2005/262/EC: Commission Decision of 20 April 2004 on the aid implemented by France in favour of the Coopérative d'exportation du livre français (CELF) (notified under document number C(2004) 1361)Text with EEA relevance.
Date: 2004-04-20
Institutions: European Commission
Subjects: France, State aid, application of EU law, book trade, control of State aid, cooperative, export

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COMMISSION DECISION

of 20 April 2004

on the aid implemented by France in favour of the Coopérative d'exportation du livre français
(CELF)

(notified under document number C(2004) 1361)

(Only the French text is authentic)

(Text with EEA relevance)

(2005/262/EC)

THE COMMISSION OF THE EUROPEAN COMMUNTIES,

Having regard to the Treaty establishing the European Com-
munity, 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,

Having called on interested parties to submit their comments
in accordance with the above Articles (1), and having regard to
those comments,

Whereas:

I. PROCEDURE

(1)

By judgment of 28 February 2002 (2), the Court of First
Instance of the European Communities annulled the last
sentence of
the Article 1 of Commission Decision
1999/133/EC of 10 June 1998 concerning State aid in
favour of the Coopérative d'exportation du livre français
(CELF) (3), which stated that:

‘The aid granted to CELF for the handling of small
orders of books in the French language constitutes
aid within the meaning of Article 92(1) of the EC
Treaty. As the French Government failed to notify
the aid to the Commission prior to its implementa-
tion,
is,
the aid has been granted unlawfully.
however, compatible aid as it satisfies the conditions
the
for derogation under Article 92(3)(d) of
Treaty’ (4).

It

(2)

The judgment followed a long procedure, the principle
stages of which are set out below.

A. FIRST STAGE OF THE PROCEDURE

(3)

By letter dated 20 March 1992, the Société internatio-
nale de diffusion et d'édition (SIDE), which presented

(1) OJ C 366, 5.12.1996, p. 7.
(2) Case T — 155/98 Société internationale de diffusion et d'édition (SIDE)

v Commission [2002] ECR II-1179.

(3) OJ L 44, 18.2.1999, p. 37.
(4) The underlined sentence is the one annulled by the Court.

itself as ‘a French firm that exports books and has to
compete with a publishers' cooperative receiving State
aid’ (5), drew the Commission's attention to aid measures
for promotion, transport and marketing granted by the
French authorities to CELF, which aid had not been noti-
fied to the Commission's services in advance in breach
of Article 93(3) (now Article 88(3)) of the Treaty.

By letter dated 2 April 1992, the Commission pointed
out to the French authorities that any plans to grant or
alter aid must be notified in advance to its services and
asked the said authorities to inform it about the nature
and purpose of the aid measures referred to by SIDE.

By letter dated 29 June 1992, the French authorities
confirmed to the Commission the existence of grants to
CELF. They explained that the measures were designed
to make French literature and language known in
non-French-speaking countries and that Celf had been
asked to manage three schemes of ad hoc aid designed
to facilitate access by readers in far-off places to French
books.

By letter dated 7 August 1992,
the Commission
confirmed to SIDE the existence of aid to CELF,
explained its purpose and informed the company that
the measures in question had not been notified. It stated,
however, that the disputed aid did not seem likely to
adversely affect trade between Member States. SIDE was
accordingly asked to submit its comments.

By letter dated 7 September 1992, SIDE informed the
Commission that it intended to object to the discrimina-
tory nature (6) of the measures and the consequences for
intra-Community trade, without however disputing the
cultural objective of the Ministry of Culture, which was
to see the spread of the French language and French
literature.

(4)

(5)

(6)

(7)

(5) Extract from the letter from SIDE dated 20 March 1992.
(6) SIDE mentions in particular that the Ministry of Culture refused it

access to the aid granted to CELF.

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(8)

(9)

Having assessed the disputed measures, the Commission
did not endorse SIDE's objections and considered, by
Decision dated 18 May 1993 (7), that, given the special
nature of competition in the book trade and the cultural
purpose of the aid schemes in question, the derogation
provided for in Article 92(3)(c) (now Article 87(3)(d)) of
the Treaty applied to them.

SIDE, by application dated 2 August 1993,
filed an
action for annulment of the Decision with the Court. By
judgment of 18 September 1995 (8), the Court partially
granted SIDE's request, annulling the Commission Deci-
sion of 18 May 1993 but only as regards certain
measures in favour of small orders.

(10)

The Court also upheld the following three aid schemes
administered by CELF on behalf of the State:

(a) subsidies for air freight or airmail;

(b) the Page à page programme (9) (aid for the dissemina-
tion of French-language books in the countries of
central and eastern Europe);

(c) Programme Plus (university textbooks in French for

students in sub-Saharan Africa).

The Court held that the Commission had obtained suffi-
cient information on the three schemes to justify the
finding that the impact of their operation on the rules of
competition was negligible. The Court pointed out in
particular that it was possible for any operator meeting
the specific conditions of the schemes to apply to CELF
for a grant. It stated that SIDE had not provided any
evidence to show that the granting of aid under the
three schemes was likely to affect trade between Member
States.

ingly,
it felt bound to conclude that determining the
cultural aim of the aid at issue did not pose any particu-
lar difficulties for the Commission and that it was not
necessary for it to obtain further information in order to
accept that their purpose was cultural.

(14) As regards the compensation granted exclusively to
CELF for small orders, the Court found, however, that
the Commission should have thoroughly examined the
conditions of competition in the sector concerned before
expressing an opinion on the compatibility of
the
measures with the common market.

(15)

It concluded (paragraph 76 of the judgment) that the
Commission should have initiated the inter partes proce-
dure provided for by Article 93(2) (now Article 87(2)) of
the Treaty and that the Commission Decision of 18 May
1993 should be dissolved, ‘in so far as it concerns the
aid granted exclusively to CELF for the purpose of offset-
ting the extra cost involved in handling small orders of
French-language books placed by booksellers established
abroad’.

B. SECOND STAGE OF THE PROCEDURE

(16)

the Commission
By Decision dated 30 July 1996,
in accordance with the Court's judgment of
decided,
18 September 1995, to initiate a formal
investigation
into the aid in question. The decision to initiate was
published in the Official Journal of the European Commu-
nities (10). Interested third parties were invited to submit
their
in
December 1996 and January 1997.

these were

comments,

received

and

(17)

Following this examination, the Commission adopted a
new, positive Decision: Decision 1999/133/EC.

The Court concluded that the Commission was able to
adopt a favourable decision concerning the three aid
schemes administered by CELF and that it could there-
fore reject SIDE's arguments as unfounded.

(18) On 28 September 1998, SIDE applied to the Court to
annul the last sentence of Article 1 of the Decision
1999/133/EC.

is the spread of

The Court stated that ‘as regards the cultural purpose of
the aids at issue, it is common ground that the aim of
the French Government
the French
language and French literature’. The Court also found
that the information available to the Commission when
it adopted its Decision of 18 May 1993, including the
facts contained in the letter from SIDE's board, dated
7 September 1992, was capable of supporting its assess-
ment that that aim was a real and proper one. Accord-

(19)

The seven grounds of annulment cited by SIDE were as
follows:

(a) procedural defect;

(b) inadequate reasoning;

(c) factual error;

(d) manifest error of assessment;

(7) Decision NN 127/92 Aid to exporters of French books (OJ C 174,

25.6.1993, p. 6).

(8) Case T-49/93 Société internationale de diffusion et d'édition (SIDE) v

Commission [1995] ECR II-2501.

(9) Which subsequently became the programme A l'est de l'Europe.

(10) See footnote 1.

(11)

(12)

(13)

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(e) breach of the principle of non-discrimination;

(26)

(f) breach

of

former

Article

92(3)(d)

(now

Article 87(3)(d)) of the Treaty;

(g) the disputed Decision is inconsistent with former
Articles 85 and 86 (now Articles 81 and 82) of the
Treaty.

The Court, in its judgment of 22 June 2000 (11), rejected
the French claim without going into the substance of the
case, having stressed the importance of the safeguard
of
by
mechanism introduced
Article 93(3) (now Article 88(3)) of the Treaty. It stated
that the fact that a Member State considers an aid to be
compatible with the common market does not entitle it
‘to defy the clear provisions of Article 93 of the Treaty’.

sentence

last

the

(20)

the Court
By judgment dated 28 February 2002,
annulled the last sentence of Article 1 of the said Deci-
sion on the basis of the ‘manifest error of assessment’,
without considering it necessary to examine the other
grounds cited in the action.

the Court considered that

(21) Having stressed the principles stemming from Com-
munity case-law on the degree of product interchange-
the Commission
ability,
should have carried out the necessary checks to obtain
the relevant data to enable it to distinguish the export
agency market
for the export of French-
from that
language books in general.

(22)

(23)

(24)

(25)

The Court found that by failing to carry out such a
check the Commission committed a manifest error of
assessment in selecting the export market for French-
language books in general as the reference market, when
it was established that the contested aid was intended
only for export agencies.

The Court concluded that under these conditions the
Commission was not able to assess appropriately the
effects of the contested aid on the relevant market and
therefore annuls the last sentence of Article 1 of Deci-
sion 1999/133/EC on this basis.

The French authorities applied to the Court of Justice of
the European Communities on 8 September 1998 for
Decision 1999/133/EC to be annulled, since it had set
aside the application in the case in point of Article 90(2)
(now Article 86(2)) of the Treaty. According to France,
the disputed aid was intended to offset the costs of a
service of general economic interest which had been
assigned to CELF by the Ministry of Culture.

and (3)

The French Government argued that under Article 92
(now Article 87 and
and Article 93(2)
the Treaty, contrary to an
Article 88(2) and (3)) of
existing aid, a new aid cannot be implemented before it
has been declared compatible with the common market,
except where the eligible undertaking qualifies for the
derogations provided for
in Article 90(2). France
defended the view that the obligation of suspension was
‘necessarily’ inapplicable in the case of aid allocated to
an undertaking responsible for administering a service of
general economic interest.

(27)

(28)

Consequently, the Court rejected the French action and
confirmed that the obligation of prior notification and
the suspensive effect attaching to it are applied in an
inseparable manner, since the fact that an aid may be
covered by Article 86 of the EC Treaty has no bearing
on the obligation to notify.

Lastly, SIDE lodged a complaint on 5 October 1999
with the Commission against CELF for restrictive prac-
tice and abuse of a dominant position under Articles 81
and 82 of the Treaty. SIDE also mentioned France as
responsible under Article 10 of the Treaty, since it had
encouraged the said anti-competitive practices.

(29)

This matter is being treated separately by the competent
services of the Commission.

C. THIRD STAGE OF THE PROCEDURE

(30)

(31)

(32)

(33)

the

partial

annulment

Following
of Decision
1999/133/EC, the Commission asked the French autho-
rities and SIDE by letters dated 14 June 2002 to give
their views on the reasons for the annulment of the deci-
in particular, on the aspects relating to the
sion and,
relevant market.

The French authorities were asked to comment in par-
ticular on the special
the CELF offer
compared with those of other market operators,
including SIDE.

features of

SIDE was asked to comment in particular on the notion
of small orders and to indicate any special feature its
offer might have compared with CELF's and those of the
other market operators.

By letter dated 8 July 2002, SIDE asked for an extension
in which to reply, which it was granted by letter dated
25 July 2002. The French authorities, which were to
meet the Commission's services on 17 July 2002, also
asked for an extension for their reply by letter dated
10 July 2002. This was granted by letter dated 1 August
2002.

(11) Case C-332/98 France v Commission (Aid for the Coopérative d'ex-

portation du livre français (CELF)) [2000] ECR I-4833.

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(34)

SIDE sent its reply to the Commission by letter dated
12 August 2002. The French authorities sent their reply
by letter dated 17 September 2002.

II. DESCRIPTION OF THE MEASURES IN QUESTION:
AID AIMED AT MAINTAINING A PARTLY NON-PRO-
FITABLE ACTIVITY

and having obtained a negative

(35) Having asked SIDE, by letter dated 19 September 2002,
to say whether its reply contained confidential informa-
tion,
reply on
30 September 2002, the Commission, by letter dated
17 October 2002, sent SIDE's reply together with its
annexes to the French authorities for comment. It also
asked them some further questions on this occasion.

(36)

By letter dated 30 October 2002, the Commission also
asked SIDE some further questions,
to which the
company replied by letters dated 31 October 2002 and
9 December 2002. SIDE informed the Commission, by
letter dated 23 December 2002, following the Commis-
sion's request of 16 December 2002, that its replies
contained no confidential information and could be sent
to the French authorities for comment.

(37)

In the meantime, since the French authorities had not
replied within the time limit,
the Commission was
obliged to send them a reminder by letter dated
27 November 2002. By letter dated 19 December 2002,
the French authorities again requested the Commission
for an extension.

(38) On 9 January 2003, the Commission sent SIDE's reply
of 23 December 2002 to the French authorities for
comment. By letter dated 17 January 2003, the French
authorities replied to the Commission's questions of
17 October 2002.

(39)

a

further

the Commission for

By letter dated 4 February 2003, the French authorities
asked
extension
(concerning the request for comments on SIDE's second
reply, dated 23 December 2002). By letter dated
11 February 2003,
the Commission granted the
requested extension in part. By letter dated 11 March
2003,
their reply to the
Commission.

the French authorities sent

(41)

(42)

(43)

(44)

The Ministry of Culture decided in 1980, in accordance
with the general policy guidelines of the French Govern-
ment on promoting books and literature in French, to
grant aid to export agencies accepting any type of order,
irrespective of the amount and whether it was profitable.
The measures were introduced to alleviate the effects of
market failure and to foster the ‘small non-profitable
orders’ activity in the export agency market.

The French authorities explain that small bookshops,
established in basically non-French-speaking areas, and
sometimes difficult of access and/or remote, were experi-
encing serious supply difficulties, since their orders
could not be met by the traditional distribution channels
when the quantities of books ordered were insufficient
or when the unit price of the books ordered was not
high enough to make the service profitable.

The operating grants in question were intended to
encourage firms to approach such customers (book-
shops, not final consumers), whom it had not been
possible to serve under a ‘normal’ commercial relation-
ship based solely on profit.

The aid in question was designed therefore to allow
export agencies to meet all orders from booksellers
established abroad in basically non-French-speaking
areas, irrespective of amount, profitability and destina-
tion. The aim was to ensure, as part of France's policy of
supporting cultural diversity, the optimum distribution
of books in the French language, thus promoting the
dissemination of French literature throughout the world.

(45)

The aid mechanism chosen by the French authorities,
the Small Orders programme, consisted in an operating
grant intended to offset the extra cost of handling small
orders of FRF 500 (i.e. approximately EUR 76) or less.

(40)

In the meantime, SIDE was received by the Commis-
sion's services at its request and was able to explain its
view of the case from the beginning at a meeting held
on 4 March 2003.

(46)

Two other funding systems, direct aid to booksellers and
direct aid to publishers, had been considered but had
finally been rejected, as they were thought by the French
authorities to be less efficient and more costly. The
system challenged by SIDE had seemed the most rational
economically and the safest as regards the use of public
funds.

(48)

(49)

(50)

(51)

(52)

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turnover,

(47) Under the Small Orders programme, the undertaking
receiving the grants had to promise to provide the Book
and Reading Directorate in the Ministry of Culture with
information concerning the general activity of the
all
financial accounts, provisional
firm (overall
budgets, copies of
the proceedings validating these
figures, the auditor's report where appropriate, and a
summary salary scale), and any documents relating to
the activity to be subsidised, in particular the grant utili-
sation account, substantiating that the services giving
rise to the grant awarded the previous year had been
carried out.

In practice, only one firm, CELF, had qualified under the
Small Orders programme. Every year it had to justify the
extra costs incurred by the small orders service in
support of its application for a grant for the following
year (12).

Specifically, one quarter of
the grant awarded the
previous year was paid at the start of the year, the
balance being awarded in the autumn, after the authori-
ties had examined the provisional budget of the recipient
firm and the changes recorded in the first part of the
financial year.

(54)

(55)

by the Ministry of Culture to grant it the aid described
in Part II.

Basically, SIDE is asking the Commission to take a deci-
sion putting an end to the distortions of competition
which it is suffering from on the market for the export
of French-language books, the disturbances complained
of being caused by the aid granted exclusively to CELF.

this

SIDE states that it refused to be granted the disputed aid,
which it had been offered by the Ministry of Culture at a
meeting held on 26 September 1996. It explains that it
late offer, which was made
could not accept
the Court of First
suddenly after
the judgment of
Instance on 18 September 1995.
It did not wish to
benefit
from a programme whose compatibility with
Community law might be questioned by the Commis-
sion. It also explained that the offer had been made
simply to get it to undertake to terminate the proceed-
ings which it had itself initiated.

It was agreed that if the amount of aid was not fully
utilised,
the balance would be deducted from the
planned grants for the following year.

(56)

It should be explained that the aid was abolished in
2002 (see Annex I,
table showing the trend of aid
granted since 1980, in euro).

the need for

SIDE also says it was convinced that the activity of
export agent did not require any aid. It therefore chal-
the Small Orders programme.
lenges
However, it no longer rules out all possibility of using it
in future,
‘so that its business can be run on a level
playing field’, but only assuming that a mechanism
which is clearly compatible with the Treaty rules is
adopted by the French authorities.

III. COMMENTS FROM SIDE AND INTERESTED THIRD

(57)

PARTIES

SIDE states that ‘on the export agency market, operators
whose turnover is basically generated by intermediaries
such as bookshops and not end-users are regarded as
“general” exporters’. The only general agencies,
in its
view, are CELF and SIDE. It also explains that there are
exporting booksellers, who sell direct to end-users.

A. REASONS FOR SIDE'S INTERVENTION

The object of SIDE (13), under Article 2 of its articles of
association, is: ‘the sale in France and abroad of books,
newspapers and magazines and all cultural products,
publishing, the setting-up or acquisition and running of
any similar business and, more generally, any industrial,
commercial or financial operation, whether in movable
or immovable assets, that can be linked directly or indir-
ectly to the object of the company or is likely to facili-
tate its expansion or development’.

(53)

By letter dated 20 March 1992, SIDE lodged a
complaint (14) with the Commission, following a refusal

(12)

In addition, the Ministry of Culture attended CELF's board meetings
and general meetings as an invited observer.

(13) A family company founded in 1980.
(14) See recital 3.

(58) At a meeting on 4 March 2003, SIDE informed the
Commission that it operates basically in western Europe.
It also operates in the markets of eastern Europe, but
not widely on account of the programme A l'est de l'Eu-
rope (15), from which CELF benefits. It also operates in
North America and South-East Asia. It used to operate
in Argentina, before the current crisis hit that country. It
explained that it did not want to operate in Africa, since
there are few interested customers in those territories,
particularly in sub-Saharan Africa. It does not operate
either in countries not covered by Coface (16).

(15) The Commission states that the programme makes it possible to
grant discounts on list prices to booksellers. CELF takes part on
the same basis as other operators; export agency is not involved in
this case.
Insurance undertaking covering export payment risks. SIDE refuses
to deliver to countries that are not covered.

(16)

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(59)

SIDE disputes the French authorities' argument that large
orders are profitable, whereas ‘small orders’ are not,
which is the reason why they have to be subsidised in
order to be met. It even adds, lastly, that small orders
overall are more profitable to process than larger ones.

(60)

(61)

(62)

The notions ‘small orders’ and ‘profitability thresholds’, it
explains, are arguments put
forward by the French
Government to try and justify the aid granted specifically
for the operation of CELF under the cover of aid for
processing small orders of French books for abroad,
when in fact it is just a simple operating aid.

SIDE maintains there is no profitability threshold for the
type of activity concerned. Economies of scale can of
course be achieved when several copies of the same title
are ordered at once. This is why its scale of discounts
provides for an additional discount of 5 % for each order
of 10 copies or more.

It states that the processing cost and profitability for all
orders are the same, since only the number of order
lines entered by one person in one day and the quantity
of books for each line are significant. The total amount
of the invoice issued has no influence on costing the
service. A person entering 1 000 lines in one day takes
exactly the same time as an order from a customer
containing two or 100 lines, the only difference being
that the customer has to be identified for each order
from a different customer, which only takes a few
seconds. The amount of turnover generated during a
given period does not depend, therefore, on the number
of customers but only on the number of lines entered
during that period.

(63)

SIDE also states that, just like CELF, it accepts all orders
sent to it whatever their amount, the solvency of the
customer being its only selection criterion.

(64)

Some orders, however, may contain requests for works
that are not
listed and consequently require special
searches; this type of order accounts for about 4,5 % of
its business.

(65)

SIDE therefore considers that the aid granted to CELF for
processing small orders enables that organisation to
offer customers particularly attractive discounts, which
SIDE cannot do itself.

(66) Apart from challenging the principle that there are extra
costs which justify the aid in question, SIDE highlights
certain errors in the data from CELF's cost accounts,
produced by the French authorities and used by the
Commission in support of Decision 1999/133/EC. Thus
it rejects the idea that there are extra costs associated
with the tele-transmission of small orders, as identified
in Decision 1999/133/EC. It also points out that some
of the data taken from CELF's cost accounting, relating
to social security contributions, are different to those
pertaining to the same item in the firm's financial
accounts, and that therefore the CELF accounting data
notified by the French authorities are not relevant.

(67)

(68)

(69)

SIDE explains that it chose to include in its public list-
ings only those publishers which offer the most attrac-
tive discounts. It adds that its list of publishers is much
more restricted than CELF's, because it is not able to
offer attractive discounts for all publishers, unlike CELF,
which can do so as a result of the aid it receives and the
special relations it maintains with publishers.

SIDE points out that it suffered a loss, since some of its
customers switched from its services to CELF, which, on
account of the aid it receives and the accommodating
attitude of the publishers, offers particularly attractive
discounts (17).
It considers that by this means CELF
acquired a dominant position on the export agency
market.

It explains that it is now suffering another kind of loss
resulting from the changes to the pricing policy of CELF,
which it has been applying ‘for at least two years terms
that discourage small accounts’ (18), (19). Now that CELF
only receives a symbolic part of the disputed grants, and
especially since they were completely abolished in 2002,
small accounts are requesting SIDE's services. This new
demand causes further loss for the company, ‘since the
most interesting customers are also those who have a
large volume of orders’.

(70)

SIDE concludes that ‘the policy thus being conducted by
CELF is obviously in total contradiction with its state-
ment that its supposed public service task, which in its
view and that of the French Government justifies the aid
it receives, obliges it to treat all orders and all customers
the same’.

(17) For this purpose, SIDE produces in particular a document entitled
‘Determination of the losses suffered by SIDE on account of the
grants paid by the Ministry of Culture to CELF between 1 April
1980 and 31 March 1996’.

(18) That is, 2000 to 2002, the period between the start of significant

reductions in grants and their abolition.

(19) SIDE produced in particular a letter from CELF dated 18 March
2002, informing a German customer of a change in its general
conditions of sale for ‘small accounts’, the effect of which was an
increase in charges.

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In support of its claims, SIDE produces two external
reports from 1996, the first by the Fondation nationale
des sciences politiques and the second by the Cour des
comptes (Court of Auditors).

(77) He also mentions the problems of a possible agreement
between CELF and the publishers, the latter in part being
members of CELF (24). He objects to a ‘manifestly unjust’
in which private initiative as represented by
situation,
wholesale exporters is harmed.

(71)

(72)

(73)

(74)

and academic books)

The report of the Fondation nationale des sciences poli-
tiques, entitled ‘La diffusion assistée du livre scientifique
et universitaire français’ (Assisted marketing of French
scientific
and published in
November 1996, concerns a particular segment of the
market. According to SIDE, although outside the scope
of the present proceedings, the document contains parti-
cularly significant information, which should have been
taken into account by the Commission in Decision
1999/133/EC when assessing the legality of the aid in
question.

SIDE also produces a report by the Cour des comptes,
published in October 1996, criticising generally the
policy of the Ministry of Culture on grants and focusing
more specifically on certain programmes financed by the
Ministry, including programme Page à page, administered
by CELF.

SIDE raises other, more specific questions. It objects to a
recapitalisation of CELF by the Government in 1980,
which it considers tantamount to rescue aid. It believes
that CELF was recapitalised a second time in 1993, also
a State aid, through the Association pour le développe-
ment de l'édition française (ADEF). Finally, it mentions
the advantages to CELF of being entrusted with the
‘management of public programmes’, and a whole set of
specific advantages linked to the firm's special relations
with the public authorities.

B. COMMENTS FROM INTERESTED THIRD PARTIES

(75)

Following publication in the Official Journal of the Euro-
pean Communities (20) of the initiation decision of 30 July
1996, and even before then, several
interested third
parties made their views known (21).

(76) Mr

in

his

comments

Van Ginneken (22),

of
December 1996, explains in his capacity as a wholesale
exporter of French books to non-French-speaking coun-
tries that ‘CELF had already set itself the task (23) of
becoming a profitable exporting wholesaler itself, which
conflicted with the object of its foundation, namely as a
service organisation’.

(20) See footnote 1.
(21)

It will be noted that two of the intervening third parties were
bought up by CELF, Mr Van Ginneken also intervening on behalf
of Hexalivre in 1996.

(22) Former multiple representative of CELF, whose relations with the
company ‘terminated on a sour note’. He was bought up by CELF.
In 1996 to 1997.

(23)

(78) Hexalivre,

a

company exporting French books (25),
submitted comments on 23 December 1996, also signed
by Mr Van Ginneken,
its chairman, as a bookseller
whose customers are ‘institutions’ established abroad. It
stated that CELF's business, whose object was to supply
booksellers abroad, should not in principle interfere with
its own. It argues that ultimately the grant in question
benefits ‘a private company supported by the govern-
ment and tending as far as possible towards a mono-
poly’.

‘unconditional

(79) Mr Fenouil, for Lavoisier Tec et Doc, a former colla-
borator of CELF, publisher and exporting bookseller
specialising in scientific and technical works, does not
dispute, in comments dated 7 January 1997, the appo-
siteness of the aid granted to CELF from 1980, and even
support up to 1994 (26)’.
mentions
However, he does take issue with CELF's diversifica-
tion (27), which he says was financed by means of the
disputed grants. He also states that 50 % of the orders
handled by his company are small orders of less than
FFR 500. Lastly, Mr Fenouil ‘calls for a return to normal
conditions of competition in exports,
involving the
abolition of aid not based on a genuine public service
mission or an indisputable cultural objective which
cannot be achieved by existing means’.

(80) Mr de la Rochefoucauld, for ‘Aux amateurs de livres inter-
national’, submitted comments dated 2 January 1997. He
objects to, and regrets, the fact that CELF can serve
foreign libraries and/or institutional customers while
for meeting the needs of another
receiving grants
market. He would like CELF to limit its sales to foreign
booksellers only,
ignoring all other customers. He
considers that the compensatory grant enabled CELF to
give its customers an extra discount of three percentage
points. For him ‘the aid is a hypocrisy’, he is ‘astonished
that the aid can be more than 60 % of the amount of
the orders in question’. He concludes that the aid serves
to expand CELF's commercial activities, and considers
therefore that it should be divided ‘between the book-
shops concerned in proportion to their turnover in third
countries’ and that CELF should be prohibited from
supplying customers other than booksellers established
abroad.

(24)

It will be noted that the Commission was able to establish that
CELF's collaborators on average numbered about a hundred, while
the market comprises several thousand publishers.

(25) Hexalivre was bought in 1998 by a subsidiary of CELF, which

itself has since been bought by CELF.

(26) Commission's italics.
(27) According to Tec et Doc, CELF should limit its activities to the
export agency business and not get involved in the export of scien-
tific books.

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(SNIEL) points out

The Syndicat national des importateurs et exportateurs
de livres
in its comments of
31 December 1996 that SIDE's remarks about CELF
were not considered sufficiently credible for it to join its
court action initially. It does object, however, to the fact
that CELF, from 1996, was able to operate in ‘areas
where it was not originally planned that
it should
operate’ (28), and considers that it developed these activ-
ities as a result of the compensatory grants received,
which it regards as too high.

(86)

The French authorities state that, in the circumstances,
CELF was transformed into a closed-end cooperative
society in public limited company form. Its capital was
increased from FRF 80 500 to FRF 1 280 500. One half
of the recapitalisation was provided by the shareholders,
and the other by ADEF (30), an association financed by
the State. ADEF was dissolved in 1994; its shares were
assigned free of charge to SNE, itself a collaborator of
CELF.

Similarly, SIDE,
in its comments of 6 January 1997,
stated that ‘(…) even supposing that small orders are
commercially significant,
it has become apparent very
quickly that CELF has not confined itself to this allegedly
non-profitable activity’.

(87)

disputes

CELF, which likewise submitted comments as a third
and
party,
produces several letters from publishers expressing satis-
faction with its services.

complainant's

allegations

the

France states that CELF has remained, to this day, a
cooperative society in public limited company form,
which operates using its own funds. It is a structure that
has always been open to all, there being no nationality
requirement in order to become a shareholder. The only
obligation has always been to have ‘an activity somehow
linked to the export of French books’. Thus publishers of
French-language works established in another Member
State can join the cooperative without any problem and
benefit from its action (31).

IV. COMMENTS FROM THE FRENCH AUTHORITIES

(88)

The French authorities state that for a long time small
orders were handled by the companies Hachette and
Messageries du Livre. These firms acted as distributors
for numerous publishing houses which did not have
suitable distribution structures for ad hoc small orders
and/or did not want to develop them.

CELF's object, under Article 3 of its articles of associa-
tion, is to ‘process directly orders for abroad (32) and the
overseas territories and departments of books, brochures
and any communication media and, more generally, to
perform any operations aimed in particular at increasing
the promotion of French culture throughout the world,
using the above media. To this end, the cooperative will
carry out all industrial, commercial or financial opera-
tions to achieve its object. Given the particular object of
the cooperative, no natural or legal person may become
or remain a shareholder, if they do not carry on a busi-
ness somehow linked to the abovementioned export
operations’.

(81)

(82)

(83)

(84)

(85)

FRF 50 000, was

increased subsequently

CELF, bringing together various operators
in the
publishing world, was set up in 1977, initially in the
form of an open-end cooperative, to offset the perceived
failure of the export agency market at a time when
Hachette and Messageries du livre had decided to
abandon that activity as unprofitable (29). Its capital, initi-
ally
to
FRF 80 500. From 1979, CELF encountered substantial
financial difficulties, which were expected however, since
the two companies which previously administered the
activity had preferred to withdraw from a market they
considered unprofitable. The profession, publishers, the
Syndicat national de l'édition (SNE) and the public
authorities considered that CELF's activity should be
maintained in any event,
to ensure the optimum
marketing of French-language books abroad. Since no
other operator seemed prepared to provide the service, it
was decided in 1980 that CELF would be restructured
and recapitalised.

(28) Small orders, according to SNIEL, account for 6 % of CELF's busi-
ness, which means, according to this union, that ‘CELF conducted
94 % of its business in areas where it was not originally planned
that it should operate’.

(29) A letter from the Syndicat national de l'édition dated 18 July 1980

submitted by the complainant confirms this.

(89)

The French authorities explain that, at 6 November
2002, CELF had 76 cooperative shareholders, who are
mainly, though not entirely, publishers. Each shareholder
has one vote at the general meeting, irrespective of the
size of
the
company has provided a guarantee of
transparency,
concern for the collective interest and the sound admin-
istration of the grant awarded.

its stake. The interprofessional nature of

(30) The association brought together a number of publishers whose
aims were to increase the presence of French books abroad and to
support investment for exporting publishers. It received assistance
from the State through the Book and Reading Directorate in the
Ministry of Culture.

(31) Only one foreign firm is currently a member of CELF: Casterman,
whose registered office is in Belgium. It is a French subsidiary of
Flammarion, itself a subsidiary of the Italian company Rizzoli.
(32) Prior to a discussion at the general meeting on 29 June 1994,
CELF's articles of association referred explicitly to “small orders”.
What was then Article II stated that “the Cooperative's object is to
process directly or facilitate the processing of small orders for
abroad and the overseas territories and departments, (…)”.

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(90)

The main players in the marketing of books are as
follows:

(91)

(a) publishers, which ‘produce’ the books;

(b) marketers, whether integrated into publishing houses
or not, which ensure the commercial promotion of
books to retailers or certain large institutional users;

(c) distributors, whether

integrated

into
publishing houses, which ensure the logistics of the
publishers' marketing; they receive their orders from
booksellers, certain large institutional users or diver-
sified intermediaries and obtain their supplies from
publishers;

not

or

(d) wholesalers, which are not always involved in the
distribution channels and who are intermediaries
between distributors and retailers or certain large
institutional users;

(e) export agencies, which deal only with retailers and

not the end-user.

(92)

(93)

(94)

France explains that on-line bookshops must now be
included among the players present on the market and
must also be considered as potential competitors of the
export agencies. It is, however, unable to supply data on
the market shares held by these new entrants (33).

The French authorities explain that the variety of the
players present on the market must make it possible to
market and promote books to all types of public, irre-
spective in principle of their geographic location, since
the Small Orders programme has provided an appro-
priate remedy for
the complex
mechanism for marketing books.

the deficiencies of

The French authorities transmitted certain information
on the global market for the export of French-language
books. This illustrates CELF's commercial policy, which
gives preference, in line with its articles of association
and the commitments given to the French authorities, to
those areas where publishers are not very present.

Thus Table 1 shows that CELF is not very active in those
areas where publishers are very active and that, conver-
sely, it is active in those areas where publishers are not
very active.

Table 1

Comparative geographic distribution of the turnover of French language publishing and CELF, and CELF's share of the global market
for the export of French language books

Regions concerned

Publishing

CELF

CELF's share

European Community

North America

Non-Community Europe

Overseas departments and territories

Asia

French-speaking Africa

Maghreb

Near and Middle East

Eastern Europe

Latin America

West Indies

Non-French-speaking Africa

38,2 %

17,4 %

16 %

8,4 %

3,7 %

5,5 %

4,4 %

2,3 %

2 %

1,5 %

0,32 %

0,16 %

100 %

20,23 %

6,03 %

1,11 %

0,87 %

19,9 %

11,58 %

28,43 %

1,09 %

2,21 %

7,6 %

0,7 %

0,21 %

100 %

0,97 %

0,64 %

0,13 %

0,19 %

9,95 %

3,85 %

11,84 %

0,87 %

2,03 %

9 %

4,27 %

2,47 %

(33) Market not identifiable from customs statistics.

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(95)

(96)

(97)

(98)

(99)

The French authorities point out that the Small Orders
programme was not designed as an aid specifically for
CELF, but as a scheme of support for the marketing of
it being possible to use the
French-language books,
channels of other operators that might respond to the
same type of order.

They explain that the structural change to CELF, which
occurred in 1980, was accompanied by a decision to
grant aid under the Small Orders programme. They
in practice, CELF was the only general
confirm that,
operator to receive the grants in question (34), since no
other operator (apart
from SIDE, 12 years after the
launch of
the programme) applied, even when the
programme was known to the profession.

the conditions of

France does not dispute that the Ministry of Culture
refused to grant the aid to SIDE (35) in 1991, since the
transparency
firm did not meet
required to qualify for the said aid and refused to be
in their award.
bound by the constraints
Furthermore, France points out
the Ministry of
Culture approached SIDE in 1996 to offer it the aid, but
the company refused it.

inherent
that

The French authorities point out that one of the objec-
tives of French cultural policy is to ensure the marketing
of French-language works throughout the world. This
objective must be understood as a public service task.
Which is why the French authorities maintain that the
Commission should analyse the measures in question
under Article 86(2) of the Treaty.

France points out that CELF was set up, and then allo-
cated the disputed grants, at a time when the economic
operators responsible for this activity had decided to
withdraw from the market. If the disputed measures had
not been put into effect, the marketing of French-lan-
guage books to small bookshops established in often
remote areas, where demand is slight in terms of turn-
over and volume, would have clearly been penalised.

(100) The French authorities consequently decided to imple-
ment the disputed programme, so that all orders can be
met, including non-profitable orders for French-language
works, under the same conditions as for larger orders.

(101) France asserts that the Ministry of Culture provided ‘its
assistance for the operational costs of CELF's public
service associated with small orders’ and that conse-
quently CELF was entrusted with a genuine public
service task.

(34) Some firms, Servedit for French-speaking Africa from 1988 to
1993, and the Ecole des Loisirs, in 1995, for the countries of the
Mediterranean basin, managed to qualify for aid of the same kind
but in specialist sectors.

(35) The only other company to have applied.

(102)

In support of their claim, the French authorities sent the
Commission several instruments:

(a) Decree No 82-394 of 10 May 1982 on the organisa-
tion of the Ministry of Culture stresses its role in the
‘influence of French culture and French art in the
free dialogue of world cultures’;

(b) Decree No 93-797 of 16 April 1993 on the powers
of the Minister for Culture and the French-speaking
World, which provides that ‘the Minister for Culture
and the French-speaking world (…) shall implement,
jointly with the other Ministers concerned,
the
measures introduced by the Government to ensure
the influence of French culture and the French
language in the world’;

(c) the orders on the organisation of

the Book and
Reading Directorate, the latest of which dates from
1996, based on the said decrees, which set out the
tasks of the Ministry of Culture in relation to the
export of books.

(103) The French authorities state that it is on the basis of
these instruments that the Book and Reading Directorate
concluded annual agreements with the partners respon-
sible for implementing measures arising out of
the
Government's cultural policy. The agreements define the
aims of the collaboration between the Ministry and the
bodies it subsidises, and the obligations of the parties.

(104) The French authorities explain that, every year,

the
Ministry of Culture concluded with CELF (36) an agree-
ment entrusting it with the performance of a public
service task which consisted in ‘meeting any order for
French-language works from foreign bookshops,
irre-
spective of the amount’.

(105) The French authorities also explain that, however the
reference market is defined, SIDE and CELF are not in
competition for low-volume orders.

(106)

In particular they highlight the contradiction in SIDE's
case: while claiming to work with the same type of
customers as CELF and that it treats all its customers in
their
the same way ‘irrespective of
orders’, SIDE gives a discount of less than five percentage
points on orders of less than 10 copies.

the amount of

(107) They consider that the significant ‘penalty’ which SIDE
applies to low-volume orders of less than 10 copies is
evidence that small orders are not a priority target for
the company, unlike orders which allow it to achieve
considerable economies of scale, such as those placed by
institutional customers.

(36) Until 2001, since the grant was abolished from 2002.

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L 85/37

(108) The fundamental difference in commercial strategy is
clear in particular from the average number of books
per line and per invoice, which is much higher for SIDE
than for CELF.

(109) The French authorities state that CELF must be able to
offer its customers a comprehensive list of publishers in
return for the aid granted to it, even if
this is not
compensated as such by the aid from the Small Orders
programme, since the policy objective of the Ministry of
Culture is to market books in French as widely as
possible. They point out that hundreds of publishers on
CELF's list are in fact very small publishers, associations
or miscellaneous bodies which are almost unheard of (37)
and whose publishing activity is not likely to generate
large, profitable orders. By offering such an expanded
list of publishers, CELF is promoting diversity. It must
accordingly be sourced from a very large number of
suppliers for amounts which are often very small, which
in turn forces it to manage numerous small publisher
accounts without this being compensated by aid of any
sort.

(110) Small publisher accounts are economically less profit-
able, since unlike large publishers they don't offer very
favourable terms. For its part, SIDE applies a commercial
policy that gives priority to the more popular publishers,
which are likely to generate large orders. The French
authorities explain that, consequently, a distinction
should be drawn between ‘small accounts’ and ‘small
orders’. The notion ‘small orders’ suits the description of
the disputed ‘programme’ of course, but it does not suffi-
ciently capture the counterpart of
‘small customer
accounts’, namely ‘small supplier accounts’.

(111) The award of grants is of course based on the extra costs
generated by small orders, but the beneficiary operator is

also subject
speaking, ‘compensated’.

to obligations which are not, properly

(112) The French authorities state that compensatory aid was
allocated to CELF to offset the additional expenses gener-
ated by small orders, the threshold for which had been
set empirically at FRF 500. The threshold was a refer-
ence figure which did not mean that each order between
FRF 0 and 500 had to be at the breakeven point. Some
orders of FRF 500 might be profitable, others not. It all
depended on the number of titles and books included,
the nature of the books, the reliability of the order
placed, depending on whether the customer was eligible
or not for the Coface guarantee, and the means of and
time required for payment.

(113) The French authorities explain that what was certain,
however, was that the FRF 0 to 500 order market was
not profitable overall and would not, in principle, have
been covered by an operator which had taken only
economic criteria into account. They base this argument
on a cost analysis for the reference year 1994.

(114) As tables 2a and 2b show, the French authorities explain
that in recent years, and in particular since they started
to run down their financial commitment in 1996 to
1997, CELF has been forced to diversify by developing a
profitable customer base made up of large bookshop
accounts and institutional customers such as libraries,
universities and cultural centres. At the same time, while
‘small account’ turnover and the number of customers
have declined, there has been an increase in CELF's turn-
over overall. The French authorities confirm conse-
quently that processing small orders has acted as a brake
on CELF's business.

Composition of CELF's turnover

Table 2a — Example of Germany

GERMANY
3,4 % of CELF's turnover represents 27,2 % of active small customer accounts

1999

2000

2001

Turnover

FRF 2 331 713

FRF 2 548 430

FRF 2 906 533

Number of customers

Turnover < FRF 5 000

Turnover < FRF 10 000

Turnover + FRF100 000

593

480

47

0

561

462

35

2

444

344

38

4

(37) For example, Ensemble baroque Limoge; monastère Sainte Made-

leine.

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Table 2b — European Community

Customer accounts, European Community

1999

2000

2001

Turnover

FRF 15 253 754

FRF 14 241 785

FRF 14 436 006

Number of active customers

Turnover < FRF 5 000

Turnover < FRF 10 000

Turnover + FRF 100 000

V. ASSESSMENT

(115) CELF and SIDE are two competing undertakings estab-
lished in France which are active, in particular, as agen-
cies for the export of French-language books (38). This
activity consists in the marketing of books in French (39)
in order to meet orders from small retailers (small book-
shops or institutions such as libraries or universities),
principally in non-French-speaking countries and areas.
For areas such as Belgium, Canada and French-speaking
Switzerland, books are marketed by the publishers them-
selves or through distribution networks, the volume of
the market being sufficiently large for firms to invest in
integrated distribution networks. This type of service
makes it possible to ensure the optimum marketing of
many works.

(116) SIDE and the French authorities are agreed that

the
agent collates individual small orders which it would be
too expensive for publishers and traditional distributors
to handle. This service enables customers, whether they
to avoid having to
institutions,
are booksellers or
contact a multitude of suppliers.

(117) At the same time, the orders are sent to the publishers
and/or distributors, which thus have a single point of
delivery: the agent. Through this type of service, there-
fore, they also save time and money by not having to
maintain relations with several customers, which are
assumed to be very scattered geographically.

fragmented and/or

(118) Export agents are thus essential service providers for
channels exporting books to countries where demand is
irregular,
low-volume. Using the
services of an export agent is therefore often the only
way for a buyer (never the final customer) established in
a non-French-speaking country to place and receive its
orders. The service of the agent makes it possible to
reduce the fixed costs associated with processing each
order.

(38) CELF is an agent only for books in French; this is not the case with

SIDE, which also handles books in foreign languages.

(39) Contrary to that of SIDE, CELF's activity is exclusively devoted to

exports.

1 567

1 059

162

19

(119)

1 440

950

154

15

1 249

782

139

18

it is established that the French
In the case in point,
authorities
implemented the disputed Small Orders
programme in order to assist, within the export agency
market, small orders of less than or equal to FRF 500,
regarded in principle as non-profitable. It is appropriate
to examine, therefore, whether this programme, which
was not notified and of which CELF was in practice the
only beneficiary, was compatible with the Treaty.

A. APPLICABILITY OF ARTICLE 87 OF THE TREATY

1. THE MEASURES IN QUESTION ARE AID WITHIN THE

MEANING OF ARTICLE 87(1) OF THE TREATY

(120) Article 87(1) of the Treaty lays down that ‘Save as other-
wise provided in this Treaty, any aid granted by a
Member State or through State resources in any form
whatsoever which distorts or threatens to distort compe-
tition by favouring certain undertakings or the produc-
tion of certain goods shall,
insofar as it affects trade
between Member States, be incompatible with the
common market’.

(121) The measure in question gives CELF an advantage, since
it is a grant designed to reduce the cost of small orders.
This point, moreover, was never disputed by the French
authorities.

(122)

It is financed from budgetary resources administered by
the Book and Reading Directorate in the Ministry of
Culture, i.e. from State resources.

(123)

It is intended for book agents and, in practice, has only
benefited CELF. It is therefore selective.

(124) As

to whether

trade between
the measure affects
Member States and distorts competition, the Commis-
sion has taken account of the following.

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books

(125) The aid is granted to French agents who export books in
the French language principally to non-French-speaking
countries. The French agents are therefore competing, at
least potentially, with other agents for the export of
French-language
other
French-speaking countries of the Community (principally
Belgium and Luxembourg).
It should be mentioned,
however, that given the considerable difference between
the volume of French-language books exported to
non-French-speaking countries
from France and the
volume exported from Belgium and Luxembourg, the
distortion of competition on the market as a result of
aid is by nature very limited.

established

in

(131)

It should now be examined whether one of the deroga-
tions provided for in Article 87(2) and (3) was applicable
in this case, so that the measure in question could have
general prohibition in
been exempted from the
Article 87(1).

2. ASSESSMENT OF THE MEASURES IN THE LIGHT OF

ARTICLE 87(2) AND (3) OF THE TREATY

(126) The aid may also give rise to a distortion of competition
and affect trade by having induced effects on the other
activities of CELF. However,
these seem confined to
marketing abroad, and CELF's website (40) clearly states
that the company does not sell in France or to indivi-
duals. The aid in question was granted to CELF under
the Small Orders programme, which was designed to
ensure that all orders from foreign bookshops located in
non-French-speaking territories can be met, irrespective
of the amount. The Commission notes that the disputed
mechanism was able to benefit buyers and publishers of
French-language books, since the former could enjoy
affordable prices and the latter's sales were facilitated.
Such an effect on trade, however, is extremely indirect
and, all things considered, very limited, given the low
substitutability between books in French and other
languages.

(127)

In these circumstances, the aid granted to CELF is State
aid within the meaning of Article 87(1) of the Treaty,
since it meets the four conditions of aid. It should also
be mentioned, however, that the impact on trade and
the distortion of competition as a result of the measure
are very small.

(128)

It must be stressed that Member States are obliged to
inform the Commission, in sufficient time, of any plans
to grant aid,
in accordance with Article 88(3) of the
Treaty.

(129) The French Government did not notify the programme
in question or the aid to CELF for processing small
orders, before it granted them. The aid was thus granted
unlawfully.

(130) Moreover,

since the Court of First

Instance partly
annulled the Commission Decision of 18 May 1993, and
subsequently Decision 1999/133/EC, which authorised
the aid granted to CELF, the aid which was granted to
CELF for processing small orders is still unlawful.

(40) www.CELF.fr.

(132) The Commission notes

the

that

derogations

in
Article 87(2) of the Treaty are not applicable in this
case, since the measures in question were manifestly not
intended to achieve the objectives defined therein. Nor
did the aid satisfy the tests for
the derogation in
Article 87(3)(a) of the Treaty, since it was not intended
to promote the development of areas eligible for the
provision. The derogation provided for in Article 87(3)(b)
concerning the promotion of the execution of an impor-
tant project of common European interest cannot be
applied in this case either, since the measure in question
was not intended to promote that type of project. Since
the aid was not intended either to remedy a serious
disturbance in the French economy, the derogation in
the second part of Article 87(3)(b)
is not applicable
either
in the case in point. Lastly, Article 87(3)(c),
concerning the facilitation of the development of certain
economic activities or certain economic areas cannot be
relied on, since the aid did not pursue regional or hori-
zontal objectives and the Commission considers that the
provision cannot be used in this case for sectoral
purposes.

(133) However, under Article 87(3)(d), ‘aid to promote culture
and heritage conservation where such aid does not affect
trading conditions and competition in the Community
to an extent that is contrary to the common interest’
may be considered to be compatible with the common
market.

(134)

It is established that the cultural objective of the aid in
question, recognised early on by the complainant (41)
was acknowledged by the Commission in its Decision of
18 May 1993, confirmed by the Court of First Instance
in its judgment of 18 September 1995, confirmed again
in Decision 1999/133/EC, and not called into question
in the CFI's annulment decision of 28 February 2002.

(135) This objective is clearly affirmed by the French Govern-
ment, which wanted to conduct a proactive policy
aimed at promoting the worldwide marketing of Fren-
ch-language works. The desire is part of an increasing
trend to safeguard and encourage cultural diversity at
international level.

(41) Letter from SIDE's board to the Commission dated 7 September

1992.

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(136) The Commission has already expressed its views on this
topic in its communication to the Council and the Euro-
pean Parliament entitled:
‘Towards an international
instrument on cultural diversity’ (42).
It considers that
cultural diversity has become one of the major issues of
the international debate taking place among interna-
tional and regional organisations, which makes
it
possible to answer growing concerns of civil society and
regarding the preservation of cultural
governments
diversity as a common heritage of populations.

(137) The preservation and promotion of cultural diversity are
among the founding principles of the European model.
They are incorporated in the Treaty, in Article 151(1),
which states:
‘The Community shall contribute to the
flowering of the cultures of the Member States, while
respecting their national and regional diversity and at
the same time bringing the common cultural heritage to
the fore’, or again in Article 151(4), which states: ‘The
Community shall take cultural aspects into account in its
action under other provisions of this Treaty, in particular
in order to respect and to promote the diversity of its
cultures’.

(138) The Treaty requires the Community and the Member
States to promote cultural diversity in their international
relations as a contribution to a world order based on
sustainable development, peaceful
and
dialogue between cultures. By fostering and financially
supporting the marketing of French-language works, the
French authorities have implemented a cultural policy
which meets the objectives laid down in the Treaty.

coexistence

(139) Accordingly,

the Commission considers that

the aid
which was granted to CELF by the French authorities for
marketing French-language works,
the
amount of the order, was pursuing a cultural objective
as understood in the Treaty.

irrespective of

3. COMPATIBILITY OF THE AID WITH COMMUNITY LAW

(140) Under Article 87(3)(d) of the Treaty, aid to promote
culture and heritage conservation where such aid does
trading conditions and competition in the
not affect
Community to an extent that is contrary to the common
interest may be compatible with the common market.

a. Preliminary remarks by the Commission on the

comments of third parties

(141) The Commission notes that

the third parties which
expressed their views, following publication of the deci-
sion to initiate the proceeding, are not, except for SIDE
and CELF, export agents but rather providers of specialist
the intervening third
‘wholesale’

services. None of

parties states that
Culture for the aid in question.

it had applied to the Ministry of

(142)

It is clear from several of the third-party comments that
the mechanism of assistance set up by the French autho-
rities was not, at least initially, called into question by
those members of the profession who expressed their
views.

(143) The Commission would also observe that the complai-
nant, like the third parties, was fully aware of the aid
which CELF had been granted since it was set up in
1980.
that SIDE asked the
Ministry of Culture to grant
the
the aid as well,
Commission being informed of the case only several
months later, in March 1992.

It was only in 1991 (43)
it

(144) The Commission notes that the third-party comments
are basically critical of CELF's policy of diversifica-
tion (44). CELF is accused of having gone, over a period
of time and with the complicity of the publishers that
granted it preferential discounts, into markets other than
i.e. the small
that for which it was originally set up,
orders market.

(145)

It is clear from the documents supplied that, when it
was set up, CELF served bookshops only. It is only later,
during the 1990s, that it started to canvas other types of
indicates
customer. However, nothing
that CELF
financed the diversification of
its business from the
indeed the opposite is the case, since
disputed grants,
the purpose and effect of the grants was to compensate
only the extra costs generated by small orders, as is
shown in recital 198 et seq.

(146) Some third parties, exporting wholesalers or exporting
booksellers, point out that the aid was not appropriate
for satisfying demand, though no relevant information
in support of these claims was produced.

(147) Lastly, some third parties claimed that CELF benefited
from the privileged relations it maintained with certain
public organisations, such as France édition. Hexalivre,
in particular, criticised the attitude of France édition,
treatment by
which,
allowing it access to its stand at
fairs,
which it refuses to do for Hexalivre.

it said, had given CELF special

international

(148) The Commission has been able to establish, as the docu-
ments communicated by the French authorities testify,
that CELF, which is a member of France édition, paid
both for the space rental on France édition's stand and
for the catalogues it ordered from that organisation. In
any event, as the French authorities have noted, this type
of relation in no way concerns the public authorities.

(42) COM(2003) 520 final.

(43) Letters from SIDE, dated 22 May and 4 June 1991.
(44) See recital 81.

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(149) However, as these factors did not figure in the decision
to initiate proceedings of 30 July 1996, they have no
bearing on the ‘small orders’ problem. Consequently, the
Commission will not give an opinion on this question in
the present proceedings.

CELF and the advantages it would receive from ‘adminis-
tering public programmes’. SIDE also challenged a whole
series of specific advantages,
linked to the preferential
relations which CELF allegedly maintains with the public
authorities.

(150) The French authorities are also accused of

favouring
CELF through public procurement. These claims relate in
particular to the assistance granted for implementing the
‘Nouveautés’ programme administered by the Ministry
for Foreign Affairs and the impact of orders placed by
associations linked to that Ministry and the Ministry for
Cooperation (such as the Association pour le développe-
ment de la pensée française (ADPF) and the Association
pour le développement de l'enseignement et de la culture
en Afrique et à Madagascar (Audecam).

(151) As these factors did not figure in the decision to initiate
the proceeding of 30 July 1996, they have no bearing
the
on the problem of small orders. Consequently,
Commission will not give an opinion on this question in
the present proceedings.

(152) Lastly, SIDE objects to ‘the complex bundle of aid bene-
fiting not only CELF but also various organisations
bringing together,
like CELF, publishers and public
authorities in the greatest obscurity’ and the cultural
policy of the public authorities generally.

(153)

In support of its claims, SIDE produces in particular a
report by the Cour des comptes from November 1996.
The Commission notes that the report basically contains
general criticisms of the way cultural aid was awarded in
It contains nothing about the aid granted to
France.
CELF for
small orders. CELF is
mentioned, but only in connection with the programme
Page à page and the Programme Plus operation, which
were approved by the Court of First Instance in its judg-
ment of 18 September 1995 (45).

the processing of

(154)

In the circumstances, the Commission considers that the
conclusions of the Cour des comptes' report are not
likely to help its assessment in these proceedings. In any
event, SIDE's general criticisms of French cultural aid
policy were not
included in the decision to initiate
proceedings of 30 July 1996 with regard to the Small
Orders programme. Consequently, the Commission will
not give its views on this question in these proceedings.

Recapitalisation of CELF in 1980

(156)

It will be noted that CELF's capital was raised in 1980
from FRF 80 500 to FRF 1 280 500. The operation was
financed by ADEF to the tune of 50 % and by the
(private) shareholders of CELF, also to the tune of 50 %.

(157) The main objective of ADEF, which brought a number
of publishers together, was to promote the presence of
French books abroad and to support investments made
by publishers or exporters. The Association received a
public grant from the Ministry of Culture.

(158) Having analysed the documentation submitted by the
the Commission has reached the
French authorities,
conclusion that the disputed capital
increase did not
constitute State aid but simply the acquisition of a
holding. It is not, and cannot be, disputed that private
investors participated in setting up the company in its
present form. The Ministry of Culture, did not contribute
to CELF's capital, and ADEF, an association that is admit-
tedly financed in part by the state, always acted like a
private investor in a market economy. ADEF's subscrip-
tion fully satisfies point 3(2)(iii) of the Commission's
notice on the application of Articles 92 and 93 of the
EEC Treaty to public authorities' holdings (46). Accord-
ingly, the transaction contained no element of State aid
within the meaning of Article 87(1) of the EC Treaty.

(159) Moreover, the recapitalisation had already taken place
more than 10 years before SIDE sent its first letter to the
Commission, dated 20 March 1992, and before the
Commission asked the French authorities for informa-
tion by letter dated 2 April 1992. Consequently, and in
accordance with Article 15 of Council Regulation (EC)
No 659/1999 of 22 March 1999 laying down detailed
the EC
the application of Article 93 of
rules
Treaty (47), the Commission could not,
if appropriate,
order the recovery of the capital increase, even if State
aid were involved.

for

b. Reply concerning SIDE's related claims

(155)

the aid procedure, SIDE raised
In the first stage of
certain specific questions about the recapitalisation of

Recapitalisation of CELF via ADEF in 1993

(160) SIDE also objects to aid which was granted to CELF in
1993 via a sale of shares in ADEF to SNE, which is a
collaborator of CELF.

(45) See recital 10.

(46) Bulletin of the European Communities, 9-1984.
(47) OJ L 83, 27.3.1999, p. 1.

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(161)

In its comments of 5 December 2003, SIDE remarked to
the Commission that,
in accordance with the written
evidence it had deposed at the hearing on 4 July 2001,
the Commission should give its opinion on the aid
which, according to SIDE, had been granted to CELF
when ADEF was wound up in June 1993.

(168) SIDE maintains,

that

for its part,

the Small Orders
programme was reserved exclusively for CELF. The rejec-
tion it received from the Ministry of Culture in 1991, in
its view, confirmed this. At the same time, SIDE did not
dispute that its application for aid was justified by its
own refusal to accept the transparency requirement for
eligibility.

(162) The Commission notes that this point was not covered
by the decision to initiate proceedings of 30 July 1996.
Consequently, it will not give its opinion on the question
under the present proceedings.

(169)

Advantages to CELF associated with the ‘administra-
tion of public programmes’

(163) SIDE explains that CELF has been able to maintain its
presence in the market and continue to grant the same
type of discount to its customers after the abolition of
the Small Orders programme, since it continues to
receive many public grants through programmes such as
A l'est de l'Europe, which superseded the programme Page
à page, or Programme Plus,
to which constantly
increasing funds are allocated.

(164)

(165)

It should be pointed out that these programmes, which
had already been approved by the Commission in its
decision of 18 May 1993, were also confirmed by the
CFI in its judgment of 18 September 1995 (48).

It follows that these aspects were not reported in the
decision to initiate proceedings of 30 July 1986. Conse-
quently, the Commission will not give an opinion on
this question in the present proceedings.

c. The aid for small orders was not such as to
adversely affect trading conditions and competition
in the Community to an extent that is contrary to
the common interest

(i) A mechanism intended to promote an activity abandoned

by the publishing trade

(166) The Small Orders programme was designed in 1980 by
the Ministry of Culture, at a time when the industry
(Groupe Hachette and Messageries du livre) wanted to
quit the export agency market. The disputed mechanism
was
to become
involved in the market, so that all orders for French-lan-
guage books from bookshops in non-French-speaking
areas could be met.

introduced to encourage operators

(167) The Commission finds firstly, in agreement with some of
the comments from third parties intervening in the
proceedings, that the Small Orders programme, which
was in fact
launched when CELF was set up in its
current form, was known to practitioners, which at least
initially welcomed it (49), or at the very least did not call
it into question, without however applying for it them-
selves.

In 1996, following the annulment of the Commission
Decision of 18 May 1993,
the Ministry of Culture,
wanting to put an end to the proceedings, pointed out
to SIDE that the scheme of aid for small orders was not
reserved for CELF. By letter dated 3 September 1996,
the Ministry offered the company a meeting to examine
whether it was able to provide, in the same conditions
of transparency, the same services as CELF.

(170) At a meeting held on 26 September 1996, SIDE's
managers refused the proposal which was made to
them. They told the Ministry of Culture that they refused
to benefit from a programme whose compatibility with
Community law could be called into question by the
Commission.

(171)

In support of its claims, SIDE produces a report by the
Fondation Nationale des Sciences Politiques, basically
criticising the decision of the French authorities not to
pay grants direct to booksellers. The Commission would
point out in this respect that national authorities are free
to choose the form of subsidy which seems to them to
be best suited to the objectives they are pursuing,
subject to respecting the relevant Community law. In
any event, the Commission stresses that the document
produced is not relevant and notes that its authors them-
selves take a critical view of their own assessment (50).

(172) Lastly, SIDE maintains that the aid was inappropriate.
The Commission would emphasise in this respect that
the beneficiaries of the aid were obliged to process all
orders of less than FRF 500. This ensured that Fren-
ch-language books could reach all bookshops, including
the smallest in far-off countries, even if they only needed
a few books, often published by different publishers.
This was not guaranteed by SIDE, which, as has already
been stated, did not supply all countries.

(173)

In light of the above, the Commission finds that the
Small Orders programme was, in principle, accessible to
any firm applying, provided it accepted the conditions
according to which the aid was granted. It also notes
that, from 1996, SIDE made it clear that it did not want
to qualify for the programme. In the circumstances, the
Commission considers that the disputed aid was not
discriminatory and that it was necessary for the achieve-
ment of the objectives pursued by the French authori-
ties.

(48) See recital 10.
(49) At least until 1991. See recital 79 et seq.

(50) Page 163 of the report transmitted by SIDE.

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(174)

In any event,
the Commission considers that, even
assuming the aid in question could have been regarded
until 1996 as being exclusively reserved for CELF, it was
for the French authorities to assess what measures were
the most appropriate and useful for optimum attainment
of the objective pursued, since the aid did not exceed
what was necessary for achieving that objective, as will
be shown below.

(ii) Examination by the Commission, based on the figures
supplied by the French authorities and the complainant

The export agency market for French-language
books

(175) As part of their export agency activity, CELF and SIDE
distribute books in non-French-speaking countries and
such as
territories.
Belgium, Canada and Switzerland, the local market is
covered by large publishers through their subsidiaries or
representatives.

In French-speaking

countries,

(176) The export agency has only a very marginal role, there-
in the markets which are the main outlets for
the three countries mentioned

i.e.

fore,
books in French,
above.

(177)

It is established that CELF was set up, at the end of the
1970s, to remedy the failures of a market abandoned by
firms in the industry because it was not profitable, and
that the disputed aid was intended to support a mani-
festly non-profitable segment of the agents' activity.

(178)

In Decision 1999/133/EC, the Commission defined the
market on which it had examined the effects of the
disputed aid as being the market for the export of Fren-
‘in general’. The Court of First
ch-language books
Instance, following the arguments developed by SIDE,
criticised that analysis and considered that the Commis-
sion had made a manifest error of assessment in that the
export of French-language books and the export agency
business for French-language books were not substitu-
table, but distinct markets, the latter being a submarket
of the former.

(179) Without questioning the CFI's assessment, the Commis-
sion would observe that the evidence produced during
the examination of the case, both by the SIDE (51) and by
the national authorities, shows that the mechanisms for
marketing French-language books abroad are very

(51) SIDE itself refers, in several of its written comments, to aid for the

export of books.

varied (52), complimentary, and sometimes substitutable,
since export agency is one of several existing systems.

(180) The Commission notes that SIDE and the French autho-
rities appear to agree that it is not always easy to define
exactly the various markets in the book marketing
sector.

(181) SIDE states in its most recent comments that general
agents like itself and CELF are present on the national
market in question. Other operators, which it defines in
some cases as agents and in others as exporting book-
shops (53), also sell, marginally, direct to end-users and
would be competing very marginally with the two
general agents.

(182) The French authorities share SIDE's analysis in part,
while stating that the exporting booksellers to whom the
complainant refers are in reality specialised agents. They
have added to the list of potential competitors a number
of bookshops which meet, even on an occasional basis,
orders from foreign booksellers. France explains that
on-line book shops should now be included among the
competitors of the general agents, which the Commis-
sion considers to be relevant, even if accurate volume
data for this segment, which has been created by the use
of new technology, are still unavailable.

(183)

the Commission
It should be noted that SIDE sent
certain figures purporting to show the ‘dominant posi-
tion’ of CELF (54) on the submarket concerned.

(184) As was pointed out in recital 29, the Commission will
not give its opinion in this decision about SIDE's
complaint based on Articles 81 and 82 of the Treaty,
since this question is the subject of a separate examina-
tion. It should be noted in this respect that a preliminary
letter conveying the Commission's preliminary intention
to reject the complaint was sent to SIDE on 7 August
2003.

(185) However, without prejudging the final position it takes
in the other half of the dossier, the Commission would
point out that CELF, an interprofessional firm, was set
up, which on the basis in particular of third parties'
comments is not disputed, to remedy the failings of a
market abandoned by the industry. Thus it
is not
surprising that the market shares held by the firm are
very large.

(52) See recital 90.
(53) Letters dated 7 September 1992 and 9 December 2002 relating to

Aux amateurs du livre international.

(54) CELF's share of the market is alleged to have risen from 86,60 %
in 1992 to 92,75 % in 2001, which would mean that the amount
of aid has no effect on CELF's position, since the aid it was granted
fell steadily after 1996 to 1997.

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(186) The Commission considers that CELF's position on the
market in question, still has no direct bearing on the
granting of the aid. The Commission is solely concerned
to check the compatibility of the aid on the export
agency market under Article 87(3)(d) of the Treaty.

Relevance of
the notion ‘small orders’
connection with the export agency business

in

mine, where appropriate, the origin of the extra costs to
be compensated.

(191) The French authorities and SIDE agree overall as to what
constitutes
the processing of orders, described in
Annex III by SIDE and not disputed by the French autho-
rities.

(187) The book export agency business consists in meeting
orders that are not very large. The market was aban-
doned at the end of the 1970s by publishers and tradi-
tional distributors because it was not profitable enough.
In any event,
the export agency business
concerns small orders.

therefore,

(192) Their differences, therefore relate basically to the profit-
ability of the services. For SIDE, all orders are profitable,
irrespective of their nature. For the French authorities,
some services are clearly not profitable, which justifies
the aid granted.

(188) SIDE and the French authorities agree as to the defini-
tion of the service involved. However, their positions
diverge when it comes to identifying, on the export
agency market, ‘lesser’ orders (e.g. an order for an inex-
pensive work by an African bookshop), which generate
extra costs so that the service cannot be profitable.

(193)

In this respect, the Commission notes certain statements
of SIDE, which, taken together, may seem contradictory.
As with the following: ‘the best customers are those with
a large volume of orders’ and ‘small orders are overall
more profitable to process than larger ones’.

(189) The Ministry of Culture fixed the amount for ‘small
orders’ which should be subsidised at a threshold of
FRF 500 (EUR 76,22). The French authorities have
always explained that certain orders of less than FRF 500
might be profitable, whereas others, above that amount,
might not be. The objective was to find an economically
acceptable solution, so that operators would want to
assume orders that had been abandoned because they
were not profitable enough.

(194) The Commission noted that SIDE and CELF did not
seem to be talking necessarily about the same type of
customer. More specifically, SIDE is interested in the
institutional customer, while CELF gives priority to
booksellers. SIDE disputes this point. However, it did not
want to provide the Commission, as it was asked to,
with clarification of its types of customer. The complai-
nant has simply observed, in its written comments, that
between 1991 and 2002 it had 1 308 customers and
that it served the same type of customer as CELF.

(190) The Commission asked the complainant and the French
authorities to explain the problems of the business's
profitability. In particular it asked them to describe the
different tasks which the service involved, so as to deter-

(195) To check the relevance of the contradictory comments
supplied, the Commission has drawn up the following
comparative tables 3a, 3b and 3c on the basis of data
supplied by SIDE and the French authorities:

Table 3a

1999

SIDE

CELF small orders

CELF without small
orders

CELF Total

(in EUR)

Turnover

818 297

329 204

10 027 299

10 358 503

Number of invoices

2 187

9 688

13 210

22 898

Number of lines

27 470 /27 978

21 978

263 080

285 058

Number of books

88 163

26 996

575 593

602 589

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Official Journal of the European Union

L 85/45

1999

SIDE

CELF small orders

CELF without small
orders

CELF Total

(in EUR)

Number of customers (55)

Not disclosed

2 171

718

2 889

Average number of lines per invoice

Average number of books per line

Average number of copies per invoice

Average price of each copy sold

Average value of a line

13,07

3,21

40,84

9,09

29,17

2,26

1,22

2,79

12,19

14,98

20

2

44

17

38

12

2

28

17

38

Average value of a customer account

Not disclosed

151,84

13 968

3 585

Table 3b

2000

SIDE

CELF small orders

CELF without small
orders

CELF Total

1 021 831

301 604,53

11 151 915

11 480 519

Turnover

Number of invoices

Number of lines

Number of books

2 069

29 006

102 229

Number of customers

Not disclosed

Average number of lines per invoice

Average number of books per line

Average number of copies per invoice

Average price of each copy sold

Average value of a line

14,97

3,52

52,75

9,87

29,17

8 763

20 387

25 229

2 007

2,32

1,24

2,87

11,95

14,79

12 565

258 124

586 643

631

20

2

46

19

43

21 448

278 511

610 872

2 638

13

2

28

19

41

Average value of a customer account

Not disclosed

15 028

17 684

4 344

Table 3c

2001

SIDE

CELF small orders

CELF without small
orders

CELF Total

Turnover

905 077

275 068

12 817 252

13 092 330

Number of invoices

2 137

7 702

12 195

19 897

Number of lines per invoice

23 990

17 681

256 019

273 700

Number of books

105 518

21 853

590 278

512 129

Number of clients

Not disclosed

1 659

835

2 494

(55) The Commission regrets that SIDE did not want to produce any data about the number of its customers and the average value of a customer

account.

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2001

SIDE

CELF small orders

CELF without small
orders

CELF Total

Average number of lines per invoice

Average number of books per line

Average number of copies per invoice

Average price of each copy sold

Average value of line

11,23

4,27

47,97

8,66

37,73

2,30

1,24

2,84

12,59

15,56

21

2

48

22

50

14

2

31

21

48

Average value of a customer account

Not disclosed

16 580

15 360

5 250

(196) The Commission finds that the figures in tables 3a, 3b
and 3c show that, while CELF, disregarding what
it
considers ‘small orders’, sells an average number of
books per invoice comparable to SIDE's (44 as against
41 in 1999, 46 as against 43 in 2000 and 48 as against
48 in 2001), it also meets a large number of particularly
small orders (less than three books on average, with an
average value of approximately EUR 35): 9 688 orders
in 1999, 8 763 in 2000 and 7 702 in 2001. It follows
that, overall (the column headed CELF Total) the number
of books per order is clearly much lower for CELF than
for SIDE: 28 as against 41 in 1999, 28 as against 53 in
2000 and 31 as against 48 in 2001.

(197)

It is apparent from the foregoing, that CELF's business is
characterised in particular by a large number of very
small orders (fewer than three books on average and
about EUR 35), which clearly distinguishes it from SIDE
and possibly justified granting the aid in question.

the factors giving rise to the
the extra costs associated with the Small

Examination of
aid:
Orders programme

(198) Having established the relevance of small orders as a
the

criterion for justifying the granting of

the aid,

Commission analysed the cost accounting data supplied
by the French authorities. The accounting figures justify
the extra costs incurred by CELF in the small orders
segment. The information communicated by the French
authorities to the Commission concern 1994, a year in
which CELF received a grant of FRF 2 000 000 (EUR
304 900) from the Ministry of Culture.

(199) The Commission's

the

examination concerns

cost
accounting information on the costs of small orders
with a value of less than FRF 500. The Commission
noted the explanations provided by the French authori-
ties, which indicate that the FRF 500 threshold chosen
for defining a ‘small order’ was determined empiri-
cally (56).

(200) The French authorities suggested that it could be shown
the processing of small orders clearly involve
that
evident extra costs. The evidence for this is a cost
analysis based on the information for reference year
1994 in the following table.

Type of order

Small orders

Other

Total

Turnover (*)

Number of invoices

Number of books

(*) In French francs.

2 419 006

48 148 971

50 102 869

9 725

24 933

10 947

442 740

20 672

467 673

(201) As described in detail in Annex III, processing an order

(d) dispatch of the order to the publisher;

requires that several tasks be carried out:

(a) receipt of the bookseller's form;

(b) coding the order;

(e) receipt of the books;

(f) allocation of space (compartment) to each customer

for storage of the books ordered;

(c) inputting the order;

(56) See recitals 112 and 113.

(g) packaging.

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Official Journal of the European Union

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(202) The analytical approach of

it
possible to record all the flows relating to the above
operations. An invoice of FRF 100 generates as much
work, in principle, as an invoice for FRF 10 000.

the accounts makes

(203) The

enabled

explanations

French authorities'

the
Commission to estimate the costs and allocate them to
the tasks associated with processing an order. The profit-
ability of an order depends, in particular, on the type
and number of books concerned, the accuracy of the
information supplied on the order form and the diffi-
culty of executing the order, it being possible to consider
20 % of CELF's orders and 4,5 % of SIDE's as difficult to
carry out (57). In addition, orders with a value of less
than FRF 500 concern,
in 67 % of cases, publishing
houses of a craft industry type (58). Lastly, processing
small orders involves administering a large number of
small accounts.

(204) Costs will be higher for small orders, since the operator
handling them will have to repeat the same physical
operations for each order, irrespective of the amount. A
firm processing several small orders will have to provide
an organisation that can cope with the greater number
of separate processing stages and, hence, the extra costs
involved.

(205) The French authorities explain that a coefficient was
applied to each type of operation. To this end, account
was taken of the various tasks involved in each of the
operations as described in Annex IV.

(206) On the basis of the information supplied by France, the
Commission is able to conclude that for 1994 the costs
of processing small orders were FRF 4 446 706. Turn-
over in orders of less than FRF 500 was FRF 2 419 006.
The aid for the same year amounted to FRF 2 000 000.
The operating loss was consequently, FRF 27 700.

Turnover

Grants

Total income

Processing costs

FRF 2 419 006

FRF 2 000 000

FRF 4 419 006

– FRF 4 446 706

Operating result

– FRF 27 700

(207) As a result, the Commission concludes that the aid of
FRF 2 000 000 did not overcompensate the costs of
processing of small orders.

(208) To check the relevance of the information supplied for
the Commission asked the
information

the reference year 1994,
French authorities

to supply

further

(57) Percentages communicated by the French authorities in CELF's

(58)

case, and by SIDE itself.
In principle, large publishing houses generate bigger orders; these
often involve the marketing of works intended for the general
public, which are generally sold in large quantities.

concerning the processing of small orders by CELF for
other periods. The supporting documents and explana-
tions sent by France for other financial years show that
the structure of small orders (turnover compared with
the number of small orders,
the quantity of books
ordered, the number of invoices relating thereto, and the
number of customers and order lines) remained stable
from one year to another.
In the circumstances, the
the data for 1994 can
Commission considers that
reasonably serve as a reference for the Commission's
assessment.

(209) The Commission was also able to verify from the agree-
ments it was sent that any excess amount was deducted
from the aid paid the following year. It was not possible
therefore for the aid to finance other commercial activ-
ities of CELF, contrary to the claims of SIDE and several
intervening third parties.

(210) The

aid was allocated annually on the basis of
including
accounting information supplied by CELF,
grant utilisation accounts,
justifying the extra costs
incurred through the Small Orders programme; the aid,
therefore, was not liable to be used for other purposes
than those for which it was granted.

Assessment of the errors identified by SIDE

(211)

recent comments, SIDE informed the
In its most
Commission that the accounting information supplied
by the French authorities to the Commission,
in the
second stage of the proceedings, as evidence of extra
costs contained certain errors. The French authorities
were informed of this and submitted the appropriate
explanations to the Commission.

(212) SIDE observed that the French authorities had switched
the percentages of tele-transmitted orders with those for
orders sent in on paper. The Commission was able to
verify that
switch
amounted to EUR 0,24 per book for the cost of a small
order. The difference is not such as to call into question
the compensation mechanism presented by France.

incidence of

financial

the

the

(213) As regards the variations in turnover which SIDE identi-
fied in the first accounting information produced by
France, the Commission confirms that the French autho-
rities themselves made the necessary corrections as soon
as the proceeding was initiated in 1996, and that conse-
quently the
recent
comments are without foundation.

in SIDE's most

claims made

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(214) The variation in the other figures is explained by the fact
that, in one case, reference is made to the proceeds of
selling the books alone (FRF 2 284 536), whereas, in the
other, the figure communicated (FRF 2 535 818) is the
proceeds for the books and incidental services (packa-
ging, insurance and transport).

(215) SIDE also thought that it could identify certain ‘distor-
tions’ between the financial accounting and the cost
accounting of wages and salaries. The French authorities
stated that these differences are due to the fact that
included in the social security
certain taxes are not
contributions given in the tax forms but are levied
directly on the wages. The Commission was able to
check the accuracy of
explanation from the
this
accounting documents sent to it.

(216) The Commission considers, therefore, that SIDE's addi-
tional comments, on the inaccuracy of the accounting
data transmitted by the French authorities when the
proceedings were initiated in 1996, do not call
into
question the Commission's assessment of the relevance
of the accounting data justifying the compensation for
the extra costs generated by small orders.

Additional constraints on CELF

(217) The Commission found, on the basis of the analysis of
the documents produced by the complainant itself, that
CELF's
((3 000
publishers offered by CELF, as opposed to 200 offered
by SIDE).

list was much larger

than SIDE's

(218) The Commission took note of this factor (which is not
taken into account in the calculation of the extra costs)
and observes that CELF's wider list meets the require-
ments of the Ministry of Culture that French-language
books should be marketed as widely as possible. The list
offered by SIDE which stipulates, however, that it can
meet all types of demand, does not take account, quite
legitimately, of this cultural objective.

(219) The French authorities add that CELF was often forced
to take financial risks. Thus it continued to provide its
services in certain high-risk countries such as Algeria or,
more recently, Argentina. It was also able to provide
services in certain countries not covered by the Coface
guarantee.

(220) SIDE sticks quite

legitimately with its commercial
choices and states that it does not want to operate in
difficult areas such as sub-Saharan Africa or in countries
not covered by Coface. It states that these are decisions
that are part of a firm's commercial development
strategy and that, for its part, it has made other choices.

(iii) Examination by the Commission of the customer trans-

fers objected to by SIDE

Transfers of customers from SIDE to CELF

(221) The Commission found that SIDE's claims concerning
foundation, on the
customer transfers were without
basis of an analysis of the explanations and documents
produced by SIDE itself.

(222) Thus the Commission asked SIDE to justify the customer
transfers from which it claimed to have suffered as a
result of the advantageous discounts which ‘only CELF’
was able to offer due to the aid it had received. SIDE
accordingly produced a very long document (59), whose
data could not be used by the Commission in the form
presented, in particular because the said transfers were
not absolutely apparent from it. The Commission asked
SIDE for further explanations on this point, and the firm
was able in particular (60) to state that one customer, the
Librairie Française de Milan, had gradually switched its
custom to CELF in 1987 to 1988, since CELF had
offered it more attractive discounts.

(223) The French authorities pointed out in reply that the
Italian market was known for its competitive nature and
that, in addition, the increase in CELF's turnover from
the said bookshop only became significant in 1999, i.e.
well after the period mentioned by SIDE.

(224) The Commission found that the other examples quoted
by SIDE were not more relevant (61). Thus one of the
bookshops cited by SIDE, Grupodis in Madrid, was never
a major customer of CELF's, and the Japanese bookshops
cited are in fact large-account customers who are not
concerned by the small orders segment of the market.

(225) The list of discounts communicated by SIDE did not
show that the discounts it offers are less attractive than
those offered by CELF. Thus, of the 28 publishers which
SIDE selected to illustrate its claim,
the Commission
finds that SIDE offers more attractive discounts in 16
cases, as opposed to 12 for CELF (62). The difference is
if one takes into account the extra five
even greater,
percentage points discount granted by SIDE for orders of
more than 10 copies per title, since in that case CELF
offers better discounts for only six publishers as opposed
to 22 by SIDE.

(226) The Commission considers,

therefore,

that customer
transfers from SIDE to CELF, due supposedly to the
more attractive discounts offered by CELF to its custo-
mers as a result of the aid it had received, cannot be
established in reality.

(59)

‘Détermination des préjudices subis par la SIDE du fait des subventions
versées par le ministère de la culture au CELF entre le 1er avril 1980 et
le 31 mars 1996’. (Determining the losses suffered by SIDE on
account of the grants paid by the Ministry of Culture to CELF
between 1 April 1980 and 31 March 1996).

(60) Five other examples are given by SIDE.
(61) The French authorities do not endorse the other examples given

by SIDE.

(62) SIDE's initial presentation on the discounts referred to the list of
discounts granted by CELF on the public price in France (inclusive
of all tax), whereas export sales are made on the basis of a price
exclusive of tax. It is on the basis of a list of prices corrected
accordingly that the comparison is now made.

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Transfer of customers from CELF to SIDE

(227) As was noted in recital 69, in a letter dated 12 August
2002 to the Commission, SIDE claims that CELF had
been applying dissuasive conditions for small accounts
for at least two years. SIDE points out that ‘this policy
also only increases the distortion of competition suffered
by SIDE, since in the circumstances some former custo-
mers of CELF's which have small accounts are now
turning to SIDE (…). However, for SIDE, obviously, the
best customers are those which have a large volume of
orders (…)’.

(228) The Commission finds, firstly, that the pricing changes
objected to (63) occurred during the period when the aid
in question had been abolished and/or very significantly
reduced, i.e. when CELF had to find alternative solutions
in order to continue to try to meet the small orders
which it was sent.

(229) The Commission compared (64) the figures on the two
undertakings and finds that there is nothing in them to
confirm the remarks of SIDE concerning the recent
customer transfers to which it objects. The Commission
finds no increase in the number of invoices drawn up by
SIDE: they were 2 187 in 1999, and 2 137 in 2000. As
to the number of customers, the Commission would
point out that it cannot make a comparison because it
was not able to obtain data from SIDE.

(230) The Commission cannot

identify, either, any factors
which show that the number of small orders met by

SIDE has increased now that CELF no longer receives
any aid. On the contrary, the figures supplied by SIDE
show that the average number of books per invoice
increased from 40,31 in 1999 to 49,38 in 2001,
whereas the shift in customers from CELF to SIDE, if
confirmed, would have resulted in a decline in the
average number of books per invoice.

(231) The Commission notes, finally, that the average number
of books sold per line by SIDE is again greater than the
average sold by CELF, for the whole of its activity, not
just small orders. Consequently, the abolition of the aid
did not involve redeploying customers from CELF to
SIDE.

(232)

In any event, in the analysis of State aid, only distortions
of competition caused by that aid are relevant, not the
effects of reducing and/or abolishing the aid, regarded as
negative by SIDE.

Conclusions
customer transfers

of

the Commission

regarding

(233)

In light of the data communicated by SIDE and the
French authorities, the Commission considers that the
only visible consequences of abolishing the aid are a
reduction in the turnover from small orders met by
CELF and a significant reduction in the number of its
customers (-17,34 % between 1999 and 2001), as table 5
below shows:

Table 5 — Trend of activity in small orders and small accounts

Information supplied by the French authorities

Year

1999

2000

2001

Turnover small orders
(euros)

Trend

Number of customers

Trend

329 204

301 605

275 068

- 8,38 %

- 8,80 %

2 171

2 007

1 659

-7,55 %

-17,34 %

(234) The Commission also considers that SIDE's comments contradict its own statements to the effect that only
the number of lines inputted by the service provider ought to be taken into consideration, and that the
total amount of the order has no effect in terms of profitability. If this were the case, SIDE would have no
reason to think that the alleged transfer of CELF customers to its services (which, moreover, is not clear
from the figures provided) increases the distortion of competition suffered by SIDE (65). Furthermore, the
Commission notes that SIDE would seem to contradict itself, when it states in a note dated 9 December
2002, that ‘(…) small orders are overall more profitable to process than large orders’.

(63) CELF's pricing changes are not disputed by France, which stated
that CELF had had to suddenly review its ‘small accounts’ prices
following the reduction of the aid.

(64) See also tables 3a, 3b and 3cC.
(65) Commenting on this point, SIDE explained that ‘clearly, the best
customers are those which have a large volume of orders — not
because the others would not be profitable, but simply because,
like any commercial firm, it is always preferable to have customers
that generate a large volume of business’.

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(235) Table 6, compiled by the Commission from data communicated by the French authorities and by SIDE,
shows that there is no automatic link between the variation in SIDE's turnover and the variation in the
grants received.

Reference year

Aid granted to CELF

Variation in SIDE's turnover

Table 6

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

304 900

373 500

422 280

382 650

304 900

304 900

304 900

243 920

182 940

121 960

60 980

38 110

0

—

+

-

+

-

-

-

-

+

-

+

-

-

Aid

—

+

+

-

-

=

=

-

-

-

-

-

0

(236) The figures supplied by CELF and by SIDE enabled the
Commission to establish that the level of aid granted to
CELF had no automatic impact on the business and
results of SIDE, the only other general agent
in the
market (66). For instance, over several years, SIDE's turn-
over fell even though the aid granted to CELF was
declining.

(240)

In light of all the factors examined above, it is clear that
the disputed aid concerns a very marginal share of the
export agency business, which would obviously not have
been performed without
the aid in question. The
Commission has also established that the aid granted by
France did not over-compensate the costs inherent in the
activity in question.

(237) The Commission observed that a visible, significant
consequence of abolishing the aid to CELF on the
market was a fall
in its small orders turnover and a
decline in the number of its small accounts.

(238) The Commission finds, on the basis of

the figures
supplied, that, without the aid, some of the orders no
longer appear to be met by CELF, though SIDE does not
benefit from the observed disaffection.

(241) The Commission would also point out,

as was
mentioned in recital 132 et seq., that the effect on trade
and the distortion of competition at Community level
are very limited in this particular case. These factors
have to be taken into account by the Commission when
it assesses the compatibility of the aid with Article 87(3)
of the Treaty, as the Court of First Instance clearly stated
in Ladbroke Racing Ltd (68).

(239) The Commission also observes that for the period 1994
to 2001, the grants awarded did not cover the entire
and
deficit under
accounted for a relatively small proportion of CELF's
total
from 3,95 % in 1994 to 0,29 % in
2001 (67).

Small Orders programme

turnover:

the

(66) For the record, the Commission would point out that ad hoc aid
of the same type as that at issue was paid to two other firms:
Servedit and l'Ecole des Loisirs.

(67) See also Annex II in this respect.

(242) Consequently, the aid granted to CELF under the Small
Orders programme was not such as to affect competi-
tion and trade to an extent contrary to the common
interest. The action taken by the French authorities was
proportional to the objective pursued, and simply made
it possible for some of the demand, which would not
otherwise have been met,
to be met by the service
provider without worrying about profitability.

(68) Case T-67/94 [1998] ECR II — 1, in particular paragraphs 150 to

162.

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B. APPLICABILITY OF ARTICLE 86(2) OF THE TREATY

1. POSITION OF THE FRENCH AUTHORITIES

(243) The French authorities argue, as they did in 1998 (69)
that CELF was entrusted with a public service task and
that, consequently,
the disputed measures must be
assessed in the light of Article 86(2) of the Treaty, which
states that ‘undertakings entrusted with the operation of
services of general economic interest or having the char-
acter of a revenue producing monopoly shall be subject
to the rules contained in this Treaty, in particular to the
rules on competition, in so far as the application of such
rules does not obstruct the performance,
in law or in
fact, of the particular tasks assigned to them. The devel-
opment of trade must not be affected to such an extent
as would be contrary to the interests of the Community’.

(244)

instruments (70) which,

the French authorities submitted
In this connection,
several
in their view, confirm
that the task entrusted to CELF was a service of general
economic interest.

case law of the Court of Justice (71), there is no need for
the Commission to assess further the subsidised activities
of CELF in the light of Article 86(2) of the Treaty. The
Court confirmed this position in its judgment of 22 June
2000 (72), the Court having concluded that even aid justi-
fied on the basis of Article 86(2) must be notified to the
Commission. It is therefore not necessary to determine
whether
the aid to CELF is also justified under
Article 86(2) of the Treaty.

(248) The Commission notes

in the meantime,

in
that,
Altmark (73) the Court clarified the conditions in which a
grant to an undertaking responsible for administering a
service of general economic interest does not constitute
State aid. The Commission finds that in the case in point
these conditions are not satisfied. It considers, first, that
the condition set out in paragraph 89 of Altmark has not
been met, since the legal basis of the aid does not
expressly concern CELF.
It also considers that para-
graph 90 of the said judgment, which concerns the
establishment in advance of the parameters on the basis
of which the compensation is calculated, has not been
observed either, even if overall the aid has not exceeded
the amount necessary to compensate for the costs of
processing small orders.

VI. CONCLUSION

(245) The French authorities stated, on the basis of

these
instruments, that the Book and Reading Directorate had
concluded with CELF, until 2001, annual agreements
defining the objectives of the collaboration between the
Ministry and CELF and the respective obligations of the
parties.

(249)

In view of the above, it is clear that the aid in question
meets the requirements of Article 87(3)(d) of the Treaty,
to the cultural objective
in that
pursued. The Commission found that the aid was not
such as to affect trade and competition in the Com-
munity to an extent contrary to the common interest,

is proportional

it

(246) The French authorities submitted several of these agree-
ments. Article 1 of the first of these, dated 25 April
1991, specifies that ‘the Ministry shall provide its assis-
tance for the combining of small orders of books by
CELF intended for abroad (…)’. Another agreement,
dated 23 October 1997, mentions, it would seem, for
the first time, that ‘the Ministry shall provide its assis-
tance for the operating costs of CELF's public service
associated with small orders’. The agreements concluded
subsequently, until 2001, are identical except for the
amount of aid granted.

2. ASSESSMENT BY THE COMMISSION

(247) The Commission has already concluded in this Decision
that the aid granted to CELF is State aid within the
meaning of Article 87(1) of the Treaty and that it is
compatible with
under
in accordance with the
Article 87(3)(d). Consequently,

common market

the

(69) See recital 24.
(70) See recital 102.

HAS ADOPTED THIS DECISION:

Article 1

The aid to the Coopérative d'exportation du livre français
(CELF) for processing small orders of French-language books,
implemented by France between 1980 and 2001, is aid that is
caught by Article 87(1) of the EC Treaty. Since France failed to
notify the aid to the Commission before implementing it, the
aid was granted unlawfully. It is, however, compatible with the
common market under Article 87(3)(d) of the Treaty.

(71) Case C-387/92 Banco Exterior de España v Ayuntamiento de Valencia

[1994] ECR I-877.

(72) See recital 24 et seq.
(73) Case C-280/00 Altmark Trans GmbH and Regierungspräsidium
Magdeburg v Nahverkehsgesellschaft Altmark GmbH [2003] ECR
I-7747.

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This Decision is addressed to the French Republic.

Article 2

Done at Brussels, 20 April 2004.

For the Commission

Mario MONTI

Member of the Commission

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ANNEX I

Table showing the trend of aid granted since 1980, in euro

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

91 470

91 470

205 510

164 640

137 200

141 780

248 490

214 950

213 430

259 160

304 900

373 500

422 280

382 650

304 900

304 900

304 900

243 920

182 940

121 960

60 980

38 110

0

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ANNEX II

Decline in the compensation for CELF's expenses

Information supplied by the French authorities

Amount of aid (euro)

Total charges

Percentage covered

304 900

304 900

304 900

243 920

182 940

121 960

60 980

38 110

0

683 788

697 177

624 206

680 023

664 783

635 577

572 670

509 048

0

44,59 %

43,73 %

48,85 %

35,87 %

22,63 %

19,19 %

10,65 %

7,49 %

0

Year

1994

1995

1996

1997

1998

1999

2000

2001

2002

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L 85/55

ANNEX III

Processing orders

Information extracted from SIDE's comments

Ne w c u stome r

(a) Dispatch to the buyer of a file containing:

— the general conditions of sale (e-mail, fax or mail)

— request to open an account (e-mail, fax or mail)

(b) After receipt of the request to open an account, check on the customer's solvency at Coface

(c) If there is no problem, an account is opened for the customer

(d) If there is a problem, the customer can only be served ‘pro forma’, (i.e. after payment of an estimate)

Cu stomer h ol ds a n a cc ou nt

(a) Identification of the customer (in particular from his account number)

Inputting of the item ordered (searching among 640 000 titles, including books, audio cassettes, audio CDs and
CD-ROMs)

Inputting: once the item has been identified, the quantity, order date and customer reference are keyed in, and the
inputting validated

— If other order lines have to be inputted, the operation is repeated

— The method of dispatching orders can be altered to suit the customer's wishes

(b) If the work ordered is not in the database

— The item is inputted manually:

the title, name of author, ISBN, publisher and supplier are given

(c) Each order for a book automatically generates a ‘supplier’ order

(d) Special software automatically transmits orders to suppliers who have the right equipment and are, hence, listed

(e) Order forms are then printed automatically and sent by fax, mail or messenger to the suppliers concerned

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ANNEX IV

Breakdown of CELF's cost-accounting items — 1994

based on information supplied by the French authorities

F i g u r e s (F r a nc s a n d eu r o )

Cost of purchasing books

— Purchase

— Transport and messengers

FRF

2 068 293

2 026 011

42 282

EUR

315 309

308 863

6 446

Staff costs

1 670 963

254 737

— Reception (of works), direct labour

— Packaging, direct labour

— Sales department, direct labour

— Area 1

— Area 2

— Area 3

— Wages and salaries, General Services

— Wages and salaries, Marketing

Overheads

— Packaging consumed

— Administrative supplies

— Freight out

— Commission on sales

— Telephone, telex

— Collection charges

— Loan repayment insurance

— Depreciation of tangible fixed assets

— Other

Individual, indirect fixed charges

— Trade tax

— Charges to provisions

— External services

— Exceptional charges

— Other

Exchange rate: EUR 1 = FRF 6,55957

217 641

53 409

149 770

157 627

49 390

1 022 285

20 841

518 926

14 770

183 784

148 056

36 540

29 103

26 294

20 929

20 609

38 841

188 524

14 064

51 890

66 828

46 733

9 009

33 179

8 142

22 832

24 030

7 529

155 846

3 177

79 110

2 252

28 018

22 571

5 570

4 437

4 008

3 191

3 142

5 921

28 740

2 144

7 911

10 188

7 124

1 373

Total cost

4 446 706

677 896

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Comments and e x planati on s

1. Purchasing and transport (including messengers) costs. The cost was calculated taking into account the total cost of these
activities allocated according to the number of books, i.e. FFR 38 795 874 (EUR 5 914 393). This amount is divided
by the number of books to obtain the unit cost per book. The total number of books sold by CELF in 1994 was
467 673, so the unit cost per book is FFR 82,95 (EUR 12,65). To determine what was the purchasing and transport
cost to be allocated to small orders, the unit cost per book is multiplied by the number of ‘small orders’ books,
giving a total of FFR 2 068 293 (EUR 315 309).

2. Staff costs. A coefficient of 3 (based on the number of books) was applied to this item, as the reception of small
orders gives rise to difficulties peculiar to this category. The reception of works from large publishers or distributors
is computerised using the EAN code, which makes recognition of the work by optical scanning possible. Conversely,
works published by small publishers often do not contain a bar code, which means that manual recognition is
necessary.

Large publishers delivered to Parisian customers for a contribution to the transport costs fixed by the trade associa-
tion, which is FFR 0,75/kg, whereas the price paid messengers is FFR 6,5/kg for the packages used for works from
small distributors. As invoices to foreign booksellers are flat-rate, that source of supply means a reduction in
margins.

Giving small orders a coefficient of 3 thus makes it possible to include an appropriate charge for their processing in
the cost accounting.

3. Packaging. The direct labour is taken into account on the basis of the number of books.

4. Sales department. The cost of direct labour was calculated by applying a coefficient of 3, since small orders involve
more onerous processing as regards sales administration. The differences of treatment make it possible to include
the appropriate charge for their processing in the cost accounting.

Additional explanations on coding the order. If there are difficulties with coding orders, further work is needed. The
work has to be carried out irrespective of the amount of the order.

In addition, research is required before an order can be inputted: ISBN, publishers' catalogues, various data bases,
check on the availability (or not) of the work, check on the match between order and publisher. Difficulties asso-
ciated with the quality of the order form, in particular in identifying the order, will give rise to extra costs. Such
difficulties often occur in the case of small orders. Large bookshops, which have a considerable turnover with CELF,
are generally large-scale firms that use high-performance tools to enable them to rationalise their management, and
in particular to transmit standardised orders, i.e. ones containing clear identification features. Among CELF's custo-
mers are numerous small bookshops, whose activity does not always allow modern international business resources
to be used. Thus orders coming from this type of establishment are sometimes difficult to decipher and only include
some of the information necessary for meeting the order, which means extra work and, hence, extra cost.

5. Wages and salaries, general services (management, IT, switchboard, accounting, marketing, cleaning). The costs are allo-

cated according to the number of books, except for accounting where the criterion is the number of invoices.

6. Overheads (packaging consumed, freight out and depreciation of tangible fixed assets). Costs are calculated on the basis of

number of books.

7. Overheads (administrative supplies). Costs are calculated on the basis of the number of invoices.

8. Overheads (commission on sales and loan repayment insurance). Costs are calculated on the basis of turnover.

9. Overheads (telephone, telex and collection charges). A coefficient of 2,5 is applied, since telephone costs vary in accord-
ance with many factors, in particular customer replies and publisher searches. These costs concern several opera-
tions,
inputting the order and
including reception of the order form from the bookseller, coding the order,
accounting, whose purpose is to record all the flows relating to the operations described.

10. Trade tax and charges to provisions. Costs are calculated on the basis of turnover. External services (e.g. rents, travel and

promotion costs, etc.) and exceptional charges. Costs are calculated on the basis of the number of books.