, the most important of which were Sipra,
Nuova Fonit, Nuova Eri and Sacis.

activities not

(29)

(30)

(31)

(32)

3. DETAILED DESCRIPTION OF THE MEASURES

3.1. Purpose of the present decision

(33)

In its injunction, the Commission mentioned different
measures that, according to Mediaset, were contrary to
Article 87 of the Treaty, namely:

(a)

the licence fee;

(b) the tax exemption on the revaluation of RAI assets;

(c)

the conversion of the 1992 and 1993 concession fee
into a Cassa depositi e prestiti (hereinafter CDDPP)
loan in 1995;

(d) the capital injection for RAI in 1992;

(e)

the reduction in the concession fee paid by RAI to
the State (from ITL 154 billion to ITL 40 billion);

(f)

the factoring operation by Cofiri Factor in 1990;

(g) the Cofiri loan of 1997.

(34)

a

launched

the Commission

The information received following the injunction led
the Commission to the conclusion that the measure at
(a) constituted existing aid and that the measures at (e),
(f), and (g) did not constitute State aid, while the
measures at (b), (c) and (d) are new and may qualify for
State aid. Accordingly, with the decision to initiate the
formal
procedure,
investigation procedure under Article 88(2) in respect of
the tax exemption on the revaluation of RAI assets, the
conversion of the 1992 and 1993 concession fee into a
CDDPP loan in 1995, and the capital injection for RAI
in 1992 (7)
(hereinafter the ad hoc measures). At the
same time, in its decision, the Commission explained in
detail why the measures at
(f), and (g) did not
constitute State aid. The conclusions concerning the
measures at (e), (f) and (g) were not challenged before
the Court. As the licence fee could rank as existing aid,
it was explicitly excluded from the scope of the decision
to initiate the procedure.

(e),

(6) The Treasury Ministry currently holds 99,45 % of the share capital.

(7) Point 74 of the decision to initiate the procedure.

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(35)

The ad hoc measures covered by the Commission's
formal investigation were adopted over the period 1992
to 1995. The present decision thus focuses on the
financial relations between RAI and the Italian State
during that period.

3.1.2. Tax exemption on the revaluation of RAI assets

(36)

(37)

(38)

Like the decision to initiate the procedure, the present
decision does not deal with the legal classification of the
licence fee or its compatibility with the Treaty. Since the
licence fee is considered on a preliminary basis as
existing aid, these matters are being dealt with in a
separate procedure under Article 17 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 (8). However, in order to have a complete
the financial relations between the Italian
picture of
State and RAI over the period covered by the present
investigation,
into
the Commission has
consideration not only the ad hoc measures but also the
the
financial support granted to RAI by means of
licence fee mechanism. Therefore,
it will refer here to
the licence fee only to the extent necessary to clarify its
reasoning regarding the ad hoc measures.

to take

instruments

already
statutory
In addition to the
mentioned, during the period covered by the present
investigation relations between the Italian State and RAI
were
the 1988 Convention, which
remained in force until August 1994, and by the 1994
on
entered
Convention,
1 September 1994.

governed by

which

force

into

3.1.1. Licence fee

is

fee

licence

important

The
funding
the most
mechanism for RAI. The law clearly links the licence fee
to the assignment of the public broadcasting service to
the concessionaire, RAI. The licence has its origins in
RDL No 246 of 1938, converted into Law No 880 of
1938, which introduced the obligation for all owners of
an appliance capable of receiving the signal broadcast to
pay to the State a licence fee the proceeds from which
were allocated by the State to the entity entrusted with
the public broadcasting service.

(8) OJ L 83, 27.3.1999, p. 1.

(39) Decree Law No 558 of 30 December 1993 (Disposizioni
urgenti per il risanamento e il riordino della RAI —
SpA and hereinafter DL 558/1993) laid down a series of
measures
Its provisions were
reproduced in later decrees and eventually converted
into Law No 650/1996.

reforming RAI.

for

(40) According to Articles 2, 3 and 5 of DL 558/1993, RAI
is to revalue the assets entered in its 1993 balance sheet.
Any possible positive difference between the revalued
assets and those shown in the last balance sheet can be
placed in a special reserve. Such operations are exempt
from tax and duties.

(41)

By revaluing its assets, RAI created a revaluation reserve
amounting to ITL 677 billion. It used this reserve to
cover accounting losses in 1993.

3.1.3. Conversion of the 1992 and 1993 concession fee into

a CDDPP loan in 1995

to

for

the

(42) As noted in the decision to initiate the procedure, the
television
concession fee is an amount paid by all
broadcasters
certain
State
transmission frequency. The 1988 Convention governed
the concession fee payable by RAI in 1992 and 1993.
The concession fee payable by RAI in 1992 and 1993,
which was determined according to Article 24 of DPR
367/1988, totalled around ITL 154 billion per year (9).
The amount had to be paid within 30 days of RAI's
annual budget being approved.

using

a

(43) Article 4 of DL 558/1993 stated that the State's credit
for the 1992 and 1993 concession fee would be sold to
CDDPP, which would then transform the liability into
equity if certain conditions were met. Subsequently,
Article 4 of DL 134/1995 provided for the possibility of
converting the CDDPP credit into a loan. Accordingly,
Article 4 of DL 252/1995, which was converted into

(9) ITL 154 283 billion in 1992 and ITL 154 245 billion in 1993.
However, RAI paid ITL 1 560 billion for 1992, leaving an amount
outstanding of ITL 152 723 billion.

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Law 650/1996, provided for the actual assignment of
the State credit for the 1992 and 1993 concession fee to
CDDPP and for the transformation of these credits into
a loan for RAI (10).

(44) On 6 July 1995 CDDPP granted RAI a 10-year loan at a
fixed interest rate of 9 %. On 31 December 1997 RAI
repaid the entire loan thanks to another loan granted by
the
Cofiri.
Commission noted that the latter loan complies with
market conditions.

In the decision to initiate the procedure,

(49) Mediaset

for

contends

the debt

the
that, while
concession fee was outstanding (i.e. up to 1995), RAI
should have paid interest at the statutory discount rate
(tasso ufficiale di sconto) plus a penalty of 2,5 %, rising
to 5 % after the first month (12). When the amounts due
for the concession fee were converted into a loan, this
penalty rate was not applied and RAI obtained an
advantage. Moreover, RAI obtained other advantages
because the loan itself carried an interest rate (9 %) that
was lower than the market rate (12 %) (13).

3.1.4. 1992 capital injection for RAI

(50) As for the capital injection, Mediaset claims that this is
not consistent with the market economy investor
principle and thus constitutes State aid in favour of RAI.

(45) According to Article 1 of DL No 2 of 2 January 1992,
converted into Law No 332 of 1 July 1992, the State
granted ITL 100 billion to IRI, which was to transfer the
money to RAI. In the parliamentary acts the grant is
described as compensation for the insufficient increase
in the licence fee for 1992 relative to inflation. On 20
February 1992 IRI transferred the ITL 100 billion to
RAI (11).

4. COMMENTS FROM INTERESTED PARTIES

level of

the performance of

(51) Mediaset further argues that there should be supervision
at national
the public
service task entrusted to RAI. However, in the absence
of an effective national body to carry out this role, it
falls to the Commission to exercise that supervision (14).
Mediaset subsequently added that the communication
would preclude a finding by the Commission that the
public funding of RAI can be considered compatible
with the common market simply because there are no
indications
effectively
supervised (15).

the public

service

that

is

(46)

(47)

as

The comments submitted by RAI are fundamentally the
same
Italian
authorities and are summarised in recitals 55 to 61. For
brevity's sake, they will not be examined in this section.

arguments developed by the

the

The arguments of the complainant may be summed up
as follows: Mediaset maintains that the tax exemption
on RAI's asset revaluation resulted in an advantage for
RAI of some ITL 450,6 billion. Moreover, the reserve
created following the revaluation was also used to
reconstitute RAI's share capital, which should have been
subject to a registration tax of 1 %. The exemption from
registration tax conferred an advantage of
ITL 1,2
billion.

(48) Mediaset is of the opinion that the conversion of the
1992 and 1993 concession fee into a CDDPP loan in
1995 constitutes an advantage for RAI in so far as this
operation made it possible to reduce the sums that RAI
should have paid to the State as the concession fee for
1992 and 1993, including interest.

(10) Letter from the Italian authorities of 16 June 1999.
(11) As a matter of fact, this measure is more in the nature of a grant
than a capital
there was no corresponding
Indeed,
increase in capital. However, since this measure has been described
the procedure was
as a ‘capital
initiated, the Commission will retain the wording used.

from the moment

injection.

injection'

(52)

Since its first complaint was lodged on 17 June 1996,
Mediaset has argued that RAI is engaged in ‘dumping'
on the advertising market, with devastating effects for
the financing of private broadcasters. In its subsequent
complaint of 19 October 1998, Mediaset
took the
further, arguing that RAI was able to offer
matter
airtime at below cost in a market that is of secondary
importance to it (advertising accounts for only 33 % of
RAI's revenues) by financing the cost of the operation
with State resources with a view to undermining
Mediaset, whose only income is from advertising. This
happened in 1993 and 1994 once the ceiling on RAI's
advertising revenue was removed (16). The number of
seconds of advertising broadcast by RAI
increased
dramatically from 2 823 000 in 1992 to 3 845 000 in
1994.

(53)

The Federazione Radio Televisioni (FRT), the association
of
Italian private broadcasters, observed that RAI
operates as a private broadcaster, seeking an audience

(12) Mediaset letter of 28 January 2000.
(13) Mediaset letter of 8 January 1999.
(14) Mediaset letter of 12 June 2002.
(15) Mediaset letter of 20 April 2003.
(16) Paragraph 10.4.1 of the letter of 19 October 1998.

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advertising

revenues. Other

and advertising revenues. The State aid allows RAI to
employ anchormen and acquire interesting programmes,
conferring on RAI advantages in terms of audiences and
advertising revenues. RAI's behaviour on the market is
that of a typical commercial operator
seeking to
increase its audience in order to attract advertising.
Major sporting events too are used to boost already
sizable
commercial
programmes are bought with State resources if they are
capable of guaranteeing a large audience and advertising
revenues. State aid to RAI has the effect of preventing
development of the local broadcasting sector. Regardless
of
the Amsterdam Protocol, which allows Member
States to define as a public service programmes that are
intrinsically commercial and to fund them with State
resources, commercial television and public television
should be clearly distinguished and State financing
allowed only for services that are not provided by
private broadcasters and are clearly described as having
social utility.

(ACT),

(54) According to the Association of Commercial Televisions
in Europe
these measures are undoubtedly
capable of adversely affecting competition because some
EU broadcasters are already active in Italy. All other
broadcasters are potential competitors of RAI. The
public broadcasters should be allowed to broadcast only
programmes that the market does not provide. Even
though,
in accordance with the Amsterdam Protocol,
the Commission cannot introduce a European measure
defining the content and organisation of public service
broadcasting, it should still endeavour to demarcate the
concept of public service in this sector in line with the
case-law of the European Court of Justice.

5. COMMENTS FROM ITALY

(55)

(56)

the public
The Italian authorities have asserted that
its
service task entrusted to RAI extends to all of
programming.
from the
situation
development over time of broadcasting regulations in
Italy and from the various provisions in force defining
public service broadcasting.

stems

This

Italian authorities have

The
tax
exemption on the revaluation of RAI's assets does not
constitute State aid for the following reasons:

argued that

the

(a)

this kind of tax exemption is a measure that has
also been used in connection with the conversion of

other public bodies into limited companies (such as
IRI, ENEL, ENI and INA) and with certain cases of
privatisation in the banking sector.
is not
therefore a special measure;

It

(b) there is no real financial advantage for RAI, simply a
recalculation of the value of assets already at its
disposal;

(c) private law prohibits asset revaluation. The measure
was thus compulsory for RAI, which had no reason
to carry out a revaluation. Any possible advantage
would therefore not have been intended;

(d)

in the past, some laws have provided for optional
revaluation of the assets of all undertakings and laid
down specific tax treatment: either tax exemption or
a substitute duty (17).

(e)

the tax exemption on revaluation is linked to the
restructuring of RAI provided for by DL 558/93.

(57)

In the opinion of the Italian authorities, the conversion
of the 1992 and 1993 concession fee into a CDDPP
loan does not constitute State aid either. The 1995 loan
to RAI was
indeed granted at market conditions.
Bearing in mind that in 1998 RAI obtained a EUR 150
million loan from Comit and Citibank at Libor plus 25
basis points, an interest rate of Ribor plus 60 basis
points would have been appropriate for RAI in 1995
since, at that time, RAI was a healthy undertaking. This
rate is very close to the rate applied by CDDPP (18).

(58)

In any case, even if the conversion meant that RAI paid
less than what was originally due for the 1992 and
1993 concession fee, a possible reduction would be
justified by the disparity between the fee paid by RAI
and that paid by private operators in previous years.

(59) According to the Italian authorities, the 1992 capital
injection should be considered as part of the licence fee,

(17) Letter from the Italian authorities of 12 December 2002.
(18) According to the Italian authorities, a comparison between
Ribor + 60 and the interest rate applied by CDDPP shows that RAI
saved ITL 5 billion thanks to the CDDPP loan.

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because the latter was not adjusted for inflation, and as
a measure aimed at covering the cost of the public
service task entrusted to RAI. The Italian authorities
have also argued that the capital injection complies with
the market economy investor principle because after
1993 RAI's economic situation began to improve (19).
Accordingly, the capital injection is not to be regarded
as State aid.

(63)

each measure,

the Commission will

examine
For
separately whether the conditions at (a) and (b) are met.
It will then consider whether the measures that meet
those two conditions also meet the condition at (c).
Then it will examine whether the recent case-law of the
Court of Justice of the European Community (20) affects
this analysis.

(60)

letter of 2 December 1999 the

In their
Italian
authorities contested the fact that RAI advertising prices
were higher than those of competitors. RAI has limited
advertising time compared with private broadcasters
and so has to apply higher prices in order to survive in
this competitive market. According to a table annexed
to that letter, RAI's average advertising prices in 1993
were consistently and significantly higher than those of
Mediaset (30 seconds of advertising at prime times, both
day and night).

(61)

The Italian authorities and RAI have also claimed that
the measures under investigation do not constitute State
aid because they are not capable of affecting trade
between Member States and compensate RAI for the net
additional cost of performing the general service task
entrusted to it, i.e. public service broadcasting.

6. ASSESSMENT OF THE AID

6.1. Existence of aid under Article 87(1) of the
Treaty

6.2. State resources, selective advantage and
distortion of competition

6.2.1. Tax exemption on revaluation of RAI assets

in

resulted

increase

(64) At the time DL 558/1993 was adopted, asset revaluation
normally involved the payment of income taxes if the
in value (21).
an
operation
Accordingly, the tax exemption on the revaluation of
RAI assets, while not involving a direct cash outflow,
does directly affect the public budget. The State, in fact,
forgoes tax revenues to which it has a statutory right
and which it would normally have claimed. The Court
of Justice has consistently held that: ‘A measure whereby
the public authorities grant to certain undertakings a
tax exemption which, although not involving a transfer
of State resources, places the persons to whom the
financial
favourable
in a more
exemption applies
position than other
taxpayers constitutes State aid
within the meaning of Article 92(1) of the Treaty' (22).
This measure is, therefore, granted through the use of
State resources.

(62)

For a State measure to constitute State aid within the
meaning of Article 87(1), all the following conditions
must be met:

(65)

(a)

it must be granted by a Member State or through
State resources in any form whatsoever;

(b)

favour

certain undertakings or

the
it must
production of certain goods (selective advantage),
thereby
distort
competition;

threatening

distorting

or

to

(c)

it must affect trade between Member States.

(19) The return on equity (ROE) rose from 0,0 in 1992 to 15,7 in

1997.

This measure is capable of conferring an economic
advantage on RAI as it eliminates a cost item from the
undertaking's profit
account. Any other
and loss
undertaking would have paid the normal tax rate on the
revaluation of its assets and would thus have incurred a
cash outflow. By virtue of DL 558/1993, RAI has been
able to avoid paying such taxes,
thereby benefiting
directly from a financial and economic advantage not
available to any other undertaking in a comparable
situation. Given that competition is distorted whenever
aid reinforces the competitive position of the beneficiary

(20) Judgment of 24 July 2003 in Case C-280/00 Altmark Trans, not yet

published.

(21) See Article 54(1)(c) of DPR No 917 of 22 December 1986:
‘Approvazione del testo unico delle imposte sui redditi'. See also
Leo, Monacchi and Schiavo, ‘Le imposte sui redditi nel testo unico',
Giuffré 1990, p. 551.

(22) Case C-6/97 Italian Republic v Commission [1999] ECR I-2981,

paragraph 16.

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undertaking vis-à-vis its competitors, this advantage is
capable of distorting competition between RAI and
other undertakings (23).

(68)

(66)

The arguments adduced by the Italian State and RAI as
justification for
essentially the
following:

revaluation are

the

(a)

this kind of tax exemption is a measure that has
also been used in connection with the conversion of
other public bodies into SpAs and with certain
privatisation cases in the banking sector. It is not,
therefore, a special measure;

(69)

(b) there is no real financial advantage for RAI, simply a
recalculation of the value of assets already at its
disposal;

(c) private law prohibits asset revaluation. The measure
was thus compulsory for RAI, which had no reason
to carry out a revaluation. Any possible advantage
would therefore not have been intended;

(70)

(d)

in the past, some laws enacted before DL 558/1993
provided for optional revaluation of the assets of all
undertakings and laid down specific tax treatment,
viz. either tax exemption or a substitute duty (24);

The argument at (b) cannot be accepted because the
advantage lies not in the fact that RAI obtains new
assets or in the fact that assets are transferred to a
different legal entity, but simply in the fact that the
same company (RAI) does not pay taxes that would
have been normally applicable in respect of such an
operation. RAI's asset revaluation improves its balance
sheet and its overall economic situation. Moreover, RAI
does not pay taxes that would normally be applicable in
respect of revaluation and so a cost item that otherwise
would have been present is eliminated from its balance
sheet.

Similarly, the argument at (c) cannot be accepted either.
According to the case law, the concept of State aid is
defined on the basis of the effects of the measure and
not on the basis of other characteristics such as the
objectives, the scope or the compulsory or voluntary
nature of
the aid is
compulsory does not alter the fact that RAI receives an
advantage that it would not have received under normal
received an
market conditions.
advantage from specific tax treatment provided for by
the law, the fact that revaluation is not permitted under
private law is likewise irrelevant.

the measure. The fact

In so far as RAI

that

The argument at (d) confirms the Commission's analysis
of
laws
this measure. Before DL 558/1993, other
provided for favourable treatment for all undertakings in
case of asset revaluation. Instead of the normal tax rules
being applied, they provided for total exemption or a
substitute duty. In the present case, this treatment has
been offered only to RAI. Therefore, this measure is
selective.

(e)

the tax exemption on revaluation is linked to the
restructuring of RAI provided for by DL 558/93.

(71)

The argument at (e) relates to the compatibility of the
measure and does not need to be dealt with in this
section.

(67)

The argument at (a) is not pertinent in so far as the fact
that a tax exemption might have been applied in other
cases (which, moreover, have no similarity with the
situation of RAI) does not change the selective nature of
the measure at issue, unless it is demonstrated that the
measure accords with the general scheme or nature of
the system. The Italian authorities have not provided
any such evidence.

(23) See Case 730/79 Philip Morris [1980] ECR 2671, paragraph 11,
and Opinion of the Advocate General, p. 2698; see also Case
259/85 Italian Republic v Commission [1987] ECR 4393, paragraph
24. See also opinion of the Advocate General in Case C-280/00
Altmark, not yet published in ECR, paragraph 103, where it is
noted that this requirement is very easy to fulfil since it can be
assumed that any State aid distorts or
to distort
competition.

threatens

(24) Letter from the Italian authorities of 12 December 2002.

(72)

In conclusion, the tax exemption on the revaluation of
RAI assets is granted through State resources, appears to
confer an advantage on RAI and is capable of distorting
competition.

6.2.2. Conversion of the 1992 and 1993 concession fee into

a CDDPP loan in 1995

(73) As mentioned above, the Commission concluded in the
decision to initiate the procedure that the concession fee

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is a payment made by all broadcasting companies to the
State for
to use a certain broadcasting
frequency (25).

the right

concession fee payable by RAI in 1992 and 1993 under
the 1988 Convention does not constitute State aid in so
far as the reduction does not exceed what a private
operator in a similar situation would have paid as the
concession fee.

(74)

(75)

As indicated by the Italian authorities, URI and then
RAI had paid a concession fee since 1924 (26). The
amount payable by RAI for the concession fee totalled
ITL 152 703 million in 1992 and ITL 154 245 million
in 1993. On the other hand, private broadcasters did
not pay any concession fee before Law 223/90. They
have since had to pay a fee for a national concession,
but the amount differs from that payable by RAI. In the
fee for a private operator
same period the annual
amounted to around ITL 0,5 billion per frequency.

(77)

decision to initiate

the
In the
Commission concluded that
the
concession fee payable by RAI did not constitute State
aid. It observed:

procedure,
reduction of

the

the

is

to check whether

therefore necessary

the
It
conversion of the 1992 and 1993 concession fee had
the effect of reducing the amount payable by RAI for
the concession fee in those two years and whether this
reduction exceeded what a private operator in a similar
situation would have paid as the concession fee. First, it
has to be checked whether the amount of the CDDPP
loan covers the sums payable for the 1992 and 1993
licence fee plus the interest accrued in the period during
it
which the payment remained outstanding. Second,
has to be checked whether and to what extent
the
interest rate on the CDDPP loan was below the rate that
RAI could have obtained on the market.

‘RAI's concession fee was, at the time the measure was
adopted, significantly higher than the fee paid by its
competitors (RAI paid ITL 140 billion per year for its
frequencies (27), while other
concession on three
broadcasters were charged some ITL 0,5 billion per
frequency). […] The reduction in its concession fee has
not conferred any economic advantage on RAI since, in
fact, it has only partially reduced the burden imposed
by the State on the undertaking. […] Therefore, the
reduction in the concession fee from ITL 154 billion to
ITL 40 billion per year, although it alleviates the burden
on RAI, does not constitute State aid within the
meaning of Article 87 of the Treaty as it did not confer
on the beneficiary any economic advantage over its
comparable
competitors'
circumstances (28).

undertaking

any

or

in

(78) As to the first element,

it should be recalled that on
6 July 1995 the 1992 and 1993 concession fee was
converted into a CDDPP loan granted to RAI for 10
years. The loan amounted to ITL 345 810 892 000,
equivalent
to the credits assigned to CDDPP and to
around ITL 39 billion of interest accrued while the debt
for the concession fees was outstanding. In the period
during which the sums payable for
the licence fee
remained outstanding the tasso ufficiale di sconto fell
from 9 to 7 % before rising again to 9 % (29). According
to the Commission's calculation, the amount of interest
is slightly higher than that resulting
charged to RAI
from the mere application of
the tasso ufficiale di
sconto (30).

(76)

In line with its
regarding the
reduction in the concession fee, the Commission notes
that any operation having the effect of reducing the

conclusion above

(25) See the decision to initiate the procedure.
(26) Letter from the Italian authorities of 16 June 1999.
(27) This decision implicitly refers to the three television channels
allocated to RAI but
if
account were taken of the three radio channels also allocated to
RAI.

the conclusion would be no different

(28) Paragraphs 21, 23 and 24 of the decision. The Commission also
noted that ‘this situation might actually be considered as providing
State aid to RAI's competitors as the State renounces part of the
concession fee and favours these undertakings over RAI, which
pays the full amount'.
It is worth recalling that the complainant did not formally contest
this analysis or the amounts of the concession fee payable by RAI
and by the private broadcasters. The complainant has not even
the disparity between the
suggested any
concession fee for RAI and that for the private broadcasters.

justification for

(79) As mentioned in points 47 to 52, Mediaset contends
concession fee was
that, while
outstanding (i.e. up to 1995), RAI should have paid,

the debt

the

for

(29) For the 1992 concession fee the period during which the debt was
outstanding ran from 18 July 1993 (date of approval of the 1992
budget plus 30 days) to 6 July 1995 and for the 1993 concession
fee from 23 July 1994 (date of approval of the 1993 budget plus
30 days) to 6 July 1995. The tasso ufficiale di sconto was as
follows:
6.7.1993 to 9.9.1993
10.9.1993 to 21.10.1993
22.10.1993 to 17.2.1994
18.2.1994 to 11.5.1994
12.5.1994 to 11.8.1994
12.8.1994 to 21.2.1995
22.2.1995 to 28.5.1995
29.5.1995 to 23.7.1996

9,00 %,
8,50 %,
8,00 %,
7,50 %,
7,00 %,
7,50 %,
8,25 %,
9,00 %.

(30) In the absence of precise information from the Italian authorities
about the calculation of interest accrued while the debt for the
concession fees was outstanding, the Commission has calculated
the amount of interest on the basis of the tasso ufficiale di sconto.

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the

to 5 % after

first month (31). As

according to Article 27 of the 1988 Convention, interest
at the tasso ufficiale di sconto plus a penalty of 2,5 %,
to
rising
non-payment of the penalty, it should be stressed that
the provision mentioned by the complainant stipulates
that, in the event of any delay in paying the concession
fee, RAI is to be subject to interest on arrears, to be
added to the statutory rate, of not more than 2,5 %,
rising to not more than 5 % after the first month.
Therefore, nothing in this provision indicates that the
maximum amount of the penalty rate has to be applied
since this is at
the administration,
which can apply a penalty ranging from zero to 5 %.
The complainant has not provided any information in
support of the argument that a given rate has to be
applied. In these circumstances, the Commission cannot
accept the claim of the complainant according to which,
on the occasion of the conversion of the sums payable
for the 1992 and 1993 concession fee into a loan
granted by CDDPP, RAI obtained an advantage because
it did not pay the penalty.

the discretion of

very

in a

substantial.

comparable

situation in the

reduction could not be

In
the
particular, given the disparity between the fee charged
to RAI and that charged to private broadcasters,
it
follows that the reduction (if any) would not be such as
to bring the concession fee paid by RAI for 1992 and
1993 below the concession fee payable by a private
operator
same
period (33). Since any operation having the effect of
reducing the concession fee payable by RAI for 1992
and 1993 does not constitute State aid provided that the
reduction does not exceed what a private operator in a
similar situation would have paid as the concession fee,
the Commission concludes that the conversion of the
1992 and 1993 concession fee into a CDDPP loan in
1995 did not confer on RAI an advantage relative to
any other undertaking in comparable circumstances.
Accordingly, this measure does not constitute State aid
within the meaning of Article 87(1).

(80)

after

Regarding the second element,
it should be borne in
mind that the interest rate on the CDDPP loan was fixed
at 9 %. The loan was for 10 years but RAI repaid the
loan
on
31 December 1997. According to Banca d'Italia, the rate
applicable to medium and long-term loans
in the
relevant period was: 1995: 11,71 %; 1996: 9,10 %; 1997:
8,28 % (32).

about

years,

two

half

and

a

(81) As indicated in recital 57,

following the decision to
initiate the procedure, the Italian authorities argued that
the CDDPP loan was granted at market conditions.
Bearing in mind that in 1998 RAI secured a EUR 150
million loan from Comit and Citibank at Libor plus 25
basis points, an interest rate of Ribor plus 60 basis
points would have been appropriate for RAI in 1995.
This rate is very close to the rate applied by CDDPP.

(82)

In view of the observations in recitals 73 to 81, it does
not appear to be established that the conversion of the
concession fee entailed a reduction in the sums that RAI
should have paid for the concession fee in 1992 and
there were such a
1993,
reduction, given the above circumstances, it is clear that

including interest. Even if

(31) Mediaset letter of 28 January 2000.
(32) Given the difference between the market rates and the CDDPP
rate, it transpires that RAI enjoyed a reduced rate only for about
half of 1995. In the most prudent and unlikely scenario (with RAI
securing a loan on the market at 11,71 % for two and a half years,
without refinancing it when the market rate falls), RAI would have
paid about ITL 27 billion more in interest relative to the CDDPP
loan.

(83)

(84)

6.2.3. RAI capital injection of 1992

In February 1992 IRI transferred to RAI on behalf of the
State an amount of ITL 100 billion. There is no doubt
that this measure entails the use of State resources (the
money comes directly from the State budget) and is
imputable to the State (it is provided for by a law of the
State).

(i.e. an advantage that

In order to establish whether the injection of capital by
the public authorities confers a selective advantage on
the recipient
the undertaking
would not have obtained under normal market
the market
the Commission applies
conditions),
economy investor principle. By its very nature,
this
principle applies to investments in commercial activities
where the State can have the prospect of achieving a
return. The present case involves a company whose
main activity is classified by the State itself as a public
financed by the State. The
service and is,
Commission observes
to be a
contradiction in the argument of the Italian authorities
according to which this transfer of resources should be
regarded as a commercial investment when RAI's main
activity is not carried out primarily with a view to
making profits and generating a return on capital
invested.

there appears

therefore,

that

(85)

In any event, even assuming that the Italian authorities
have good reason to put forward this argument, it must
in order to assess whether this
be pointed out that,

(33) Basically, RAI paid more than ITL 300 billion while, if it had to
pay the same fee as a private broadcaster, it would not have paid
more than ITL 6 billion.

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capital injection complied with the market economy investor principle, it is necessary to analyse
the business results obtained by RAI in the period before the measure was adopted and its financial
prospects estimated on the basis of the market forecasts, as shown in the table below.

Table 1

RAI consolidated data 1990 to 1995

1990

1991

1992

1993

1994

1995

(ITL billion)

Revenue of which

— advertising

— licence fee

2 995

1 026

1 650

3 390

1 130

1 929

Operating costs

n. a.

n. a.

Depreciation

(582)

(642)

Financial charges

(170)

(149)

Net profit (loss)

(54)

2

NB: 1992 data and 1993 data are not consolidated.
Source: Decision to initiate the procedure.

3 629

1 247

2 044

n. a.

(767)

(224)

0

3 613

1 193

2 123

4 334

1 264

2 249

4 435

1 321

2 361

n. a.

(3 285)

(3 342)

(756)

(190)

(479)

(902)

(852)

(121)

(14)

(55)

137

(86)

The table shows that RAI was not a profitable concern in the years before the so-called capital
increase. When the Italian authorities decided to inject the capital, a private investor would not
have invested in such a company as he could have found a better return with other undertakings
or investments. Nor could such a return be expected on the basis of RAI's business prospects or
market forecasts.

(87) Moreover, a private investor would not have injected capital into RAI in the absence of a sound,
realistic and reasonable business plan substantiating its expectations of the return on investment. In
the present case, the Italian authorities have provided no evidence of the existence of such a plan.
The only business plan to which the Italian authorities have referred in relation to RAI is the
restructuring plan prepared by RAI's board of directors in 1993 and 1994 pursuant to Article 1 of
DL 558/93 and finally approved by the Italian authorities in October 1994. The measure in
question cannot, however, be linked to that plan since it was taken at the beginning of 1992.
Furthermore, this measure was never presented at this time, either by the Italian authorities or by
RAI as an investment from which the State expected any return. The Italian authorities indicated in
the relevant parliamentary acts that the injection was necessary to compensate for the insufficient
increase in the licence fee in 1992 relative to inflation. RAI itself presented the injection as a grant
in accounting terms (34) and defined it as a contributo a fondo perduto (35) (outright grant). It should
be noted though that,
this measure were to be regarded as a mere subsidy, the selective
advantage condition would in any case be met in so far as only RAI received such a grant that
improved its financial situation.

if

(88) Accordingly, the Commission confirms its preliminary conclusion contained in the decision to
initiate the procedure that the injection conferred on RAI a selective advantage that it would not
have obtained under normal market conditions and that improved its economic prospects by

(34) See the 1992 profit and loss account (Contributi e/o sovvenzioni d'esercizio).
(35) See Note sulla gestione relating to RAI's 1993 balance sheet.

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providing it with additional financial resources. Given
that competition is distorted whenever aid reinforces the
competitive position of
the beneficiary undertaking
vis-à-vis its competitors, this advantage is such as to
distort
other
between
undertakings (36).

competition

RAI

and

(89)

the opinion that

the Commission is of

Finally,
the
Italian authorities' argument according to which the
injection must be regarded as a part of the licence fee
(because it is aimed at compensating for the reduction
in the
cannot be
the
followed (37). Indeed, the injection is clearly a measure
distinct
from the licence fee and its legal basis has
nothing to do with the legal basis of the fee.

real value of

licence

fee)

(90)

In conclusion, the capital injection for RAI in 1992 was
granted through State resources and appears such as to
confer an advantage on RAI and to distort competition.

6.3. Effect on trade between Member States

6.3.1. Tax exemption on the revaluation of RAI assets and

RAI capital injection of 1992

(92)

(93)

itself not

involved in
is
beneficiary undertaking
exporting (39). Similarly, where a Member State grants
aid to undertakings operating in the
service and
distributive industries, the recipient undertakings need
themselves carry on their business outside the
not
the aid to have an effect on
Member State for
Community trade (40).
In line with this case-law, the
communication explains that ‘State financing of public
service broadcasters can generally be considered to
affect trade between Member States. This is clearly the
acquisition and sale of
position as
programme rights, which often takes place at an
international
in the case of
public broadcasters who are allowed to sell advertising
for
space,
homogeneous
national
across
boundaries. Moreover,
the ownership structure of
commercial broadcasters may extend to more than one
Member State.' (41)

cross-border
linguistic

level. Advertising,

especially

regards

effect,

areas

too,

has

the

a

exchanges

Indeed,
it

In the present case, RAI is itself active on international
through the European Broadcasting
markets.
Union
and
participates in the Eurovision system (42). Furthermore,
it is in direct competition with commercial broadcasters
that are active on the international broadcasting market
and have an international ownership structure (43).

programmes

television

RAI presents
operator
broadcasting market (44).

itself
in

active

as

an important
competitive

a

international
international

(91)

‘When State financial aid strengthens the position of an
undertaking
undertakings
competing in intra-Community trade, the latter must be
regarded as affected by that aid' (38), even if
the

compared with

other

(36) Case 730/79 Philip Morris [1980] ECR 2671, paragraph 11, and
Opinion of the Advocate-General, p. 2698; see also Case 259/85
[1987] ECR 4393, paragraph 24. See also the Opinion of the
in Case C-280/00 Altmark, not yet published
Advocate-General
(footnote 20), point 103, where the Advocate-General notes that
this requirement is very easy to fulfil since it can be assumed that
any State aid distorts or threatens to distort competition. It goes
without saying that
the
measure in question is considered not as a capital injection but as
a mere State subsidy aimed at covering RAI's financial needs (as
would seem to be the case from RAI's accounts).
the procedure,

this conclusion is even more true if

(37) In the decision to initiate

the Commission
calculated that, in real terms, between 1991 and 1992 RAI lost ITL
25 billion because of the failure to adjust the amount of the
licence fee in line with inflation. RAI noted that the licence fee
was not adjusted in 1993 either, while the inflation rate was
4,2 %. It argues that in 1993 it lost ITL 90 billion because the
licence fee was not updated. However, as explained below, the
question is not whether the real value of the licence fee was
restored but whether the public aid granted to RAI in the period
when the measures under examination were adopted exceeded the
net cost of the general service task entrusted to RAI in the same
period.

(38) See Philip Morris (footnote 23; paragraph 11) and Case 259/85

(footnote 23; paragraph 11).

(94)

Therefore, the Commission concludes that the measures
in question are such as to affect trade between Member
States within the meaning of Article 87(1).

(39) Case C-75/97 Maribel bis/ter [1999] ECR I-3671.
(40) Case C-310/99 Italy v Commission, not yet reported.
(41) See the communication, op. cit., paragraph 18.
(42) See Joined Cases T-185/00, T-216/00, T-299/00 and T-300/00 M6

and Others v Commission, not yet published.

(43) For a more detailed discussion of the effect on trade between
Member States, see the decision to initiate the procedure, points
43 to 57.

(44) See,

for instance, presentation of

the report by the board of
directors on the 1992 budget:
‘la fortissima concorrenza sul
mercato nazionale e su quelli internazionali …' and the reference
framework (general guidelines and objectives)
in the board of
‘nel contesto di forte competizione nazionale e
directors' report:
sovranazionale che caratterizza il comparto in cui opera la RAI…';
presentation of the report by the board of directors on the 1994
budget:
arricchita nel 1994 la presenza
internazionale della RAI, su molteplici fronti …'; introduction to
the report by the board of directors on the 1995 budget ‘riportare
l'azienda ad un ruolo di primo piano sui mercati internazionali'.

ampliata

‘si

é

e

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6.4. Real advantage according to the Altmark ruling

6.4.1. Tax exemption on the revaluation of RAI assets and

RAI capital injection of 1992

the costs which a typical undertaking, well run and
adequately provided with the appropriate means of
production so as to be able to meet the necessary
public service requirements, would have incurred in
discharging those obligations, taking into account
for
the relevant receipts and a reasonable profit
discharging the obligations.

(95) As indicated below, RAI

the measures under

is an undertaking entrusted
with the provision of a service of general economic
interest (SGEI), namely public service broadcasting. Italy
has argued that
investigation
compensate RAI for the net cost incurred in discharging
the general service task entrusted to it. State measures
compensating for the net additional costs of an SGEI do
not qualify as State aid within the meaning of Article
87(1) if the compensation is determined in such a way
that a real advantage cannot be conferred on the
In Altmark (45) the Court of Justice has
undertaking.
indicated the conditions that have to be satisfied in
order to escape such classification. These conditions are:

— first, the recipient undertaking must actually have
public service obligations to discharge, and the
obligations must be clearly defined;

— second, the parameters on the basis of which the
compensation is calculated must be established in
advance in an objective and transparent manner, to
avoid it conferring an economic advantage which
over
recipient
may
competing undertakings;

undertaking

favour

the

— fhird,

the compensation cannot exceed what

is
necessary to cover all or part of the costs incurred
in the discharge of public service obligations, taking
into account the relevant receipts and a reasonable
profit for discharging those obligations;

— fourth, where the undertaking which is to discharge
public service obligations, in a specific case, is not
chosen pursuant to a public procurement procedure
which would allow for the selection of the tenderer
capable of providing those services at the least cost
to the community, the level of compensation needed
must be determined on the basis of an analysis of

(45) Case C-280/00 Altmark Trans (not yet published).

(96)

‘… (A) State measure which does not comply with one
or more of those conditions must be regarded as State
aid within the meaning (of Article 87(1))' (46).

(97)

the

the first and the third
Leaving aside for a moment
condition, the Commission notes that in the present
case it does not result that the parameters on the basis
of which the financial support granted through these
measures (i.e. the possible compensation) is calculated in
advance in an objective and transparent manner so as to
avoid conferring an economic advantage which may
favour
competing
recipient undertaking over
undertakings. Moreover, RAI has not been chosen as the
public service broadcasting provider on a basis of a
public procurement procedure and it does not appear
that the level of compensation needed is determined on
the basis of an analysis of the costs which a typical
undertaking, well run and adequately provided with the
appropriate means of production so as to be able to
meet the necessary public service requirements, would
have incurred in discharging those obligations, taking
into account
the relevant receipts and a reasonable
profit for discharging the obligations.

(98)

Since all the conditions of Article 87(1) are met and
since two of the conditions set out by the Court in
Altmark are not, the Commission concludes that the tax
exemption on the revaluation of RAI assets and the
so-called RAI capital injection of 1992 constitute State
aid within the meaning of Article 87(1) (47).

(46) Op. cit., paragraph 94.
(47) In the best-case scenario, the measures in question may be of the
same kind as those mentioned by the Court in paragraph 91 of
the Altmark ruling: ‘Payment by a Member State of compensation
for the loss incurred by an undertaking without the parameters of
such compensation having been established beforehand, where it
turns out after the event that the operation of certain services in
connection with the discharge of public service obligations was
not economically viable, therefore constitutes a financial measure
which falls within the concept of State aid within the meaning of
Article 92(1) of the Treaty'.

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7. COMPATIBILITY OF THE AID UNDER ARTICLE 86(2)
OF THE TREATY

(99)

The Court has consistently held that Article 86 may
provide for a derogation from the ban on State aid for
undertakings entrusted with an SGEI.
It has been
implicitly confirmed in Altmark that State aid designed
to compensate for the costs incurred by an undertaking
in providing an SGEI can be found to be compatible
with the common market if it satisfies the conditions of
Article 86 (48). The Court has made it clear that,
in
order for a measure to benefit from such a derogation,
and
all
proportionality need to be fulfilled. The Commission
considers that, where these principles are fulfilled, the
development of
trade is not affected to an extent
contrary to the Community interest. The way these
principles apply in the broadcasting sector is explained
in the communication.

conditions of definition,

entrustment

the

(100) Accordingly, the Commission has to assess whether or

not (49):

— public service broadcasting is clearly defined as a
service of general economic interest (public service)
by the Member State (definition),

— RAI is officially entrusted by the Italian authorities
with the provision of that service (entrustment),

— the State funding does not exceed the net cost of
the public service, also taking into account other
direct or indirect revenues derived from the public
service (proportionality).

(101)

In carrying out its analysis, the Commission has also to
take into account the Amsterdam Protocol, according to
which the system of public broadcasting is directly
related to the democratic, social and cultural needs of

(48) Altmark (see footnote 20), paragraphs 101 to 109.

In those
paragraphs the Court examined the question of whether State
payments to transport undertakings classified as State aid could be
found to be compatible with the common market within the
meaning of Article 77 of the Treaty as reimbursement for the
discharge of public service obligations. It did not rule out this
possibility, provided that the binding conditions laid down by the
secondary legislation for the transport sector were met. Mutatis
mutandis this reasoning must apply to undertaking entrusted with
an SGEI outside the transport sector and in relation to Article
86(2).

(49) See point 29 of the communication.

each society and to the need to preserve media
pluralism. More specifically, Member States have ‘the
competence to provide for the funding of public service
broadcasting insofar as such funding is granted to
broadcasting organisations for
the
public service remit as conferred, defined and organised
by each Member State, and in so far 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.'

the fulfilment of

7.1. Definition and entrustment

(102) Definition of the public service mandate falls within the
competence of the Member States. Given the specific
nature of the broadcasting sector, Member States may
provide for a wide definition, and the role of
the
for manifest
Commission is
error (50).

limited to checking

(103) As has already been noted, broadcasting was, from the
beginning of
the 20th century, considered to be a
service of general interest and thus reserved to the State.
The State monopoly of broadcasting services was
justified in the light of their public utility and their
educational, artistic and cultural objectives that are of
interest to everyone. With the entry into force of the
Republican Constitution, public service broadcasting
was seen as an activity directly linked to fundamental
rights and freedoms and thus reserved to the State on
the basis of Article 43 of the Constitution, which refers
to essential public services of overriding general interest.
In line with the
RAI was
communication and in the light of
these historical
legislative elements, the Commission accepts the Italian
authorities' claim that in the Italian legal system public
service broadcasting was considered to be a service of
general economic interest within the meaning of Article
86(2).

the sole concessionaire.

(104) During the period covered by the present investigation
public service broadcasting was entrusted to RAI under
the 1988 and 1994 Conventions.

7.1.1. Public service concession from 1992 to August 1994

(105) During these two years relations between the State and
RAI were governed by the 1988 Convention, which
remained in force until August 1994.

(50) See points 32 to 39 of the communication.

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(106) Article 1 of the 1988 Convention explicitly states that
the public broadcasting service is entrusted exclusively
to RAI by a concession covering the entire national
territory. The service entrusted consists in broadcasting
radio and television programmes over the air, by cable,
by satellite and by any other means.

able

to be
foreign operators;

to re-broadcast
in order
areas
programmes of
to provide
television and radio programmes for other countries
with a view of disseminating Italian culture and
language abroad; and to provide television and radio
French and
programmes
Slovenian in regions where such linguistic minorities
live (Article 19) (52),

in German,

Ladino,

(107) As explained above, both the Constitutional Court and
Italian legislation justified the State monopoly of
national broadcasting on the basis of the concept of
essential public service of overriding general interest laid
the Constitution. Neither the
down in Article 43 of
any
Constitutional Court nor Law 103/75 made
distinction as to the quantity or kind of programming
that would fall within the scope of this concept (51).
Instead,
to
information, culture and entertainment in Judgment No
the 1988 Convention
59/1960. By the same token,
states that
the broadcasting of radio and television
programmes throughout Italian territory constitutes the
public
(Article 1). The
Commission thus concludes that, as claimed by the
the definition of public service
Italian authorities,
broadcasting
the 1988
Convention, all of RAI's programming activity.

entrusted to RAI

included, under

Constitutional

in Italy

referred

service

Court

the

(108) A number of obligations are imposed on RAI as a
corollary
task. The 1988
Convention contains obligations concerning investment,
quality and coverage of the signal (Articles 9, 10, 15 and
16) and research (Articles 11 and 12).

to its public

service

(109) Another set of obligations and special rules is contained
in Law 103/75, which is still in force. It comprises the
following:

— a general obligation of objectivity and pluralism

(Article 1(2)),

— a specific parliamentary commission determines
(Article 1(3) and (4)) the general guidelines that RAI
must respect and monitors the broadcasting service
provided by RAI,

— the obligation to reserve at

total
least 5 % of
radio
television broadcasting time and 3 % of
broadcasting time
religious
groups, and unions and the like and to provide
them with technical assistance free of charge,

to political parties,

— RAI is required: to set up its transmission facilities
and to manage third-party plants close to bilingual

(51) See Articles 1 and 2 of that Law.

— RAI

is

required to broadcast messages by the
President of the Republic, the Presidents of the two
chambers of Parliament,
the Constitutional Court
and the Prime Minister (Article 22).

discography,

(110) Article 3 of the 1988 Convention provides for RAI to
carry out other activities of a commercial nature (such
the
of
as
programmes,
sales
exploitation of cinema,
rights)
theatre and concert
ancillary to the public service or in any way linked to
the object of the company,
in so far as they are not
prejudicial to the performance of the public service task.
Lastly, in recent years RAI has also been active in the
advertising market.

and

7.1.2. Public service remit from September 1994 to 1995

(111) The 1994 Convention has a duration of 20 years.

It
entrusts public service broadcasting to RAI on an
exclusive basis, referring to the service contract as the
legal
the
Convention itself. Article 3 of the Convention states that
the service contract for the period 1994 to 1996 had to
be concluded before the end of June 1994.

the provisions of

fleshing out

instrument

(112) Article 1 of the 1994 Convention explicitly states that
public service broadcasting covering the entire national
territory is entrusted exclusively to RAI by means of a
concession. The service consists in broadcasting radio
and television programmes by any means.

(113) The 1994 Convention lays down general obligations to
provide objective, complete and impartial information,
to recognise regional diversities, to protect national and
regional cultures, and to educate. It also contains some
obligations ancillary to the public service task. RAI is
required: to ensure the widest possible diffusion of its
signal and to respect a minimum programming time; to
broadcast free of charge messages of public interest at

(52) Article 20 provides that RAI is to conclude contracts for valuable
consideration with the administrative bodies interested in such
services.

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people

the request of the Government; to create a radio service
providing traffic information for the national motorway
network; to facilitate the utilisation of its services by
disabled
special
to carry out
programming for minors (Article 11);
establish
to
and
research
state-of-the-art television and radio infrastructures that
reflect
standards
(Article 14).

advanced technological

the most

provide

(Article

(Article

activity

12);

8);

to

(118) As indicated in point 41 of the communication, it is not
sufficient that the public service broadcaster be formally
entrusted with the provision of a public service but it is
also necessary that
the public service be actually
provided as mandatory. It is therefore desirable that an
appropriate authority monitor its application, especially
where the public service task is widely defined and
contains
an
standards. The
independent monitoring mechanism provides sufficient
and reliable indications that the public service is actually
provided as mandated. It is therefore a guarantee for the
Member States that the task is being performed and
may, at the same time, enable the Commission to carry
out its tasks under the State aid rules.

presence

quality

of

(114) Even though a service contract

should have been
concluded before the end of June 1994, the first genuine
service contract
(hereinafter the ‘1996 contract') was
signed in 1996 and entered into force around the
middle of
year. The Commission therefore
concludes that the 1996 contract is not relevant for the
purpose of defining RAI's public service obligations in
1994 and 1995. To sum up, it appears that RAI's public
service remit in 1994 and 1995 was no different from
that for the previous two years.

that

(119)

(115) The Commission concludes that, as claimed by the
Italian authorities, over the period 1992 to 1995 the
definition of public
service broadcasting in Italy
included all of RAI's programming activity and was
accompanied by a number of other ancillary obligations.

(116) As with the 1988 Convention, Article 5 of the 1994
Convention authorises RAI to carry out commercial and
editorial activities linked to the diffusion of sound,
images and data, as well as other activities linked to the
object of the company. These activities cannot prevail
over public service broadcasting.

a

of

for

the

specific

authority

inter alia,

In this respect, it is to be noted that RAI is subject to
the
parliamentary
commission (54) and to monitoring by Garante per la
radiodiffusione e l'editoria (55). The powers of
that
commission are laid down in Article 4 of Law 103/75,
the commission to
which provides,
establish the general directives for implementation of
the principles set out in Article 1 of that Law and for
RAI programmes. The commission checks that
these
directives are complied with, establishes the general
formulation of RAI's annual and
criteria for
multiannual expenditure and investment plans, approves
RAI's general annual and multiannual programming
plans and checks that they are being implemented (56).
The Garante carries out several tasks that help to ensure
legal
that RAI's activity complies with the relevant
provisions; for instance, it is required to examine RAI's
accounts and to monitor compliance with the limits on
advertising and audience figures (57). Lastly, the Post and
other
Telecommunications Ministry
checks (58). The Commission therefore considers that in
the period under examination the Italian authorities put
in place
checks providing sufficient
indications that the public service entrusted to RAI was
being provided as mandated.

system of

carries

out

a

(117)

as

that

there

follows

are no doubts

It
to the
classification of public service broadcasting as a service
of general economic interest, the entrustment of RAI
with public service broadcasting and the identification
of public service broadcasting with the entire range of
RAI's programming. Although the definition of public
service broadcasting is of a qualitative and rather wide
taking into account
nature,
the
interpretative provisions of
the Amsterdam Protocol,
considers such a ‘wide' definition as legitimate (53).
Moreover, such a definition does not seem to contain
any abuses or manifest errors in so far as it does not
explicitly include any commercial activities
such as
advertising or the sale of programmes.

the Commission,

(53) See point 33 of the communication.

7.2. Proportionality

(120) Once it has been established that the task entrusted to
RAI
is a service of general economic interest and is
defined as such by the Member State and that RAI is

(54) Commissione Parlamentare per l'indirizzo generale e la vigilanza

dei servizi radiotelevisivi.

(55) Now Autorità garante per la radiodiffusione e l'editoria.
(56) See also Articles 2 and 18 of the 1988 Convention.
(57) See also Article 17 of the 1994 Convention.
(58) See Article 20 of the 1988 Convention and Article 17 of the 1994

Convention.

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officially entrusted by the Italian authorities with the
provision of that service, the Commission has to assess
whether the State funding of that task exceeds what is
necessary to cover the net cost of the public service,
taking into account
the revenues accruing from the
public service task.

This is the case with programmes that are defined as a
public service but simultaneously generate an audience
that permits the sale of advertising or the sale of the
programmes to other broadcasters. These costs can be
allocated in their entirety to the public service since a
full distribution of these costs between the two activities
risks being arbitrary and not meaningful (61). However,
cost allocation with a view to transparency of
the
accounts should not be confused with cost recovery in
the definition of pricing policies or compensation for
public service obligations.

(121) Before

it

is

in

of

the

cost

public

service

regarding

allocation

carried out,

activities must

such an assessment

is
the criteria laid down in the
appropriate to recall
the
communication
broadcasting sector. The communication indicates that
costs
be
distinguished from the costs of non-public service
activities. To this end, it refers to Commission Directive
80/723/EEC on the transparency of financial relations
between Member States and public undertakings (59)
and the obligation to keep separate accounts laid down
in the Directive. However,
the obligation to keep
separate accounts for public and non-public service
activities did not apply to broadcasting in the period
1992 to 1995. Nor did it apply up to the entry into
force of
transparency
Directive on 31 July 2001. Accordingly, compliance
with the transparency Directive is not a matter at issue
in the present procedure.

revised version of

the

the

(122) The communication lays down specific rules for the
costs that can be allocated to the public service activities
the specific characteristic of public
on account of
service broadcasting. The costs that would be avoided in
the hypothetical situation where the non-public service
activities were to be discontinued should be allocated to
the non-public service activities, separately for each of
those activities. This includes the costs that are specific
to the non-public service activities and the additional
amount of common costs incurred through the use of
resources that are also used for the public service, such
as personnel, equipment, fixed installations, etc. (points
55 and 56). This method is accepted because of the
peculiarities of the broadcasting sector, where a large
share of the production that is part of the public service
can, at the same time, be exploited commercially (60).

(59) OJ L 195, 29.7.1980, p. 35. Directive as amended by Directive

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

In other words,

(123) Compensation is allowed only for the net costs of the
public service task. This means that account must be
taken of direct and indirect revenues derived from the
the net advertising
public service.
revenues
of
transmission
programmes falling within the scope of
the public
service task and the net revenues derived from the
marketing of such programmes, for example, must be
deducted from the total amount of public service costs
as determined above.

generated

during

the

(124) Moreover, if the revenues from public service activities
are deliberately not maximised (for instance, in order to
harm competitors), then the net public service costs will
be greater and the amount of compensation will be
justified. That
higher
means, for instance, that RAI's advertising prices cannot
fall below the level
that would allow an efficient
commercial operator in a similar situation to cover its
costs.

than necessary and hence not

is

that

twofold.

the Commission
(125) The proportionality assessment
must
the
First,
therefore
carry out
Commission has to calculate the net cost of the public
service task entrusted to RAI and ascertain whether or
not this cost has been overcompensated. Second, it has
to investigate any element at its disposal suggesting that
RAI has
deliberately not
maximising revenues from the commercial exploitation
of the public service activities. In the present case, the
complainant has asserted in particular that RAI was
‘dumping' on the advertising market, with devastating
effects on the financing of private broadcasters, in order
to harm Mediaset, whose sole income is derived from
advertising. Therefore, the Commission assesses below,

inflated

cost

this

by

(60) In general,

if a cost relating to a public service also benefits
commercial activities, this cost must be proportionally allocated
between the two activities on the basis of appropriate criteria.

(61) This, however, does not prevent broadcasters from allocating costs
on the basis of other accounting principles that are clearly
explained, consistently applied and objectively justifiable.

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first, whether the net cost of the public service has been
overcompensated by the financial support
from the
State and, second, whether RAI has carried out a pricing
policy in the advertising market (62) below the level that
would allow an efficient commercial operator
in a
similar situation to cover its costs (hereinafter price
undercutting).

7.2.1. Calculation of the net cost of the public service task

entrusted to RAI and comparison with the amount of
financial support provided by the State to RAI in the
period 1992 to 1995

the costs that appear to be linked to RAI's normal
broadcasting activity, excluding the costs that could be
linked to the commercial exploitation of
the public
service or any other commercial activity (it has therefore
excluded any cost
linked to the activities of RAI's
subsidiaries (63) or any other cost that appeared to be
linked to the commercial exploitation of
the public
service). Moreover, among the revenues directly or
indirectly linked to the public service that have to be
deducted from the gross cost of the public service, the
Commission has included all revenues derived from
commercial activities (64).

(126) As indicated above,

in the period 1992 to 1995 RAI
carried out some commercial activities through separate
legal entities. Following the conclusion that in the same
period the service entrusted to RAI embraced the whole
of RAI's programming and was accompanied by a
number of other ancillary obligations, the Commission
the public service task
notes that
entrusted to RAI can be identified,
in principle, by
deducting from RAI's costs indicated in its financial
statements with regard to the public
the
revenues received by RAI from its subsidiaries whose
activity consists in the commercial exploitation of the
public service.

the net cost of

service

(127) The Commission,

in its letter of 13 September 2002,
called on the Italian authorities to submit figures on
such cost allocation. The Italian authorities did not
provide such calculations but sent to the Commission
RAI's balance sheet. The Commission has therefore
calculated itself the net cost of the public service task.
So as not to overestimate the cost, it has included only

(62) The Commission has focused its investigation on prices for ‘spots',
which represent the bulk of the advertising market (and to which
the complainant appears to refer), and not for emerging forms of
advertising such as ‘telepromotions'.

Indeed,

revaluation.

(128) The Commission has deducted from the net cost of the
public service the amount of the State financial support
received by RAI
in the period 1992 to 1995. This
amount includes any revenues from the State identified
in RAI's balance sheet. However, it does not include the
financial advantage obtained by RAI thanks to the tax
exemption on the asset
in the
present case that advantage can be considered as
compensating for a cost that would otherwise have had
to be financed (65). In other words, in order to calculate
the proportionality of State funding to the net cost of
the public service task, it is not necessary in the present
case to quantify the advantage obtained by RAI thanks
to the tax exemption on the revaluation of the assets
specified in RAI's 1993 balance sheet because a higher
tax liability would have proportionally increased the net
cost of the public service entrusted to RAI (even though
it is regrettable, for the sake of transparency and clarity,
that this tax liability has not been included in RAI's
accounts).

(129) The

result

of

the Commission's

calculation

is

summarised in the following table.

(63) Since, on the basis of the information contained in RAI's financial
it was not possible to distinguish clearly between
statements,
subsidiaries involved in the provision of the public service and
those involved in the commercial exploitation of that service, the
Commission has taken a prudent approach, excluding all the cost
items present
in RAI's profit and loss account and linked to
subsidiaries.

(64) As it is not possible to verify the correctness of the transfer prices
between RAI and its subsidiaries on the basis of RAI's financial
statements,
the Commission has adopted a prudent approach,
deducting all the revenues received by RAI from its subsidiaries,
including any dividend. For the reason mentioned in the previous
footnote, it has made no distinction between subsidiaries involved
in the provision of the public service and those involved in the
commercial exploitation of that service.

(65) See Commission aid decision C 2/03 (ex NN 22/02) — State
financing of Danish public broadcaster TV2 by means of licence
fee and other measures, paragraph 69 (OJ C 59, 14.3.2003, p. 2).

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Calculation of the net cost of the public service task entrusted to RAI and comparison with the total
financial support granted by the State in the period 1992 to 1995

Table 2

Gross public
service cost

Direct and indirect
revenues linked to
the public service
task

Net public service
cost

State funding

Overcompensation
(+) or
undercompensation
(–)

1992

1993

1994

1995

Total

4 171

4 151

3 877

4 125

1 827

1 550

1 627

1 718

2 344

2 600

2 249

2 407

2 354

2 269

2 375

2 494

9,5

– 331

125

87

– 109

7.2.2. RAI pricing policy in the advertising market

(130)

It should be stressed at the outset that there is general agreement that the television advertising
market in Italy is characterised by a low degree of transparency (66). Conditions and prices often
vary greatly depending on the client. Price lists are indicative in that broadcasters grant discounts
that vary according to the total advertising time bought by the client. The average discount is not
therefore very significant when it comes to assessing whether the public broadcaster has undercut
prices (67). The data on advertising prices must thus be interpreted with some caution.

(131) The price of advertising is linked to the audience share of each broadcaster. In the period under

investigation RAI's and Mediaset's audience shares were as follows:

Table 3

Average annual audience share as % (24 hours) (*)

RAI I

RAI II

RAI III

Total RAI

Canale 5

Italia 1

Rete 4

Total
Mediaset

1992

1993

1994

1995

18,96

18,27

18,13

17,74

8,95

9,34

46,18

19,56

11,78

11,70

43,04

45,21

20,52

12,48

11,74

44,74

19,91

16,39

10,09

46,39

20,26

12,57

10,76

43,59

22,76

15,50

9,67

47,93

21,21

12,07

9,49

42,75

(*) Source: Auditel and Corte dei Conti, ‘Relazione sul risultato del controllo eseguito sulla gestione finanziaria della RAI per gli

esercizi 1994, 1995 e 1996'.

(66) See Decision No 6662 by the Italian antitrust authority of 10 December 1998. This view is shared by another
Italian autonomous authority, Garante per la radiodiffusione e l'editoria,
in its 1995 report (pp. 140 to 143),
referring to the absolute opacity of this market. It also notes that radio advertising revenue represents a limited
component of the market since the bulk of the market is made up of television advertising. Lastly, it points out
that the advertising market is concentrated in the hands of Sipra and Publitalia, respectively RAI's and Mediaset's
advertising agency.

(67) In a letter of 25 May 2001 sent,

to the Commission's Competition Directorate-General, Mediaset
acknowledges that it is not possible to provide significant evidence of RAI's discount practices. It further states that
on some occasions RAI has granted excessive discounts but it does not identify those cases. Mediaset submitted a
table on the average discounts granted by RAI, adding that it is very difficult to measure the effects of individual
discounts on the basis of the data concerning average discounts (the table is reproduced below).

inter alia,

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Average annual audience share as % during prime time (20.30 to 22.30) (*)

Table 4

RAI I

RAI II

RAI III

Total RAI

Canale 5

Italia 1

Rete 4

1992

1993

1994

1995

20,70

20,51

21,43

24,17

15,92

15,73

15,10

14,13

10,67

11,74

11,78

10,76

47,29

47,98

48,31

49,06

19,96

19,66

20,39

22,21

11,97

13,04

13,37

12,37

11,44

11,13

9,72

8,80

Total
Mediaset

43,37

43,83

43,48

43,38

(*) Source: Auditel and Corte dei Conti, ‘Relazione sul risultato del controllo eseguito sulla gestione finanziaria della RAI per gli esercizi

1994, 1995 e 1996'.

(132) Article 8(6) of Law 223/90 established the advertising
limits for RAI and for private concessionaires. RAI may
not devote more than 4 % of its weekly broadcasting
time and 12 % of every hour
to advertising, while
national private concessionaires may not exceed 15 % of
daily broadcasting time and 18 % of every hour. Article
8(16) provided for the imposition of a ceiling on the
overall amount of revenue that RAI could generate from
advertising. This ceiling was abolished by Decree-Law
408/1992 with effect from 1 January 1994.

(134)

Table 5

Statutory advertising time for RAI and for private
national broadcasters

Advertising

RAI

Private national
broadcasters

Hourly

12 ± 2 %

18 ± 2 %

Daily

Weekly

—

4 %

15 %

—

commercial behaviour.
prices and revenue are
commercial strategy that is not anti-competitive.

In fact, such developments in
compatible with a sound

the share of

it must be pointed out

In particular,
that RAI's
commercial strategy in the advertising market appears
time. Before 1994 RAI was
to have changed over
subject to a revenue ceiling which it observed by selling
a quantity of advertising below the time set. This
suggests that RAI did not pursue a low pricing policy
before 1994 but instead chose to observe the ceiling
through a combination of relatively low supply and
influenced to a
relatively high price, a strategy that
in the
lesser extent
advertising market
for
viewers (69). After the removal of the revenue ceiling,
RAI
sales of
advertising space,
thereby increasing its advertising
revenue. Since the marginal costs of advertising space
are very limited, the fact that RAI expanded its revenues
from advertising by increasing the quantity does not
contradict the view that, also after 1994, RAI followed a
sound commercial strategy and is not sufficient to show
that prices were set below the level that would allow an
efficient commercial operator in a similar situation to
cover its costs (70).

lowered its prices and expanded its

and was more

its competitors

favourable

than Mediaset's. Accordingly,

(133) The above table shows clearly that RAI's hourly limit is
lower
the quantity of
advertising that RAI can broadcast is also lower. In any
case, advertising is an important source of revenue for
RAI. Indeed, it represents more than 30 % of its total
revenues (68). It must also be noted that the abolition of
the revenue ceiling does not substantiate Mediaset's
claim about RAI's policy of undercutting. Abolition of
the revenue ceiling allows RAI to increase its advertising
revenue. This, however,
evidence of price
undercutting. On the contrary, the fact that abolition of
increase in
the ceiling was followed by a significant
to be the logical
RAI's advertising revenue seems
consequence of the removal of a measure (the ceiling on
operator's
that
advertising

revenue)

is not

limits

an

(68) The Garante report of 1995 indicates that between 1993 and
1995 advertising revenue represented 33 % of RAI's total revenue.

(135) Furthermore,

should be stressed that Mediaset's
observations tend to demonstrate not so much that

it

(69) The fact that, while the advertising ceiling was in force, RAI did
not sell all the advertising time that it could have sold shows that
there was an opportunity for RAI to sell at lower prices and it did
not do so.

(70) The Garante report of 1995 refers to an increase in RAI's
advertising spaces from 1993 to 1994, a fall
in the average
advertising price per minute and an increase in total advertising
revenue. The average price per minute in the case of RAI's
channels is still higher than that of Mediaset's channels. Its 1996
report confirms the tendency towards more advertising time and
higher advertising revenue for RAI in 1994 and 1995.

L 119/22

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Official Journal of the European Union

23.4.2004

to

that

normal

corresponded

tries
instance,

RAI's pricing behaviour was one of price undercutting
but rather that it adopted the rational behaviour of any
to maximise
commercial operator
its
advertising revenue. For
in a letter of 28
January 2000 Mediaset argued that, without the ceiling,
‘now RAI can raise its advertisement prices as and when
it wishes with no commercial risk attached'. Second, in
its complaint of 19 October 1998 Mediaset makes some
statements that would indicate that RAI's advertising
practices
commercial
behaviour. In paragraph 10.5.1 Mediaset states that ‘RAI
has progressively modelled its advertising behaviour on
Mediaset' or, in even clearer terms, ‘RAI has modelled its
pricing and marketing policies ever more closely on
those of Mediaset's advertisement subsidiary'. Again, in
is encouraged to increase its
paragraph 10.6.2,
through the offer of
ratings
share
commercial programmes … in order
to maximise
advertisement revenues'.
In a document of 8 January
1999 Mediaset stated: ‘RAI continue to compete to the
best of its ability in the advertisement market place,
indeed, the government had abolished the ceiling on
RAI's revenue from advertisement shortly before (71).
Lastly,
in a letter dated 25 May 2001, Mediaset
complains again that RAI's board of directors had
decided to adopt an advertisement policy based on a
decisively commercial approach (72). Similar points were
also made by FRT (an association of
Italian private
broadcasters) in its observations on the opening of the
procedure. Now, all these statements suggest that RAI's
behaviour in the advertising market has been close to

‘RAI
and audience

that of other commercial operators and do not point to
excessively low prices out of
line with those of
competitors.'

(136) The

submitted, despite

complainant has not

the
Commission's requests, any precise evidence of price
undercutting by RAI. On the contrary, it has explicitly
acknowledged that it is impossible to provide significant
evidence of RAI's discount practices (73). The elements
submitted by the complainant (two tables attached to its
complaint of 19 October 1998) in support of its claim
that RAI had undercut advertising prices are not
decisive
concerns
discounts and is reproduced below:

respect. The

in this

table

first

Table 6

Average discounts on advertising

discount Sipra (*)

discount Publitalia (*)

1992

1993

1994

1995

37,28 %

37,68 %

45,50 %

41,04 %

45,32 %

32,99 %

48,26 %

39,98 %

(*) Sipra and Publitalia are respectively RAI's and Mediaset's exclusive

advertising agents.

(71) On 18 May 1999 representatives of the Commission's Competition
Directorate-General met with Mediaset, which submitted a
document in which it stated that the objective of its complaint was
inter alia to limit RAI's access to advertising resources. However,
according to the communication, public service broadcasters
should try to maximise advertising revenues, if only to reduce the
need for State compensation. In addition, Mediaset asserted that
RAI had violated its advertising limits in 1998 as it sought more
financial resources.

(72) An annex to the complaint of 19 October 1998 contains a
collection of public statements by RAI's managers that tend to
demonstrate RAI's intention to maintain a high audience share in
order to continue to generate high advertising revenues. Indeed, it
appears that the maximisation of advertising revenues is a declared
policy of RAI, as reaffirmed in different circumstances by RAI's
management (see, for example, the ordine di servizio of 26 June
1998 (pp. 4 and 5) attached to the correspondence from the
Italian authorities of 16 June 1999). Advertising indeed became an
increasingly important source of revenue for RAI in the 1990s.

(137) This table shows that the average RAI discount was
significantly higher than Mediaset's in the years under
the
investigation. Nevertheless,
absolute price charged by RAI and Mediaset and in the
light of the characteristics of the advertising market in
Italy highlighted above, the table does not prove that
RAI has practised price undercutting (74)
(see recital
144).

absence of

in the

(138) The other table submitted by Mediaset (entitled Costo in
lire per audience) compares RAI's and Mediaset's prices
in April 1998. The table is as follows:

(73) Letter of 25 May 2001, mentioned above.
(74) As admitted by Mediaset itself, the figures for the average discount
are not significant when it comes to proving the existence of price
undercutting (see footnote 67).

23.4.2004

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L 119/23

Table 7

RAI's and Mediaset's advertising prices in 1998

Channel

Peak time

RAI I

RAI II

RAI III

Canale 5

Italia 1

Rete 4

19.30 —
22.30

19.30 —
22.30

19.30 —
22.30

20.00 —
22.30

20.00 —
22.30

20.00 —
22.30

Peak rate
(30 seconds)
(in ITL million)

Peak audience
(in ITL million)

104 000

6 705

60 000

2 930

44 000

2 839

95 000

5 007

28 000

2 850

21 000

1 345

(139) Assuming that

shares

remained
in 1998 audience
substantially similar to those prevailing in the period
under investigation, table 7 does not indicate that RAI
undercut prices. Indeed, every RAI channel had a price
for advertising that was higher than that of its closest
private competitor channel.

(140)

Indeed,

in the light of

In the light of this plurality of elements indicating that
RAI did not undercut prices in the advertising market in
the years under investigation and in the absence of any
precise evidence submitted by the complainant,
the
Commission has decided that, in order to supplement its
analysis, a more detailed comparison should be made of
RAI's and Mediaset's advertising prices in the period
the similarity
1992 to 1995.
between the respective audience shares of RAI and
Mediaset and the structure of
the two broadcasters
(based on three channels) and given that in the relevant
period Mediaset (75)
invariably posted profits (and so
should, when it comes to selling advertising space, be
considered an efficient
in a
situation similar to that of RAI), the Commission is of
the opinion that a comparison between the prices of
these two operators is a meaningful proxy for
the
criteria indicated in point 58 of the communication,
whereby the public
service broadcaster must not
undercut prices in non-public service activities below
what is necessary ‘to recover the stand-alone costs that
an efficient commercial operator in a similar situation
it has
would normally have to recover'. Accordingly,

commercial operator

(75) The Commission refers to the economic results of RTI SpA, the
legal entity holding the three television concessions and one of
RAI's competitors.

the

per

daily

price

average

contact
compared
(hereinafter daily price per contact) and the average
prime time price per contact (hereinafter prime-time
price per contact) of the two broadcasters. To obtain
another indication of RAI's behaviour, the Commission
the
has cross-checked the data and the results of
comparison of prices per contact with the data for the
total advertising time and total advertising revenues of
the two operators as well as with the amount of
advertising broadcast in prime time and the advertising
prime-time revenues of the two operators.

(141) Accordingly,

the Commission requested the

Italian
authorities to submit information on the pricing of RAI
and Mediaset
in the advertising market. The Italian
authorities provided this information on 12 December
2002 on the basis of data provided by AGB (leading
company in independent audience measurement
for
advertising transactions) and Nielsen (leading provider
of
related
audience measurement
services).

television

and

limits)

and low weekly

(142) The Italian authorities explained that, given the different
structure of the advertising limits for RAI (combination
of hourly
and Mediaset
(combination of hourly and daily limits), Mediaset tends
to reach the limit at any hour of the day, while RAI
tends to concentrate advertising in the hours when its
audience is higher. For the purposes of
the present
procedure, the Commission notes that RAI's behaviour
is not
revenue
inconsistent with the objective of
maximisation. Indeed, in the presence of a low weekly
limit,
it is important for maximising revenue that the
broadcaster concentrates advertising in the hours when
the audience is high.

(143) On the basis of the data provided by AGB, the Italian
authorities have submitted two tables comparing RAI's
and Mediaset's daily and prime-time price per contact.
The tables refer to the price lists of RAI and Mediaset.
Prices are in euro per thousand viewers.

Table 8

Daily price per contact

1992

1993

1994

1995

RAI

Mediaset

2,8

1,9

2,5

1,7

2,7

1,7

2,9

1,9

L 119/24

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Official Journal of the European Union

23.4.2004

Table 9

Prime-time price per contact

1992

1993

1994

1995

RAI

Mediaset

3,2

2,4

3,3

2,2

3,5

1,9

3,7

2,0

(144) The Italian authorities have also provided data on the
net price per contact. In order to obtain the net price
they incorporated into the daily and
per contact,
the effects of possible
prime-time price per contact
discounts granted by the broadcasters, using the average
discount calculated by Nielsen. Prices are in euro per
thousand viewers.

Table 10

Net daily price per contact

1992

1993

1994

1995

RAI

Mediaset

1,8

1,2

1,4

1

1,5

1,1

1,5

1,1

Table 11

Net prime-time price per contact

1992

1993

1994

1995

RAI

Mediaset

2,1

1,5

1,9

1,3

2

1,3

1,9

1,2

(145) From the above tables it can be concluded that both the
daily price per contact and the prime-time price per
contact of RAI have been constantly higher than those
of Mediaset.

Table 12

Comparison between RAI's and Mediaset's total
advertising time and total gross advertising revenue
(including agency commissions)

RAI total
advertising
time (hours)

RAI total
advertising
revenue
(EUR million)

Mediaset total
advertising
time
(hours)

Mediaset total
advertising
revenue
(EUR million)

1992

1993

794

864

1994

1 003

1995

1 038

699

689

744

787

2 735

1 146

2 940

1 245

3 106

1 278

3 274

1 369

(147) These data show that, with an audience share slightly
higher than that of Mediaset, RAI broadcast advertising
the broadcasting time of
for almost one third of
Mediaset and generated revenue equal to more than half
of Mediaset's revenue. To sum up, with less time RAI
generated proportionally more revenue.

(148) As to the data regarding the amount of advertising
broadcast
in prime time and prime-time advertising
the Italian authorities have provided the
revenues,
following information on the basis of data compiled by
AGB and Nielsen.

Table 13

Comparison between RAI's and Mediaset's total
prime-time advertising and total gross prime-time
advertising revenue (including agency commissions)

RAI total
advertising
time (hours)

RAI total
advertising
revenue
(EUR million)

Mediaset total
advertising
time
(hours)

Mediaset total
advertising
revenue
(EUR million)

1992

1993

1994

1995

121

141

160

157

208

246

254

264

301

318

326

336

370

386

338

351

(146) As to the data on the total advertising time and total
advertising revenues of the two operators, the Italian
authorities provided the following information on the
basis of data compiled by AGB and Nielsen.

(149) These data show that, with an audience share slightly
higher than that of Mediaset, RAI broadcast prime-time
advertising for less than half the time of Mediaset and
generated revenue equivalent to more than half (1992)
and more than two thirds (1994 and 1995) of Mediaset's
generated
less
revenue. Again, with
proportionally more revenue.

time RAI

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Official Journal of the European Union

L 119/25

(150)

all

the

elements gathered by the
In conclusion,
Commission tend to demonstrate that RAI did not adopt
a pattern of behaviour consisting in setting prices in the
advertising market below the level that would allow an
efficient commercial operator in a similar situation to
cover its costs. Rather, it appears that this behaviour is
consistent with the maximisation of advertising revenue.
The complainant has not been able to provide evidence
supporting its claim that RAI undercut advertising price
(the complainant has not even been able to point to a
it has
single episode of price undercutting).
supplied statements that tend to prove the opposite, i.e.
that RAI operates in the advertising market as a normal
commercial operator.

Instead,

(151)

In the light of the foregoing, the Commission concludes
that in the period covered by the present investigation
RAI has not undercut prices.

(154) Moreover, the Commission finds that the conversion of
the 1992 and 1993 concession fee into a CDDPP loan
in 1995 does not constitute State aid within the
meaning of Article 87(1),

HAS ADOPTED THIS DECISION:

Article 1

The aid provided for in Articles 2, 3 and 4 of Decree-Law No
558 of 30 December 1993 and in Article 1 of Decree-Law No
2 of 2 January 1992, which was converted into Law No 332
for
of
RAI-Radiotelevisione Italiana SpA over the period 1992 to
1995 is compatible with the common market within the
meaning of Article 86(2) of the Treaty.

implemented

1992,

Italy

July

and

by

1

8. CONCLUSION

The conversion of the 1992 and 1993 concession fee into a
loan by Cassa Depositi e Prestiti in 1995 does not constitute
State aid within the meaning of Article 87(1) of the Treaty.

Article 2

(152) The Commission finds

that

Italy has unlawfully
implemented the measures provided for in Articles 2, 3
and 4 of Decree-Law No 558 of 30 December 1993 and
in Article 1 of Decree-Law No 2 of 2 January 1992,
which was converted into Law No 332 of 1 July 1992,
in breach of Article 88(3) of the Treaty.

(153) However,

the Commission considers

aid
covered by this investigation has not overcompensated
RAI and,
is compatible with the common
market within the meaning of Article 86(2).

therefore,

that

the

Article 3

This Decision is addressed to the Italian Republic.

Done at Brussels, 15 October 2003.

For the Commission

Mario MONTI

Member of the Commission