2005/217/EC: Commission Decision of  19 May 2004  on measures implemented by Denmark for TV2/Danmark  (notified under document number C(2004) 1814)   (Text with EEA relevance)
Date: 2004-05-19
Institutions: European Commission
Subjects: Denmark, State aid, broadcasting, commercial media, control of State aid, distribution business, domestic market, interest, public sector, public service, tax rebate

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 19 May 2004

on measures implemented by Denmark for TV2/Danmark

(notified under document number C(2004) 1814)

(Only the Danish text is authentic)

(Text with EEA relevance)

(2005/217/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
the first subparagraph of
Community, and in particular
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
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

I.

PROCEDURE

(1) With the entry into force of the Treaty of Amsterdam on
1 May 1999, a Protocol on the system of public
broadcasting in the Member States was annexed to the
Treaty establishing the European Community (hereinafter
referred to as the Protocol).

(2) By letter of 5 April 2000 the Danish commercial
television company, SBS Broadcasting SA/TvDanmark
(hereinafter
the
referred to as TvDanmark),
Commission a complaint regarding the State financing
of the Danish public broadcaster, TV2/Danmark (here-
referred to as TV2). A meeting with the
inafter

sent

complainant was held on 3 May 2000. By letters of
28 February 2001, 3 May 2001 and 11 December 2001
the complainant submitted additional information.

(3) On 15 November 2001 the Commission published a
Communication on the application of State aid rules to
public service broadcasting (hereinafter referred to as the
Broadcasting Communication) (2), which lays down the
the
principles and methods for appraising whether
funding of public radio and television activities
is
compatible with the Treaty.

(4) By letter of 5 June 2002 the Commission requested
information from the Danish authorities, who replied by
letter of 10 July 2002. Two meetings with the Danish
authorities were held on 25 October 2002 and
information was sent
19 November 2002. Additional
by letters of 19 November 2002 and 3 December 2002.

(5) By letter of 24 January 2003 the Commission informed
Denmark that it had decided to initiate the procedure
under Article 88(2) of the EC Treaty concerning State
funding of the Danish public broadcaster, TV2.

(6) The Commission Decision to initiate the procedure was
published in the Official Journal of the European Union of
14 March 2003 (3). The Commission invited interested
parties to submit their comments on the measures.

(1) OJ C 59, 14.3.2003, p. 2.

(2) OJ C 320, 15.11.2001, p. 5.
(3)

See footnote 1.

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(7) The Danish authorities sent the Commission comments
by letter of 24 March 2003. The Commission also
received comments
interested parties.
from several
TvDanmark submitted comments by letter of 14 April
2003. The Association of Commercial Television in
Europe (hereinafter referred to as ACT) sent comments
by letter of 14 April 2003. The commercial broadcasters,
Antena 3 TV and Gestevisión Telecinco,
submitted
comments on 16 April 2003. The commercial broad-
caster, TV3, submitted comments by letter of 14 April
2003. The Commission forwarded the comments to
Denmark, which responded to them by letter of
12 September 2003.

(8) The complainant sent the Commission further informa-
tion by letters of 15 December 2003 and 6 January
2004. On 17 December 2003 a meeting was held
between the complainant and the Commission in order
to clarify the information submitted in the complainant's
letter of 15 December 2003. The Commission forwarded
the information to the Danish Government, which
responded by letter of 15 March 2004. On 9 February
2004 a meeting was held between the Danish authorities
and the Commission.

(9)

In accordance with the decision to initiate a formal
investigation, this Decision covers the period 1995 to
2002.

II.

DESCRIPTION

1.

(a)

The national background

The Danish broadcasting market

(10) Two public broadcasters operate in Denmark, Danmarks
Radio (hereinafter referred to as DR) and TV2. DR is
almost entirely funded through licence fees. TV2 is
funded partly through licence fees but also through
advertising revenue.

(11) TV2 was established in 1986 (4) as an independent
autonomous institution funded by government loans and
It
started national broadcasting on 1 October 1988.
broadcasts the terrestrial channel, TV2, and also started
broadcasting the satellite channel, TV2 Zulu, in 2000. At
the end of 2002 TV2 Zulu, a public service channel,
became a commercial pay‑television channel. In addition
eight stations were approved by the Government as
regional TV2 stations. TV2 is required to carry broad-
casts from the regional TV2 stations on its nationwide
terrestrial channel.

(12) Apart from the public broadcasters, two commercial
television broadcasters, TvDanmark and TV3/3+, operate
on the nationwide television broadcasting market
in
Denmark. The commercial broadcasters compete with

(4)

By Act No 335 of 4 June 1986, which entered into force on
1 July 1986.

TV2 on the nationwide television advertising market.
TvDanmark forms part of SBS Broadcasting SA and
broadcasts two channels in Denmark. Since 1997 it has
broadcast TvDanmark2 through a network of 10 local
commercial television stations and since 2000 it has
broadcast a UK‑licensed satellite channel, TvDanmark1.
The satellite channels TV3 and 3+, which form part of
the Modern Times Group (MTF), started broadcasting in
1992.

(b)

Legal requirements

investigation, between 1995 to 2002,

(13) The rules on the public service remit during the period
under
are
embodied in the Radio and Television Broadcasting
Act, as amended (hereinafter referred to as the Broad-
casting Act) (5).

(14) TV2's mission is to produce and distribute national and
regional television programmes. Such distribution may
be by means of radio, including satellite or cable systems.
The Minister of Culture is responsible for issuing rules on
TV2's public service obligations (6).

(15) The whole of the TV2 programme platform is considered
to be public service (7). Section 6a(1) of the Broadcasting
Act states: ‘All public service activities shall provide the
Danish population, through television, radio,
Internet
and the like, with a wide range of programmes and
services comprising news coverage, general information,
education, art and entertainment. That range shall aim to
provide quality, versatility and diversity. In the planning
of programmes, freedom of information and of expres-
sion shall be a primary concern (…).
In addition,
particular emphasis shall be placed on Danish language
and culture’.

(16) A further definition is contained in TV2's constitution (8),
which specifies its broadcasting obligations as regards art
and culture, Danish film production, the use of new
technologies (also to improve access for the disabled) and
programmes for children, young people and ethnic
It is also obliged to broadcast emergency
minorities.
measures.

(17) Under Section 6a(3) of

‘TV2's
public services shall be financed through its share of
licence fees, income from advertising on TV2 and other
income’.

the Broadcasting Act

(5)

Act No 578 of 24 June 1994, as amended by Act No 666 of
5 July 1996, Act No 75 of 29 January 1997, Act No 138 of
19 February 1998, Act No 208 of 6 April 1999, Act No 551 of
20 June 2000, Act No 203 of 22 March 2001, Act No 701 of
15 July 2001 and Act No 1052 of 17 December 2002.
(6)
Section 18(1) of the Broadcasting Act.
(7)
Section 6a(2) of the Broadcasting Act.
(8) Order No 1346 of 18 December 2000.

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to transmit broadcasts

(18) Chapter 5 of the Broadcasting Act obliges commercial
television stations
to areas
exceeding a single local area. Chapter 6 applies to local
radio and television activities. These requirements mainly
concern obtaining an authorisation. The programming
requirements for holders of authorisations are laid down
in Orders No 874 on European programmes and
No 1349 on local radio and television activities (9).
Under these Orders, networking stations holding a local
television authorisation must broadcast
local pro-
grammes for at least one hour a day and produce a
significant part of their programmes in Danish or for a
Danish audience. Since TV3, 3+ and TvDanmark's
Channel 1 are broadcast under British broadcasting
authorisations, these rules apply only to TvDanmark2.

(c)

TV2's commercial activities

(19) After TV2 was granted a special authorisation for
commercial activities on 1 January 1997 (10),
it has
engaged in various forms of such activities, which may
the
include the exploitation of
establishment of new companies or the injection of
capital into existing companies. During the period under
investigation these activities have included advertising,
the sale of programmes, the leasing of masts, merchan-
dising, Internet activities and the resale of sports rights,
etc.

technical

facilities,

(20) Since January 2001 TV2 has been under an obligation to
keep separate accounts for its public service activities and
‘any other activities’
if the latter exceed 5 % of total
turnover and DKK 3 million per year (Order No 740).
Under that Order, the full costs must be entered in the
accounts, the pricing of non-public services and products
must be based on market terms and transfers of capital
between the public service and other undertakings must
be made in accordance with the market economy
investor principle and must not
involve licence fee
resources (11).

2.

The measures

(22) The Minister of Culture determines, for one or several
years at a time, the amount of the licence fee payable by
all owners of radio and television receivers (12). The fee is
collected by DR and the licence fee revenues are then
allocated between DR and TV2 on the basis of a decision
adopted by the Minister of Culture in accordance with a
media agreement concluded with the Danish Parliament.

(23) The Minister of Culture issues detailed rules on the
commencement and termination of the obligation to pay
licence fees, payment dates and collection, reminder fees,
etc. In case of failure to pay on time interest is payable
under the Interest Act. Outstanding fees and charges can
be collected by the Financial Supervisory Authority.
Outstanding amounts can be collected e.g. by attachment
under the rules on the collection of personal taxes in the
Act on the deduction of taxes at source.

(24) Until 1997 TV2 received all of its revenue through the
TV2 Fund, which was set up by the State and operated as
an independent entity with the object of providing TV2
with income. During the same period another indepen-
dent entity, TV2 Reklame A/S, was operating with
responsibility for selling TV2's advertising space. TV2
Reklame A/S was under a statutory obligation to transfer
the income it generated to the TV2 Fund. The resources,
consisting of licence fees and adverting revenue, were
then transferred to TV2 by decision of the Minister of
Culture. Since 1997 TV2 has received its share of licence
fees directly from DR.

(b)

Ad hoc transfers from the TV2 Fund and the Radio Fund

(25)

In addition to licence fee revenues, TV2 received DKK 58
million from the Radio Fund in 1997 for an increased
commitment to Danish film production. In the same year
the TV2 Fund allocated it DKK 167 million for
investment in the digitalisation of its production systems
and DKK 50 million to cover operating costs.

(a)

Licence fee resources

(c)

Exemption from corporation tax

(21) During the period under investigation TV2 was allocated

DKK 4 067,7 million in licence fee resources.

(9) Order No 874 of 9 December 1998 on radio and television
services provided by satellite or cable; Order No 1349 of
18 December 2000 on local radio and television services.
Section 6e and Section 6e(5) of the Broadcasting Act.

(10)
(11) Order No 740 of 21 August 2001 on keeping separate accounts
for Danmarks Radio's and TV2's public service activities and
any other
implemention of
adopted for
Commission Directive 2000/52/EC (OJ L 193, 29.7.2000,
p. 75).

activities,

the

(26) Moreover, TV2 has been exempt from corporation tax
under
the Companies Act, giving it an advantage
amounting to DKK 159,4 million for the period under
investigation. In January 2001 the Danish State intro-
duced a mechanism to neutralise the effect of
the
exemption for TV2's commercial activities, requiring it to
transfer 30 % of annual profits from its other activities to
its public service activities. That percentage corresponds
to the standard rate of corporation tax introduced in
2000.

(12)

Sections 61 to 63 of the Broadcasting Act.

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(d)

Exemption from servicing charges on establishment loans

(27) Government loans financed TV2's establishment costs
initial period of
and operating deficit during its
operation. Under the initial loan agreements, it had to
pay interest on the capital and to repay the principal.
However, during the entire period under investigation it
has been exempt from interest payments and enjoys a
moratorium on servicing charges. The advantage result-
ing from exemption from interest and servicing charges
on the establishment and operating loans for the period
under investigation is DKK 341,8 million.

2001 all local commercial television stations licensed to
broadcast in a network had to pay an annual fee to the
State (15). TV2's regional services were not liable for
payment of the fees as these services were broadcast in
‘windows’ on TV2's national frequency. The commercial
broadcaster, TvDanmark, was the only operator paying
this fee, which it did for its second channel. The total
amount that it paid is DKK 85 million.

(g)

Must-carry status

(e)

State guarantee for operating loans

(32) All owners of common aerial

installations must relay
TV2's public service programmes through them (must-
carry).

(28) Until the end of 1996 the Government guaranteed loans
taken up by the TV2 Fund in order to finance TV2's
operations. The amount of the guaranteed loans was
transferred to TV2 when the Fund was wound up. The
advantage for TV2 resulting from this guarantee is DKK
9,8 million.

(f)

Fees paid for nationwide transmission frequencies and the

authorisation to broadcast in networks

(29) Denmark has access

to three analogue

terrestrial
transmission frequencies with nationwide coverage,
which are reserved for the public broadcasters. One
frequency is reserved for TV2, the second frequency is for
DR and the third frequency is for digital television.

(30) TV2 pays a fee for the use of the reserved nationwide
broadcasting frequency to the National IT and Telecom
Agency, a State agency answering to the Ministry of
Research, Technology and Development (13). The amount
of this fee is laid down in the Finance Act. During the
period under investigation TV2 paid between DKK 2
million and DKK 4 million annually in frequency fees. As
the second frequency is used by the other public
broadcaster and the third frequency has not actually
been in use, the fee paid by TV2 cannot be compared to a
fee that a commercial broadcaster would have paid.

(31) Denmark also provides access to frequencies with only
In 1997 the Government made it
regional coverage.
possible to uplink regional frequencies in order to obtain
higher coverage (network) (14). In the period 1998 to

3.

Grounds for initiating the procedure

(33) After its preliminary investigation the Commission found
that the measures, except for those with must-carry
status, involved State aid within the meaning of Article 87
(1) of the EC Treaty.

(34) The Commission expressed doubts as to the compat-
ibility of the measure, since the State financing exceeded
TV2's net costs for its public service obligations and
therefore could have been used to cross-subsidise TV2's
commercial activities. It concluded, after its preliminary
investigation, that some of TV2's commercial activities
had been loss-making and that it would appraise in the
formal investigation procedure whether TV2's behaviour
concerning these loss-making commercial activities was
that of a normal market operator.

(35) Furthermore, the Commission expressed doubts as to
possible anti-competitive behaviour by TV2 in the
advertising market. The Broadcasting Communication
indicates that ‘a public service broadcaster, in so far as
lower revenues are covered by the State aid, might be
tempted to depress the prices of advertising or other
non-public service activities on the market, so as to
reduce the revenue of competitors. Such conduct,
if
demonstrated, could not be considered as intrinsic to the
public service mission attributed to the broadcaster.
Whenever a public service broadcaster undercuts prices
in non-public service activities below what is necessary
that an efficient
to recover
situation would
commercial operator
normally have to recover, such practice would indicate

the stand-alone costs
in a similar

(13)

Section 38 of
the Act on radio communications and the
assignment of radio frequencies and Section 48 of the Radio
Frequencies Act.

(14) The Media Agreement 1997 to 2000.

(15)

Introduced by Act No 1208 of 27 December 1996 and
incorporated in Section 60a of
the
Broadcasting Act and repealed on 1 January 2002 by Act
No 259 of 8 May 2002. The rate of the fee was set per
inhabitant of the local area covered by the fee and increased
every year.

the 1997 version of

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the presence of overcompensation of public service
obligations and would in any event
trading
conditions and competition in the Community to an
extent which would be contrary to the common interest”
and thus infringe the Protocol’.

“affect

(40) Regarding proportionality, ACT contended that

the
Commission should investigate whether the net cost of
each public service obligation is equivalent to the cost
that a normal private investor would incur to provide the
same service.

III.

COMMENTS FROM INTERESTED PARTIES

(36) TvDanmark considers that the provision by the State of a
nationwide transmission frequency constitutes State aid
since the State forgoes income on this scarce asset.
Competitors' cover is a maximum of only 77 %.
It
comments that the fact that the networking fee was
charged only on TVDanmark2 and not on TV2's local
stations, although they are economically and commer-
cially in the same situation, constitutes State aid to these
local stations. ACT, Antena 3 TV and Telecinco argue that
the EU law principle of neutrality requires, regarding
means of retransmission, that the fee should be imposed
on all kinds of networks.

(37) ACT, Antena 3 TV and Telecinco commented, regarding
the exemption from corporation tax, that the obligation
to transfer 30 % of the profits generated by commercial
activities to TV2's public activities cannot be regarded as
equivalent to paying corporation tax to the State, as it
distorts competition on the television market.

(38) Concerning the definition of the public service remit,
ACT, Antena 3 TV and Telecinco commented that the
qualitative and wide definition of TV2's public television
service activities cannot be considered proper as it does
not draw a distinction with commercial operators. They
claim that the State cannot impose the same obligations
upon both private and public broadcasters and formally
treat only the latter's obligations as involving a public
service remit. ACT comments that
the Commission
should not
adopt a formalistic but a functional
interpretation of the independent principle of Commu-
nity law embodied in Article 86(2) of the EC Treaty.
TvDanmark contends that the case of TV Zulu illustrates
this manifest error. When TV2 Zulu was changed from a
public service channel into a commercial channel the
programming did not change significantly.

from the

(41) TvDanmark argued that the Commission's calculation of
overcompensation should take into account TV2's
the
benefit
exemption from servicing charges on establishment
loans, the State guarantee for operating loans and the
free transmission frequency, as it gives TV2 an unjustified
advantage over commercial operators.

corporation tax exemption,

(42) TvDanmark contended that the general market fluctua-
tions in television advertising income are limited and do
not justify TV2's build-up of equity. The fluctuation in
TV2's advertising income of 13 % in 1998 to 2002
corresponded to the general economic downturn. TV2,
being the price leader,
less vulnerable than its
is
competitors to advertising revenue fluctuations.

(43) TvDanmark contended, regarding the advertising market,
that TV2's pricing practices do not allow commercial
operators to recover stand-alone costs. TvDanmark must
price its TRPs around 30 to 40 % below TV2 in order to
secure market acceptance (TV2's TRPs or GRPs are more
valuable due to better coverage) (16). In view of TV2's
and the
regarding e.g.
unique position,
programming budget, an advertiser will always assign a
part of his budget to obtain maximum impact in terms of
contacts, the level of coverage and/or frequencies within
a given budget. TvDanmark provided figures illustrating
that its operations have been loss-making from 1997 to
2002, contending that TV2's unfair competition prevents
TvDanmark from generating sufficient revenues, thus
precluding it from funding better programming to attract
advertisers.

coverage

(44) TV2's

rebates are such that customers purchasing
advertising spots on its nationwide broadcasts often get
lower prices if they also purchase TV2 Zulu advertising
time (bundling). Advertising prices in Denmark are
around 40 to 50 % lower than comparable countries like
Norway and Sweden, which is a result of TV2's special 1:
1 and 1: 2 rebate packages. TvDanmark also submitted in
support of their arguments an analysis of pricing on the
Danish market
in television advertising prepared by
Copenhagen Economics. This report compares average
and marginal prices on the market and concludes that
competition takes place only on residual demand and

(39) ACT commented that the condition concerning entrust-
ment is only fulfilled when there is a legal mechanism to
enforce the public service obligation, with real powers to
compel
to discharge the tasks
assigned. ACT maintained this condition is not fulfilled
in the present case.

the public operator

(16) Advertisers can purchase advertising time on Danish television
stations on two bases: gross rating points (GRPs), which refer to
the total audience of 12 years and over, or target rating points
(TRPs), which refer to a narrower target group. TV2 is the only
station in Denmark that also sells time on the basis of GRPs.

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therefore a comparison should be based on marginal
prices. In addition TvDanmark provided data comparing
TV2's prices with those of other forms of media and
from other countries.

(51) The Danish authorities agree with the Commission's
preliminary assessment that the State funding exceeds the
net public service cost. However, they claim that, even if
the compensation exceeds the net extra cost of TV2's
public service obligations, it cannot be considered State
resources for the reasons set out below.

its advertising slots in order

(45) TV3 contended that it had to grant very high discounts
for
to secure market
acceptance because TV2 offers extra marginal discounts
on the balance of advertisers' budgets for television
advertising if that balance is also placed with TV2.

IV.

DENMARK'S COMMENTS

(46) Regarding the judgment of

Justice in
the Court of
PreussenElektra (17),
the Danish Government doubts
whether the licence fee resources granted to TV2 should
be considered State resources within the meaning of
Article 87 of the EC Treaty.

(47) The Danish authorities consider that the transmission
frequencies for TV2 cannot be considered an advantage
as local television stations also have reserved transmis-
sion frequencies, so that TV2 has not received special
treatment. Like other stations, TV2 paid a fee for the use
of the frequencies.

(48) Regarding entrustment, the Danish authorities comment
that Article 86(2) of the EC Treaty does not require the
establishment of a special control system to ensure
compliance with the public service obligation.
In
addition the control system in place in Denmark is
sufficient
to prevent overcompensation or cross-sub-
sidisation. The National Audit Office has carried out
management audits and financial audits of TV2's
accounts.

(49) Regarding proportionality, the Danish authorities com-
ment that the DKK 167 million transferred from the TV2
Fund was allocated to the digitalisation of the broad-
casting network and so cannot be described as free equity
capital.

(50) Regarding the corporation tax exemption, the Danish
authorities comment
the profit on commercial
that
activities was very limited and that the method chosen to
neutralise TV2's corporation tax exemption for commer-
cial activities prevents these activities deriving financial
benefit from the exemption and has the same economic
effect.

(52) The surplus cannot be regarded as overcompensation
and merely reflects a reasonable rate of return on TV2's
turnover. Moreover, the capital was needed as a buffer
against any sudden falls in advertising revenue that occur
and because TV2 is prohibited by law from taking up
loans exceeding 4 % of annual turnover. In addition the
State was acting in accordance with the normal market
investor principle since TV2's current equity capital does
not exceed what a normal market investor would have
injected. Such a capital surplus is not contrary to the
is not used to cross-subsidise TV2's
Treaty if
commercial activities.

it

(53) Regarding TV2's behaviour in the advertising market, the
Danish authorities maintain that it has consistently set its
prices so as to maximise revenues. Prices are established
purely on supply and demand. Prices are set annually on
the basis of estimates made by TV2's advertising division
of the commercial audience share (in the 21 to 50 year-
old age group), of programme schedules, economic
developments and the competitive market situation.
TV2's operating costs are not a factor in the estimate, nor
is the amount of licence fee resources.

(54) TV2 has the highest price on the Danish market, which
excludes the possibility that undercutting prices resulted
in an increased need for state funding.

(55) The Danish authorities submitted a report prepared by
RBB Economics on competition on the Danish market in
television advertising. The report concludes that
the
average net prices charged by TV2 are in fact higher than
the prices charged by its competitors and that
the
differences in advertising rates charged by TV2 and
TvDanmark are explained by differences in their relative
strengths in terms of programming and ability to
generate viewers.

V.

LEGAL ASSESSMENT

1.

State aid within the meaning of Article 87(1)

(56)

In order to ascertain whether the measures described
above constitute aid within the meaning of Article 87(1)
of the EC Treaty, the Commission must appraise whether
they:

(17)

Judgment of the Court of 13 March 2001 Case C-379/98
in
PreussenElektra AG v Schleswag AG [2001] ECR I-2099,
particular paragraph 61.

— are granted by the State or through State resources,

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— are capable of distorting competition by favouring
certain undertakings or the production of certain
goods,

— affect trade between Member States.

(a)

State resources

(57) Regarding licence fees, it should first of all be pointed out
that until 1997 TV2 received these resources direct from
the TV2 Fund, which was set up and controlled by the
State. After 1997 it received them from DR, which
collects the fees from owners of radio and television sets.

(58)

It should be borne in mind here that, in accordance with
the case-law of the Court of Justice of the European
Communities (18) and with the settled practice of the
Commission in its decisions (19), financial resources must
be considered State resources if they are permanently
under the control of the public authorities and therefore
available to the competent public authorities.

(59) First,

in the present case there is no contractual
relationship between TV2 and the persons paying the
licence fee. It is DR, which itself is a public institution
under State control, which collects the licence fees from
owners of radio and television sets and passes them on to
TV2. Second, TV2's share of the income from licence
fees is determined by the Minister of Culture. Thus, it is a
public authority that ultimately decides on the amount of
the licence fees to be allocated to TV2. Third, if payment
of the licence fee has to be enforced, it is again the State
that intervenes under the rules on the collection of taxes
and other public debts. For these reasons, the licence fee
resources to be granted to TV2 are at all times subject to
the control of the public authorities and thus must be
considered State resources.

(60) Despite the Danish authorities' contentions, the Commis-
sion considers that the present case cannot be compared
with the PreussenElektra case (20).

(61) The ad hoc transfer of resources to TV2 from the Radio
Fund also concerns licence fee revenue that was made
available to TV2 in accordance with a State decision. The

same is true for the ad hoc transfer of resources from the
TV2 Fund when it was wound up, as resources from the
TV2 Fund were only made available to TV2 following a
decision by the State. Since the resources remained under
public control and available to the competent national
authorities, they must be considered State resources.

(62) Public resources are present

in the corporation tax
exemption, as forgoing tax revenue is equivalent to the
consumption of State resources in the form of fiscal
expenditure (21).

(63) The loans granted to TV2 without servicing charges are
directly provided by the State from the public budget. By
waiving servicing charges the State forgoes income and
therefore it is clear that these funds constitute State
resources within the meaning of Article 87(1). Further-
more, it is the Danish State that guarantees the operating
loans. The advantage of a State guarantee is that the risk
is borne by the State. The State's undertaking of the risk
should normally be compensated by an appropriate
premium. Where the State forgoes such a premium there
is both an advantage for TV2 and a drain on State
resources (22).

(64) The State has

reserved a nationwide transmission
frequency for TV2,
for which the operator pays a
frequency fee to a state body. The annual fee that TV2
paid has fluctuated between DKK 2 million and DKK 4
million during the period under investigation.

(65)

In the absence of a basis for comparing the fee paid for
the national frequency, that fee can only be compared to
the fee paid for the permit to reach a larger share of the
population through the establishment of a network.
TV2's frequency fee for nationwide coverage is signifi-
cantly lower
than the networking fee payable by
TvDanmark, which varied between DKK 5 million in
1997 and DKK 30 million in 2001, although TvDan-
marks' network of regional frequencies only attains a
coverage rate of 77 %. Thus TV2 has been able to reach a
larger share of the Danish population at a lower cost.

(66) The Commission is therefore of the opinion that the
frequency fee does not reflect market conditions. By not
asking for a market rate for the asset the State has
forgone revenue that would have accrued to the State
budget.

(18)

(19)

(20)

Judgment of the Court of 16 May 2000 Case C-83/98 French
Republic v Ladbroke Racing Ltd and Commission of the European
Communities [2000] ECR I-3271, paragraph 50.
See point 17 of the Communication from the Commission on
the application of State aid rules to public service broadcasting
and Commission Decision (EC) No 631/2001 of 22 May 2002
concerning the BBC licence fee.
See in particular paragraph 58.

(21)

(22)

Point 10 of the Commission Notice on the application of the
State aid rules to measures relating to direct business taxation
(OJ C 384, 10.12.1998, p. 3).
Point 2.1.2 of the Commission Notice on the application of
Articles 87 and 88 of the EC Treaty to State aid in the form of
guarantees (OJ C 71, 11.3.2000, p. 7).

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(67)

In contrast, as TV2 does not broadcast over local
networks, it does not incur the networking fee. As the
State could not have legally collected this fee from TV2 it
did not forgo tax revenue falling to the State budget and
hence no State resources are involved.

installations

(68) Equally, the Commission cannot discern any element of
State resources in the statutory obligation on owners of
common aerial
to relay public service
programmes through these installations (must-carry) as
the State is neither forgoing any income nor actively
transferring funds to such operators. It follows that the
access rule does not confer any financial advantage from
State resources on TV2 (23).

(b)

The favouring of certain undertakings and distortion

of competition

(69) There is no doubt that the licence fee revenue, the ad hoc
transfers from TV2 Fund and Radio Fund, the exemption
from corporation tax,
the exemption from servicing
charges for loans, the State guarantee for the operating
loans and access to a nationwide frequency on favourable
terms provide an economic and financial advantage to
TV2 relieving it of operating costs that would normally
have to be borne by its budget. As TV2 is favoured by
these measures compared to its competitors not receiving
the same funds, these measures must be regarded as
selective and as distorting competition within the
meaning of Article 87(1) EC. However, Denmark has
argued that these measures compensate TV2 for the net
cost
incurred in discharging the task in the general
interest entrusted to it according to the principles
established by the Court of
Justice in the Altmark
case (24).

(70) State measures compensating the net additional costs of a
service of general economic interest (SGEI) do not qualify
as State aid within the meaning of Article 87(1) of the EC
Treaty if the compensation is determined in such a way
that
it does not confer any real advantage on the
undertaking. In Altmark, the Court of Justice ruled that to
this end four conditions must be fulfilled:

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

(23)

(24)

‘State aid to public broadcasting
(OJ C 238, 21. 8.1999,

See Aid No NN 70/98,
channels Kinderkanal and Phoenix’
p. 3).
Judgment of the Court of 24 July 2003 Case C-280/00 Altmark
Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrs-
gesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundes-
verwaltungsgericht [2003] ECR I-7747.

— second, the parameters on the basis of which the
compensation must be established in advance in an
objective and transparent manner,

— third,

the compensation cannot exceed what

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

— fourth, where the undertaking which is to discharge
public service obligations is not chosen in a public
procurement procedure, the level of compensation
needed has been determined on the basis of an
analysis of the costs which a typical undertaking,
well run and adequately provided with means of
production so as to be able to meet the necessary
public service requirements, would have incurred in
discharging those obligations, taking into account
the relevant receipts and a reasonable profit for
discharging the obligations.

(71) Leaving aside for the moment whether TV2 is an
undertaking entrusted with the discharge of public
service obligations, the Commission is of the opinion
that, in the present case at least, the second and the
fourth conditions set out above are not fulfilled. First,
the parameters on the basis of which the compensation
is calculated are not established in advance in an
objective and transparent manner. The compensation is
determined in a media agreement set for four years,
whereas there is no publicly available annual budget
establishing a link between compensation and output.
Furthermore, TV2 receives a number of advantages that
interest waiver,
are not transparent (tax exemption,
etc.). Second, TV2 has not been chosen as the public
service broadcasting provider on the basis of a tender,
nor has any analysis been carried out to ensure that the
level of compensation is determined on an analysis of
the costs which a typical undertaking, well run and
adequately provided with the appropriate means of
production so as to be able to meet the necessary public
service requirements, would have incurred in dischar-
ging those obligations, taking into account the relevant
receipts and a reasonable profit for discharging the
obligations.

(72) As described in recitals 10 to 12, TV2 competes with
other public and private broadcasters in the television
broadcasting market. Since it is favoured by the measures

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compared to its competitors who do not receive the
same funds, these measures must be regarded as selective
and as distorting competition within the meaning of
Article 87(1) of the EC Treaty.

(c)

Effect on trade between Member States

(73) State measures are caught by Article 87(1) of the EC
Treaty in so far as they affect trade between Member
States. This is the case whenever the such activities
involve intra-Community trade.

(74) The Court of Justice has developed a wide interpretation
of this concept. Thus, the fact that the undertaking in
question does not engage in exports does not exclude
that trade may be affected. In fact, when a Member State
grants aid to an undertaking, domestic business may be
maintained or even increased due to the aid, which in
to
turn reduces other undertakings' opportunities
establish themselves on the market. The aid consequently
allows the recipient to maintain a share of the market
that could otherwise have been acquired by competitors
from other Member States (25).

(75)

In the Broadcasting Communication, the Commission,
referring to the Court's case-law, laid down that the ‘State
financing of public service broadcasters can generally be
considered to affect trade between Member States. This is
clearly the position as regards the acquisition and sale of
programme rights, which often takes place at interna-
tional level. In the case of public broadcasters who are
allowed to sell advertising space, advertising too has a
cross-border effect, especially for homogenous linguistic
areas across national boundaries. Moreover, the owner-
ship structure of commercial broadcasters may extend to
more than one Member State’.

(76)

in that

In the case at hand, TV2 itself operates on the
it exchanges television
international market
programmes through the European Broadcasting Union
and participates in the Eurovision system (26). It is in
direct competition with commercial broadcasters that are
active on the international broadcasting market and have
international ownership. According to the judgments of

(25)

(26)

Judgment of the Court of 13 July 1988 Case 102/87 French
Republic v Commission of the European Communities [1988] ECR
4067 and Order of the President of the Court of 17 March
1989 Case 303/88 Italian Republic v Commission of the European
Communities [1989] ECR 801.
Judgment of the Court of First Instance of 8 October 2002
Joined Cases T-185/00, T-216/00, T-299/00 and T-300/00
Métropole Télévision SA (M6) (T-185/00), Antena 3 de Televisión,
SA (T-216/00), Gestevisión Telecinco, SA (T-299/00) and SIC —
Independente de Comunicação, SA (T-300/00) v
Sociedade
Commission of the European Communities [2002] ECR II-3805.

the Court of Justice, when aid strengthens the position of
an undertaking compared with other undertakings
competing in intra-Community trade the latter must be
regarded as affected by that aid (27). The financial means
made available to TV2 have given it a competitive
advantage in the acquisition of audiovisual rights and the
investment in programmes that can subsequently be
sold. Moreover, the aid measures have placed TV2 in a
favourable situation compared to its competitors within
the European Union by diminishing their opportunities
for establishing themselves in Denmark. The Commis-
sion therefore concludes that the measures benefiting
TV2 affect
trade between Member States within the
meaning of Article 87(1) of the EC Treaty.

(d)

Conclusion

(77) Since all the conditions in Article 87(1) are fulfilled and
at least two of the conditions set out by the Court of
Justice in Altmark have not been met, the Commission
concludes that the financial measures benefiting TV2
must be considered State aid within the meaning of
Article 87(1).

(78) Since TV2 started broadcasting in 1989, all the measures
in question have been awarded to TV2 after Denmark's
accession to the European Union. For this reason, the
measures, including the licence fee, constitute new State
aid and not existing aid within the meaning of Article 88
(1) of the EC Treaty.

2.

Compatibility of the aid with the common market
pursuant to Article 86(2) of the EC Treaty

(79) According to Article 86(2) of the EC Treaty ‘undertakings
entrusted with the operation of services of general
economic interest or having the character of a revenue-
producing monopoly shall be subject
to the rules
contained in this Treaty, in 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 development
of trade must not be affected to such an extent as would
be contrary to the interests of the Community’.

(27)

Judgment of the Court of 17 September 1980 Case 730/79
Philip Morris Holland BV v Commission of
the European
Communities [1980] ECR 2671, paragraph 11;
Judgment of
the Court of 21 March 1991 Case C-303/88 Italian Republic v
Commission of the European Communities [1991] ECR I-1433,
paragraph 17; Judgment of the Court of 19 September 2000
Case C-156/98 Federal Republic of Germany v Commission of the
European Communities [2000] ECR I-6857, paragraph 33.

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(80) The Court of Justice has consistently held that Article 86
of the EC Treaty authorises derogations from the ban on
State aid for undertakings entrusted with services of
general economic interest. The Court's judgment
in
Altmark has implicitly confirmed that State aid that
compensates the costs incurred by an undertaking for the
provision of services of general economic interest can be
found to be compatible with the common market if it
meets
the EC
the conditions of Article 86(2) of
Treaty (28).

(81)

In line with settled case‑law of the Court of Justice (29),
Article 86 of the EC Treaty constitutes a derogation that
should be interpreted restrictively. The Court has made
clear that, in order for a measure to qualify for such a
derogation,
the following
is necessary that all
conditions be fulfilled:

it

— the service in question must be a service of general
economic interest and clearly defined as such by the
Member State,

— the undertaking in question must be explicitly
entrusted by the Member State with the provision of
that service,

— the application of

the competition rules of
the performance of

the
Treaty must obstruct
the
particular tasks assigned to the undertaking and
the exemption from such rules must not affect the
development of trade to an extent that would be
contrary to the interests of the Community.

(82) The Broadcasting Communication sets out the principles
and methods which the Commission intends to apply in
order to ensure that the conditions referred to above are
complied with. It must therefore examine whether in the
case at hand:

— TV2's broadcasting activities are clearly and pre-
cisely defined by the Danish authorities as a service
of general economic interest (definition),

— TV2 is officially entrusted by the Danish authorities
with the provision of that service (entrustment),

— the State funding does not exceed the net cost of
that service, taking into account other direct or
indirect revenues derived from the service (propor-
tionality).

(a)

Definition

In view of

(83) As stated in point 33 of the Broadcasting Communica-
tion, it is for the Member States to define the public
the
service task of a public broadcaster.
specific nature of the broadcasting sector, the Commis-
sion considers a wide definition entrusting a given
broadcaster with the task of providing balanced and
varied programming in accordance with its remit, in view
of the interpretative provisions of the Protocol, to be
appropriate under Article 86(2) of the EC Treaty. Such a
definition would be consistent with the objective of
fulfilling the democratic, social and cultural needs of a
particular society and guaranteeing pluralism, including
the
cultural
Commission is limited to checking whether the defini-
tion of public service contains any manifest error.

and linguistic diversity. The

role of

(84) TV2 is obliged by law to provide as a public service
‘through television, radio, Internet and the like, a wide
range of programmes and services comprising news
coverage, general
and
entertainment’
to the entire Danish population. As
the public service television
described in recital 15,
activities are specified in more detail in TV2's constitu-
tion and the Broadcasting Act.

information,

education,

art

(85) Although TV2's broadcasting obligation is of a qualita-
tive nature and rather widely defined, the Commission
considers this wide definition of the operator's task to be
in line with the Broadcasting Communication.

(86) The Commission also considers that TV2's obligation to
support Danish cinema production falls within the scope
of public service broadcasting, as TV2 subsequently
broadcasts on public service television the films, for
which it has acquired the distribution rights.

(87) The Commission does not accept

the comments of
interested parties that TV2's public service broadcasting
task cannot be considered a service of general economic
interest as this task does not differ from the requirements
for the authorisation imposed upon commercial opera-
tors. It is of the opinion that a distinction must be made
between the conditions for authorisation that a com-
mercial broadcaster must satisfy on the ground of public
interest and the State assignment of a task of public
interest to a public or private enterprise (30). It is clear
that TV2 has an explicit statutory obligation to discharge
a public service broadcasting task. Moreover, TV2's
competitors, TV3 and 3+ as well as TvDanmark's first
channel, are all broadcast under a UK authorisation.
Thus, the Danish rules do not apply to these channels. It
to the Danish
is only TvDanmark2 that
regulations. Likewise, it is not uncommon for obligations
similar to those imposed on channels operating in a
network in Denmark to be applied in other countries to

is subject

(28) Altmark see paragraphs 101 to 109.
(29)

Judgment of the Court of 27 March 1974 Case 127-73 Belgische
Radio en Televisie v SV SABAM and NV Fonior [1974] ECR 313.

(30) Recital 14 of Commission Decision 97/606/EC of 26 June 1997
pursuant to Article 90(3) of the EC Treaty on the exclusive right
television advertising in Flanders (OJ L 244,
to broadcast
6.9.1997, p. 18).

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ensure that minimum requirements as to ethics and
public moral standards are met.
It is clear that the
detailed obligations as laid down in TV2's constitution
exceed those minimum requirements.

(88) Besides

service
the obligation to transmit public
programmes of a specific content through radio and
the public service definition of TV2 also
television,
includes the obligation to provide, through the Internet
and the like, other services in the form of news coverage,
general information, education, art and entertainment.

(89) Although the nature of

information society services
differs from broadcasting services, according to para-
graph 34 of the Broadcasting Communication ‘the public
service remit might include certain services that are not
“programmes” in the traditional sense, such as on-line
information services, to the extent that while taking into
account the development and diversification of activities
they are addressing the same
in the digital age,
democratic, social and cultural needs of the society in
question’.

(90)

In the present case, the Commission notes that TV2 has
operated an Internet site as part of its public service task.
That site informs users about TV2's public service
television programmes. In addition TV2 has operated a
commercial Internet site with games, etc.

and TV2's constitution formally entrust public service
broadcasting to TV2. However, since the definition in the
Act does not make sufficiently clear which kinds of other
activities are allowed as public services, it is necessary
that TV2 should be formally entrusted in advance with
each additional activity that TV2 wants to launch as a
public service. The Commission notes that, for the period
under investigation, TV2 did not provide other services
like this apart from its public service broadcasting tasks.
Indeed, the Internet pages offering other services such as
games were operated as a commercial activity while the
Internet pages that solely informed the user about TV2's
public service television programmes can be considered
part of the public service broadcasting remit as they
cannot be separated from the broadcasting service.
Therefore the Commission concludes that, for the period
under investigation, the public service broadcasting remit
has been properly entrusted to TV2.

(94) However, as stated in points 41 to 43 of the Broadcasting
Communication, not only should the public service be
formally entrusted to the broadcaster, it is also necessary
that the public service be delivered as prescribed in the
act of entrustment. Since the Commission cannot verify
whether any quality standards have been met,
is
desirable that an appropriate monitoring authority
should exist and it is for the Member State to choose
the mechanism to ensure effective supervision, provided
that the authority is independent from the undertaking
entrusted with the service.

it

(91) The Commission acknowledges that TV2's Internet pages
that are limited to informing the user about its public
service television programmes fall within its public
service broadcasting task. There is therefore no manifest
error in treating the operation of these pages as covered
by the public service task.

(95)

(92)

In contrast, TV2's commercial Internet service should be
regarded as a purely commercial activity, as it offers
interactive products on individual demand like games or
chat rooms, which do not differ from similar commercial
products. Since such services do not address
the
democratic, social and cultural needs of society they
cannot constitute services of general economic interest
under Article 86(2) of the EC Treaty. Indeed, the Danish
authorities considered these activities to fall outside the
scope of TV2's public service.

(b)

Entrustment

investigation did not

In this context, the Commission notes that a specific
investigation into the substance and nature of TV2's
public service obligations, and how these were met in
practice, was carried out by the National Audit Office in
2000. That
find any lack of
compliance on the part of TV2 with its public service
obligations. Moreover, between 2001 and 2002 a Public
Service Council existed that was required to ensure that
TV2 complied with its public
service obligations
although the Council has never published any reports.
Nor has the Commission any information that TV2 failed
to comply with its obligations or that its performance
was such that its activities could no longer be considered
a service of general economic interest under Article 86(2)
of the EC Treaty.

(93)

In order to qualify for the exemption under Article 86(2)
of
the EC Treaty the public service remit must be
entrusted to TV2 by a legislative act. The Commission
notes that Sections 6a and 6b of the Broadcasting Act

(96) Under the Media Agreement concluded on 3 June 2002
TV2 is no longer required to present an annual public
Instead, the Government
service budget or accounts.
concludes a public service contract with TV2 obliging the

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latter to present an annual report on its compliance with
the obligations under the public service contract. The
annual reports are submitted to the Radio and Television
Board for approval.

(97) As regards the financial control of the public broad-
casting service, the Commission notes that, throughout
the whole of the period under investigation, the National
Audit Office has audited TV2's accounts. These audits
have included both financial audits and management
audits, although the Office did not have any power to
prevent overcompensation of TV2's public service costs.

(98) On the other hand, the Commission is empowered to
assess possible overcompensation.
the
Transparency Directive has been transposed in Denmark.
It has also received sufficiently transparent data from the
Danish authorities to assess whether the state funding
exceeded the extra costs of providing public service
broadcasting.

It notes that

the prices of advertising or other non-public service
activities on the market so as to reduce competitors'
revenues. The Commission considers that, whenever a
public service broadcaster reduces prices in non-public
service activities below the level needed to recover the
stand-alone costs that an efficient commercial operator
in a similar situation normally has to recover,
this
indicates overcompensation of public service obliga-
tions.

(103) The Commission's assessment of proportionality there-
fore has two aspects: on the one hand, it has to calculate
the net cost of the public service task entrusted to TV2
and verify whether this cost has been overcompensated;
on the other, it must investigate any available evidence
suggesting that TV2 has depressed prices in commercial
markets such as advertising with a view to reducing its
competitors' revenues.

(c)

Proportionality

(i)

N e t p u b l i c s e r v i c e c o s t — t h e i s s u e o f o v e r -

c o m p e n s a t i o n

(99) Pursuant

to the Transparency Directive (31), Member
States are required to maintain separate accounts for
public service and non-public service activities. Costs and
revenues must be correctly allocated on the basis of
clearly established, objective cost accounting principles.

(100) The Commission has taken the view that,

in the
broadcasting sector, separation of accounts may not be
straightforward or even feasible on the costs side when
different activities share the same inputs. In this sector,
Member States may consider broadcasters'
entire
programming to be covered by the public service remit
while at the same time allowing for its commercial
exploitation (32).

(101) When an undertaking is compensated, State aid must
not exceed the net costs of the public service mission. To
arrive at the net costs, account must be taken of other
direct or indirect revenues derived from the public
service mission. The net benefit of carrying on the public
service activity is
in
appraising the proportionality of the aid.

therefore taken into account

(102) Moreover, there may be market distortions that are not
necessary for the fulfilment of the public service mission.
For example, if loss of revenues is covered by State aid a
public service broadcaster might be tempted to depress

(104) In applying the proportionality test, the Commission
first needs to determine the cost of the service of general
economic interest. As TV2 also carries out commercial
activities,
it needs to keep separate accounts for its
different activities. After 2001 TV2 has been obliged by
law to keep separate accounts for its public service and
commercial activities.

(105) Second, when calculating the net costs the Commission
has to deduct from the gross public service costs all the
net benefits accruing from the commercial exploitation
of the public service activity. For the investigation at
hand, the Danish authorities have provided figures in
accordance with the method presented in point 56 of
the Broadcasting Communication to show the returns
on TV2's commercial and public service activities. The
figures show that most of TV2's commercial activities
have shared the same inputs as its public service
activities (33). As a consequence, no meaningful alloca-
tion of costs to these commercial activities has been
effected. When this is the case, the Commission deducts
the net revenues of the commercial exploitation in order
to calculate the net public service costs. The commercial
Internet activities are the only ones that can be regarded
as separable from the public service activities. The losses
that TV2 has made on the commercial Internet activities
since they were begun in 1997 amount
to DKK
11,3 million.

(31) Commission Directive 2000/52/EC of 26 July 2000 amending
Directive 80/723/EEC on the transparency of financial relations
between Member States and public undertakings (OJ L 193,
29.7.2000, p. 75).
Point 53 of the Broadcasting Communication.

(32)

(33)

For example, the profit margin on leasing masts is 100 %, on
merchandising it has varied between 53,5 % and 100 %, on
other programme sales the variation is 85,7 % to 92,3 %, while
the margin for other sources of income varies between 62 %
and 75 %.

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(106) Lastly, the Commission has to assess whether the total
State measures do not exceed the net cost of the service
of general economic interest.

(107) Thus in the case at hand the Commission has deducted
the income generated by the public service activities

(advertising income and other commercial income) from
the gross public service cost to arrive at the net public
service cost. The cash financing from the State has then
been deducted from the net public service cost. This
calculation is displayed in the table below:

Table 1

Public service cost and compensation measures 1995 to 2002 on the basis of the accounts

(DKK million)

Year

1995

1996

1997

1998

1999

2000

2001

2002

Total

Gross public service cost

– 755,8

– 856,2

– 1 415,2

– 1 475,3

– 1 439,1

– 1 531,6

– 1 518,5

– 1 604,1

– 10 595,8

Investment in digitalisation (a)

Net advertising income

Other

Net public service cost

Licence fee/TV2 Fund

0

0

0

0

0

0

– 10,3

– 4

– 56,7

– 23,9

– 94,9

1 091,9

1 118,4

1 014,4

1 089,9

1 006,8

1 028,3

6 349,7

83,2

121,6

97,3

76,3

50,9

65,4

58

73,8

626,5

– 672,6

– 734,6

– 226,0

– 280,6

– 384,1

– 380,3

– 510,4

– 525,9

– 3 714,5

730,4

694

328,5

357,5

414,6

449,2

537,3

556,2

4 067,7

Transfer when Radio Fund was wound up

Transfer when TV2 Fund was wound up

0

0

0

0

8

217

10

0

15

0

25

0

0

0

0

0

58

217

Balance (net cost minus state compensation)

57,8

– 40,6

327,5

86,9

45,5

93,9

26,9

30,3

628,2

(a)

The capital injection transferred to TV2 for digitalisation is shown in 1997 as income. The corresponding reductions have been taken into account as costs when the investments have been
made. So as not to take the same costs into account twice, the depreciation corresponding to the investments made have been deducted from the gross public service cost.
Source: TV2's annual profit and loss accounts.

(108) As can be deduced from the above table, the financing exceeds the costs by DKK 628,2 (EUR

84,3 million).

(109) The Commission notes that TvDanmark considers that the other measures that have benefited TV2,
such as the exemption from interest payments and tax and the access to a nationwide transmission
frequency on favourable terms, should also be taken into account for the assessment of the
overcompensation. These benefits are summarised in the table below:

Table 2

Estimated benefits from tax exemption, waiver of interest and transmission frequency

(DKK million)

1995

1996

1997

1998

1999

2000

2001

2002

Total

Corporation tax exemption

19,7

– 13,8

54,6

30,1

16,7

29,7

18,5

3,9

159,4

Accrued interest on establishment loan

44,5

39,2

36,9

41,3

37,5

45,1

51,7

45,6

341,8

State guarantee, operating loans

2,4

2,1

Transmission frequency fee (a)

1,7

2,3

1,4

7,9

1,0

0,7

0,4

0,1

9,8

12,6

21,4

26,0

70,2

Total

66,6

27,5

95,5

80,7

67,8

96,9

96,6

49,6

581,2

(a)

The difference in the frequency fee paid by TV2 and the networking fee paid by TvDanmark.

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in appraising the proportionality of

(110) The Commission agrees that these measures must be
considered in the present case. However, in calculating
the overcompensation, it is not appropriate to include
them in the calculation in Table 1. In line with the
Commission's position in the RAI case (34),
these
additional benefits can be considered compensating
costs that otherwise would have had to be financed.
Thus,
the State
funding of the costs of the public service task, these
additional advantages should not be included, since
paying them would have proportionately increased the
initial costs of the public service entrusted to TV2; it
would make no difference to the net result. However,
when this is the case it must be ensured that these
advantages benefit only the public service task and do
not spill over to the commercial activities. This latter
point is addressed in recitals 128 to 130.

the same year, licence fee income increased by DKK 57
million, or 16 %, from the previous year. TV2 also
reduced its programming costs,
like any commercial
broadcaster whose revenue was reduced. Overall, TV2's
annual surplus decreased, but it remained profitable and
did not at any point have to draw on its reserves. As a
result, TV2 has never actually needed the capital that was
built up.

(115) The Commission is therefore of the opinion that the
surplus that was built up was not necessary for TV2 to
function properly. Moreover, if it had been considered
necessary to create a buffer against any falls
in
advertising revenue, an appropriate means would have
been to create a transparent reserve and not simply to
allow surpluses to accumulate in the company. Accord-
ingly it cannot accept
first
argument.

the Danish authorities'

(111) The Danish Government

advances

a number of
arguments to justify the surplus funding that has been
provided. First, it considers that the surplus reflects a
reasonable return on TV2's activities. Second, it argues
in order to
that it was necessary to build up capital
enable TV2 to absorb fluctuations in advertising income,
thereby ensuring that the public service task assigned to
it could be performed. Third, it contends that it acted as a
private market investor in building up equity since that
was necessary to optimise TV2's capital structure.

(112) The Danish authorities' first argument is that the capital
was necessary as a reserve against any fluctuations in
advertising income. They point out that in 1996 the
National Audit Office stated in its report
that TV2
should build up equity to allow for fluctuations in such
income.

(113) The Commission recognises that it may be necessary for
undertakings to keep such reserves to ensure that they
can perform their public service tasks. However, these
reserves must be established for a specific purpose and
be regularised at fixed times, when the overcompensa-
tion that has been determined must be reimbursed. This
ensures that the public service broadcaster does not gain
an unjustified advantage. The Commission notes that in
the present case no specific reserves of this nature were
built up and what was accumulated instead was equity
capital, which can be used for any purpose and need not
be applied to performing service tasks.

(114) The Danish authorities further argue that TV2 would not
have been able to sustain sudden falls in advertising
income like that that took place in 1999. In that year
TV2 saw its advertising revenue decrease by DKK 104
million, or 9,3 %, from the previous year. However, in

(116) As

second argument,

they acted in their capacity as

the Danish authorities
their
contend that
sole
shareholder when they reinvested TV2's annual profit
and that the profit reflects a reasonable return on TV2's
activities.

the Commission must

(117) In accordance with settled case-law of the Court of
Justice,
therefore determine
whether in similar circumstances a private investor of a
dimension comparable to that of
the administrative
bodies in the public sector could have been expected to
provide capital injections of the same size (35) v .

(118) First of all, the Commission notes that it was the Danish
State that decided to establish TV2 with loans instead of
equity. Thereafter it also provided operating loans for
TV2. Since Denmark is the sole shareholder in the
company in either case it is both the first and last
creditor to be reimbursed in a winding-up. From the
standpoint of an investor, the Danish State could have
sought the best possible return on its investment, either
in the form of interest on a loan or a return on an equity
stake.

(119) The Commission points out that Denmark has forgone
servicing charges on the loan throughout the whole
period under investigation. Instead TV2 has been able to
build up its capital whilst simultaneously continuing to
enjoy a waiver of servicing charges on the loan, giving it
significant surplus capital that was not earmarked for any
specific purpose. Moreover, the Danish State has not
asked for any return on the capital that has been built up.
It has in fact refrained from asking for a normal return,
unlike a normal owner of a company or a creditor.

(34) Commission Decision 2004/339/EC of 15 October 2003 on
the measures implemented by Italy for RAI SpA (OJ L 119,
23.4.2004, p. 1).

(35)

Judgment of the Court of 3 October 1991 Case C-261/89
Italian Republic v Commission of the European Communities [1991]
ECR I-4437; Judgment of the Court of 14 September 1994
Joined Cases C-278/92, C-279/92 and C-280/92 Kingdom of
Spain v Commission of the European Communities [1994] ECR I-
4103.

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(120) The Danish authorities have not adduced any evidence to
show why it would make strategic sense to reinvest the
surplus in TV2 instead of asking for compensation in the
form of interest or a return. Such a decision would
normally be taken by an investor only if he thought that
the reinvestment would produce added value on his
initial
investment. In this case the Danish authorities
have not claimed that there was a business plan or a
clear, developed business strategy showing that this was
so. Nor are there any other indications that TV2 is
planning to develop its activities to generate added value.

(125) The only exception is the capital injection for investment
in the digitalisation of TV2's production equipment. The
Commission notes that the Danish authorities argue that
this capital cannot be considered free equity. TV2's 1997
annual accounts indicate that it was decided in the Media
Agreement that TV2 should digitalise its production
equipment before the end of 2000. DKK 300 million
was earmarked for the digitalisation of both TV2 and the
regional
In 1997 DKK 167 million was
transferred to TV2 for this purpose. The Commission
therefore agrees that the transfer was made on a clear
decision and for a specific purpose.

stations.

(121) The Commission notes that the TV2 Fund was wound
up in 1997 and that TV2 was allowed to keep the
surplus. It does not agree that the Minister of Culture's
Decision to allow TV2 a greater degree of financial
freedom can be treated as equivalent to an express
decision by the State as an investor to start reinvesting
any surpluses in TV2.

(122) The Commission therefore finds that, since in the
present case there was no investor to receive a return, it
is unnecessary to have regard to any return on capital in
calculating TV2's net costs.

(123) The Commission cannot accept the criteria advanced by
the Danish authorities to show that they acted as a
private investor would when they reinvested the annual
surpluses in TV2. The Danish authorities use the surplus
generated on the turnover as a criterion for appraising
TV2's profits. It must be stressed in the present case that
the Danish authorities are already funding TV2 since
they are making available significant resources to cover
part of its operating costs. The scale of these resources
directly influences the profits TV2 can generate. It is
doubtful whether it is meaningful to analyse the ratio in
cases where the State acts as both the source of finance
and the investor. Since the level of State funding is not
dependent on the costs,
this ratio can always be
improved simply by increasing the amount of funding
the State assigns. However, since overfinancing usually
leads to inefficiency and a heavier drain on State
resources, it is by no means certain that increasing State
funding will produce correspondingly improved profits.

(124) The Commission therefore finds

that

the Danish
authorities cannot be considered to have acted as a
private investor on a market economy. They cannot be
considered to have acted in such a way that they carefully
researched and analysed which investment could have
maximised its return. Moreover, the surplus was not
transferred to TV2's capital on transparent terms in
accordance with an express decision and for a specific
purpose in line with the rules on transfers of capital. As
is pointed out above, the Danish authorities did not
request any return on their
investment and their
reinvestment of the annual surplus in TV2 was not
based on any ‘market economy investor’ strategy.

(126) However, this reserve was in the end only partly used in
accordance with that decision. At the end of 2000 when
digitalisation should have been completed TV2 had only
invested DKK 14,3 million of the DKK 167 million. At
the end of the period under investigation only a total of
DKK 95 million was actually invested in digitalisation
equipment. With effect
the
balance of DKK 72 million of this reserve was released
and is consequently at TV2's disposal to use for any
purpose it wishes. The Commission is therefore of the
opinion that the balance, which in fact can be compared
to any other source of cash financing for covering TV2's
operating costs, may result in overcompensation. This
balance is thus taken into account in the calculation of
the overcompensation referred to above.

from 1 January 2003,

(127) In view of

the above arguments,

the Commission
concludes in the first part of its appraisal of proportion-
ality that TV2 has in fact been overcompensated by DKK
628,2 (EUR 84,3) million.

(128) As explained in the introductory section, TV2 also
carries on a number of commercial activities, which are
fairly marginal in relation to its total activities. The costs
of these commercial activities have been allocated on the
basis of
the method presented in the Broadcasting
Communication and so no full cost allocation has been
applied. As for the advantage that TV2 derives from
access to the transmission frequency, the Commission
notes that this is ring‑fenced to the public service. It also
considers that the financing costs (interest benefits) can
be fully attributed to the public service activities.

(129) To neutralise the effect of the tax exemption that the
public service activities enjoy, 30 % of the profits on the
commercial activities are transferred to that service but
this has only been in operation since 2001. The
there may
Commission therefore acknowledges that
have been a distortion on the broadcasting market in
that TV2 has not had to take the corporation tax rate
into account in setting its commercial prices. However,
the advantage should no longer exist in future because
the share of the transfer corresponds to the actual rate of
taxation, as a result of this neutralisation mechanism.

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This does not pose a problem for establishing the
amount of past overcompensation as the total income of
these commercial activities has been used to reduce the
net cost of the public service.

(130) TV2 has carried on loss-making commercial Internet
activities. Since these activities fall outside the public
service broadcasting task no state funding is possible.
Moreover, as no other activities have been operated on a
stand-alone basis, no surpluses
from commercial
activities exist to cover Internet losses.

(ii)

B e h a v i o u r r e s t r i c t i n g c o m p e t i t i v e i n c o m -

m e r c i a l m a r k e t s

(131) As is indicated in the Broadcasting Communication, the
Commission is of the opinion that behaviour by public
service broadcasters restricting competition cannot be
considered necessary for the fulfilment of public service
tasks. In point 58 of the Communication it is stated that
‘a public service broadcaster, in so far as lower revenues
are covered by the State aid, might be tempted to depress
the prices of advertising or other non-public service
activities on the market, so as to reduce the revenue of
competitors. Whenever a public service broadcaster
undercuts prices in non-public service activities below
what is necessary to recover the stand-alone costs that an
efficient commercial operator in a similar situation
would normally have to recover, such practice would
indicate the presence of overcompensation of public
service obligations’.

(132) TvDanmark submitted information showing that

it
cannot cover the stand-alone costs of its TV operations
by the prices that TV2 charges. TvDanmark compares its
costs to the TRP 21-50 prices that TV2 has been
charging.

(133) For this comparison to be valid the Commission has, as
a first step, to establish whether TvDanmark can be
considered to be in a similar situation to TV2 and
whether it is an efficient operator.

shares of

(134) First, the Commission has to appraise whether TvDan-
mark is in a similar situation to TV2. The Commission
makes the points set out below. TV2's viewer share is
about 35 % whereas the corresponding figure for
TvDanmark is approximately 15 %.
In addition the
companies'
the advertising market differ
significantly: TV2's market share is about 60 % whereas
share is around 8 %. TV2's
TvDanmark's market
advertising turnover has been approximately five times
that of TvDanmark. Moreover, TV2 is the only station to
reach 100 % of the population, whereas TvDanmark2
has a coverage of 77 % and TvDanmark1 has even
smaller coverage. In view of this, TvDanmark cannot be
directly compared to TV2.

(135) Second,

the Commission has

to establish whether
TvDanmark is an efficient market operator. An efficient
operator can be identified by an analysis of generally
used accounting ratios and a comparison of
the
operator's results with average profits generated in the
Member State. The analysis must take into account the
different size of the operators and their specific cost-
structures. However, as already established above, the
operators on the Danish market are not in a sufficiently
similar
situation to allow a direct comparison of
performance ratios based on profit and loss accounts.
The Commission therefore is of the opinion that an
analysis of those ratios on the Danish market is not
appropriate in the case at hand.

(136) Instead the Commission has analysed the financial
performances of TvDanmark and SBS Broadcasting. On
this analysis the Commission cannot establish with
certainty whether the losses incurred stem from high
initial start‑up costs that TvDanmark has not yet been
able to recover or whether the operator is simply not
the
performing efficiently. Despite several
Commission could not obtain the data on the third
television company, TV3,
that are needed for a
comparison with the third operator on the market. As
a consequence the Commission cannot conclude with
certainty whether TvDanmark's losses are caused by
TV2's pricing behaviour or by other factors for which
TvDanmark itself is responsible.

requests,

(137) Since it cannot be established with certainty whether
TvDanmark is an efficient operator and since a direct
comparison of the two operators is not possible the
Commission considers that the appraisal that was made
is not conclusive in this case. It has therefore analysed
TV2's pricing policies and available data on the
advertising market in greater depth in order to appraise
whether the operator acted with a view to maximising its
advertising revenues during the period under investiga-
tion.

(138) First, the Commission compared the prices of the two
operators and analysed TV2's pricing policies, focusing
on the years 1998 to 2002 when, according to the
complainant, TV2 started forcing down prices on the
advertising market. Second, it analysed Danish advertis-
ing expenditure compared with the EU and the other
Scandinavian countries in particular. Third, it examined
the contact prices in all Scandinavian countries and for
all media types.

(139) TV2's behaviour on the advertising market is under
investigation by the Danish competition authorities and
is without prejudice to the
the following appraisal
outcome of that investigation.

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L 85/17

Advertising prices

(140) Viewer shares and composition, programme content, the
rules on advertising time, and the funding mechanism of
the channels are all factors that affect competition on the
advertising market. As a result, prices also vary between
different television broadcasters. Channels also sell a
range of differentiated products that
fetch different
prices (36).

(141) The prices charged by channels

in television advertising. By far

include significant
discounts and so it is not relevant to compare listed
prices
the largest
television advertising (approximately
proportion of
involves annual
90 % of all nationwide advertising)
agreements under which television channels grant
annual rebates. In addition other discounts are granted
less attractive advertising slots,
(for new advertisers,
additional volume discounts,
etc.). Media agencies
negotiate and arrange these agreements.

(142) In order to compare the different stations, an average of
the different prices charged has to be established. The
following table displays the average prices for the target
group TRP 21-50. These prices have been calculated by
dividing the relevant stations' national advertising spot
turnover by the number of national TRP 21-50
delivered, as shown below (37):

Table 3

1998

1999

2000

2001

2002

TVDanmark (EUR)

283

270

252

251

211

TV2 (EUR)

480

409

364

381

325

Difference (EUR)

197

139

112

130

114

TVDanmark's CPP as share of
TV2's CPP (a)(%)

58,9

66,0

69,3

65,9

64,9

TV2's average CPP for TRP 21-50
weighted for coverage (by
0,7) (EUR)

336

286

255

267

228

TVDanmark's CPP as share of
TV2's weighted CPP (%)

84,2

94,3

99,0

94,1

92,7

(a)

CPP = cost per point. The cost per point expresses the cost of advertising per rating point, i.e.
either per GRP or per TRP.

(36) Different categories of rating points, spot campaigns, etc.
(37) The Gallup-meter system records how many gross rating points
each station actually delivers. This figure has then been adjusted
by the station to reflect TRPs delivered.
State aid C-60/99 (ex NN 167/95) France, State aid in favour of
France 2 and France 3, 10 December 2003.

(38)

(143) On the data above, TvDanmark's TRP 21-50 price has
been around 30 to 40 % lower than that of TV2. As the
Commission held in its decision on State aid in favour
of France 2 and France 3, there is a positive relationship
between the average number of contacts and the
in the television
average net price per contact
advertising market (38). It follows that a difference in
prices between broadcasters could be explained by a
difference in their ability to attract viewers. In such a
situation, it is relevant to establish whether the actual
price difference reflects the conditions of the market.

(144) In contrast to the situation in the French case, in the
present case observations can be analysed only for two
operators. As a consequence the slope of the linear
regression line will be calculated on the basis of the
prices of these two operators and will be of
little
statistical relevance. It follows that no conclusions can
be drawn on the appropriateness of the slope of the
line.

(145) In order to verify whether the actual price difference
between the two operators reflects market conditions a
correction factor was therefore applied to attempt to
neutralise TV2's stronger position on the market. This
weighting factor was derived from calculations by
media agencies and reflects the different coverage in the
target group attainable by purchasing 100 TRP 21-50
from TvDanmark and TV2. TvDanmark is on average
slightly below 70 % of TV2's reach (in purchasing 100
TRP 21-50). If this factor is applied the prices are
nearer
to converging, while TV2's price remains
slightly higher than that of TvDanmark. The difference
in price thus seems to reflect market conditions.
However, this result has to be treated with caution since
the weighting factor cannot possibly adjust all the
differences between the stations.

(146) The Commission also notes that

the complainant
maintains that
in fact operators on the television
advertising market do not compete either on listed
prices or on the average GRP or TRP prices as
instead that
presented above. TvDanmark argues
operators actually compete on marginal prices; these
marginal prices derive from TV2's stronger position in
the market. In order for advertisers to achieve their
campaign goals they have to buy a certain proportion
of rating points exclusively from TV2. Since there was
no competition on these ‘infra-marginal’ units TV2 was
able to gain additional profits on them. As a result the
operators competed on residual rating points and thus
on marginal prices. TvDanmark claims that these prices
have been even lower than the average prices shown in
the tables above.

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Official Journal of the European Union

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(147) Leaving aside the question whether this claim is correct,
the Commission considers that such behaviour would
have been made possible by TV2's strong position on the
market. However,
to
establish whether TV2's behaviour on the advertising
market was such that it did not attempt to maximise its
revenues. While it cannot be excluded that TV2 kept its
prices
share this
behaviour does not point unequivocally to refraining
from maximising income.

low to maintain a high market

investigation has

the present

TV2's pricing behaviour during the
investigation period

(148) It has been established above that TV2's prices have been
higher than TvDanmark's during this period. It is also
clear that, despite increases in listed prices, the actual
price level has been declining during this period. TV2
has significantly increased the level of the discounts
granted.

(149) However, an analysis of prices cannot establish whether
alterations
in prices have actually contributed to
reducing total income from advertising, thereby increas-
ing the need for state funding. To address this issue the
Commission analysed TV2's pricing policy and its
consequences for the overall advertising income that it
has generated.

(150) As

is explained below, during the period under
investigation TV2 both raised and cut prices on a
number of occasions (the latter by granting higher
discounts). The following table provides an overview of
changes in TV2's overall level of advertising revenue in
the period 1998 to 2002, during which the complainant
contends that TV2 was forcing down prices on the
Danish market.

Table 4

1998

1999

2000

2001

2002

(DKK million)

National advertising
income

1 008

884
(– 11,3 %)

959

(+ 8,5 %)

879
(– 8,3 %)

884
(– 0,6 %)

to the new rebate

(152) In 2000 TV2 expected competition to intensify
significantly and did not raise its prices. Indeed actual
prices decreased due
scheme
introduced by TV2. As a result TV2 expanded its
capacity utilisation by 33 % over the preceding year.
However, the pricing measures led to an increase in its
nationwide advertising income of 8,4 %. In 2001 TV2
again increased its prices. Despite the rising prices TV2's
advertising income and capacity utilisation decreased to
the level of 1999. In 2002 TV2 reduced prices again and
there was a slight decrease in total turnover in that year.
However, turnover on the overall advertising market
decreased even more.

(153) What has been indicated above shows that the use of
extensive rebates resulted in a reduction in the actual
price level. TV2 was able to compensate for the decrease
in prices by expanding capacity utilisation. Since its
competitors lack the same capacity reserve they could
not follow suit. In order to survive on the market they
have had to follow TV2's actions. During years when
TV2 increased its prices its advertising turnover fell. On
the other hand, when TV2 has reduced its prices it was
able to increase its total turnover. The Commission
therefore concludes that TV2's price cuts have actually
income. As a consequence,
brought it higher overall
TV2's pricing behaviour would not
it
refrained from seeking to maximise its income.

indicate that

Television advertising expenditure in Denmark compared to
the EU as a whole

(154) A comparison of prices between the Danish operators
and an analysis of TV2's pricing behaviour do not
provide evidence whether overall prices on the Danish
television advertising market were too low. Such a
depressed level of prices could stem from TV2's use of its
stronger position to bring down the overall
level of
television advertising expenditure below where it would
have been in a normal competitive situation.

(155) To address

this

issue,

the Commission analysed
economic data on the advertising market in all EU
countries and compared these with Denmark. As Danish
television advertising is most comparable with other
Northern countries, the Commission also compared data
for Denmark and other Nordic countries (Finland,
Sweden and Norway) (39). The key figures for television
advertising expenditure that have been analysed are: (1)
television advertising expenditure expressed as a share of
total advertising expenditure; (2) television advertising
expenditure per capita; (3) television advertising expen-
diture expressed as a percentage of GDP. The table below
gives an overview of these figures (40):

(151) In 1997 TV2 took the strategic decision not to expand
capacity utilisation but to increase its prices in 1998.
Another price increase was implemented in 1999. The
Danish authorities claim that
in 1999 competition
became so fierce that TV2 encountered difficulties as a
result of
the price increases and its income from
advertising fell by about 10 % compared to the preceding
year.

(39) Both the Danish authorities and the complainant are of the
opinion that the prices in Denmark can be compared best with
other Northern countries as the market conditions are similar
(size, viewing behaviour).
Figures were not yet available for 2002.

(40)

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Table 5
Key figures for television advertising expenditure in
Denmark, the EU and other Nordic countries

(157) In view of what has been indicated above,

the
Commission concludes
there is no clear and
that
equivocal evidence that the Danish television advertising
market was systematically and consistently depressed
due to TV2's pricing behaviour.

1995

1996

1997

1998

1999

2000

2001

27

35

24

39

37

32

29

37

25

44

40

36

29

37

26

48

45

41

30

37

27

51

49

44

28

37

27

46

53

45

27

37

27

47

60

54

27

37

26

44

58

49

1,49

2,20

1,45

1,61

2,34

1,51

1,70

2,46

1,62

1,77

2,58

1,72

1,51

2,70

1,66

1,45

2,88

1,73

1,34

2,71

1,55

TV advertising
expenditure as
share of total
advertising
expenditure (in
per cent)

TV advertising
expenditure per
capita (in EUR)

TV advertising
expenditure as a
percentage share
of GDP

DK

EU

Nor-
dic

DK

EU

Nor-
dic

DK

EU

Nor-
dic

Source: European Audiovisual Observatory, EuroStat.

(156) The above table shows that the share of advertising out
of total advertising expenditure was lower in Denmark
(27 %) in comparison to the EU average (37 %). However,
it also shows that there is a general divide between the
north and the south of Europe (41).
In the southern
Member States television advertising expenditure is
considerably higher
than in the northern Member
States (42). The same pattern can be seen for television
advertising expenditure as a portion of GDP (43).
In
addition television advertising expenditure per capita
shows a marked difference between the Member
States (44). When these ratios are set in the context of
the Nordic countries, the Danish spending pattern is in
line with other Nordic countries.

(41) A major reason for the divide is the significantly smaller
amount of time people in Nordic countries spent watching
television. In Denmark average daily viewing was 156 minutes
per capita in 2002 whereas it was 192 minutes in the EU.
In 2001 in the EU the fraction was highest in the southern
Member States Portugal (60 %), Italy (54 %) and Greece (49 %).
In the Netherlands (23 %), Finland (24 %), Austria (26 %) and
Ireland (26 %) it turned out to be lower than in Denmark. In
Sweden the share matched with that in Denmark

(42)

(43) Television advertising expenditure as share of GDP were high in
the southern countries as Portugal (6,66 ‰), Greece (4,04 ‰),
Italy (3,22 ‰), and Spain (3,21 ‰).

(44) Television advertising expenditure per capita was lower in 2001
in Finland (EUR 42) and Sweden (EUR 43) and at a similar level
in the Netherlands (EUR 45). They were highest in the UK (EUR
90), Portugal (EUR 80) and Belgium (EUR 73).

Inter-media prices

(158) The complainant also submitted data comparing contact
prices (expressed in CPM (45)) across borders for one
media type and across media types in one particular
country. This
cost of
information compares
contacting 1 000 persons by an advertisement using
either printed media or television in Denmark, Norway
and Sweden (46).

the

(159) The data show that

less
expensive in Denmark than Sweden and Norway (47),
whereas the opposite is true for print media (48).

television advertising is

(160) However, the Commission cannot verify the reliability of
the data provided and no such data are publicly available.
Since the information is very limited and does not take
possible cultural differences into account, the Commis-
sion cannot draw any valid conclusions on the level of
contact prices for the different media in the Scandina-
vian countries.

(161) The Commission therefore concludes that TV2 had the
highest prices on the Danish market during the period
under investigation since it was able to price its product
15 to 40 % higher than its competitors, depending on
the size of the target group. In comparison to Sweden
and Norway, prices are approximately 20 % lower in
Denmark.

(162) On the basis of the above analyses, the Commission
concludes that from a State aid perspective there is
currently no clear evidence that TV2 did not attempt to
maximise its advertising revenue and that this behaviour
would have led to an increased need for State funding. In
any event, the Commission is of the opinion that any
loss of TV2's income from advertising activities does not
exceed the level of overcompensation already estab-
lished.

(45) CPM (cost per thousand) represents either the cost to generate
1 000 gross impressions within the group or the cost to reach
1 000 different individuals in the group.

(46) Television contact prices
for Norway and Denmark are
information from the local SBS
estimated on the basis of
station. The estimates for print media were provided by a media
agency.

(47) CPM for television is 13 in Denmark, 14 in Sweden and 18 in

Norway.

(48) CPM for print is 21 in Denmark, 17 in Sweden and 12 in

Norway.

L 85/20

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Official Journal of the European Union

23.3.2006

VI.

CONCLUSION

Article 2

(163) For

the reasons

the Commission
set out above,
concludes that the aid covered by this investigation has
overcompensated TV2 by an amount of DKK 628,2
million (EUR 84,3 million) and that this amount it is not
compatible with the common market on the basis of
Article 86(2) and must be recovered. Regarding the
person from whom the amount must be recovered, the
Commission notes that in December 2003, when TV2
altered its legal status by incorporation as the limited
liability
(hereinafter
referred to as TV2 A/S), the full amount of the advantage
was transferred to TV2 A/S.
It follows that the full
amount of the overcompensation now benefits TV2 A/S
and must be recovered from it. The amount of the
overcompensation has been calculated annually, on the
basis the situation at the end of each year (31 December).
This date must be applied for calculating interest,

company TV2/Danmark A/S

1. Denmark shall take all the measures necessary to recover
the said amount of DKK 628,2 million.

2. Recovery shall be effected without delay in accordance
with the procedures under national law, provided these allow
the immediate and effective implementation of this Decision.

3. The amount to be recovered shall bear interest through-
out the period running from the date on which it was first put
at the disposal of the recipient until its actual recovery. The
compound interest shall therefore be calculated starting from
the first year when overcompensation occurred. For sub-
sequent years, interest shall be correspondingly payable on all
other amounts of overcompensation provided in that year.

4. The interest to be recovered under paragraph 3 shall be
calculated in accordance with the procedure laid down in
Articles 9 and 11 of Commission Regulation (EC) No 794/
2004 (49).

HAS ADOPTED THIS DECISION:

Article 3

Article 1

The aid granted between 1995 and 2002 to TV2/Danmark in
the form of
licence fee resources and the other measures
described in this Decision is compatible with the common
market under Article 86(2) of the Treaty with the exception of
an amount of DKK 628,2 million.

Denmark shall inform the Commission within two months
the measures
following notification of
planned and already taken to comply with it. It shall provide
this information using the questionnaire in the Annex to this
Decision.

this Decision of

Article 4

This Decision is addressed to the Kingdom of Denmark.

Done at Brussels, 19 May 2004.

For the Commission
Mario MONTI
Member of the Commission

(49) OJ L 140, 30.4.2004, p. 1.

23.3.2006

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Official Journal of the European Union

L 85/21

ANNEX

Information on the implementation of Commission Decision 2005/217/EC

1.

CALCULATION OF THE AMOUNT TO BE RECOVERED

1.1. Please provide the following details on the amount of unlawful State aid that has been put at the disposal

of the recipient:

Date(s) (*)

Amount of
aid (**)

Currency

Name and address of recipient

(*) Date(s) on which (individual instalments of) the aid was put at the disposal of the recipient.
(**) Amount of aid put at the disposal of the recipient (in gross aid equivalents).

Comments:

1.2. Please explain in detail how the interest to be paid on the amount of aid to be recovered will be calculated?

2. MEASURES PLANNED AND ALREADY TAKEN TO RECOVER THE AID

2.1. Please describe in detail what measures are planned and what measures have already been taken to effect
an immediate and effective recovery of the aid. Please also indicate, where relevant, the legal basis for the
measures taken/planned.

2.2. By what date will the recovery of the aid be completed?

3.

RECOVERY ALREADY EFFECTED

3.1. Please provide the following details on the amounts of aid that have been recovered from the recipient:

Date(s) (*)

Amount of
aid repaid

Currency

Name and address of recipient

(*) Date(s) on which the aid was repaid.

3.2. Please attach proof of repayment of the amounts of aid specified under point 3.1 in the table above.