Commission Decision of 19 May 2004 concerning the aid scheme that Italy plans to implement for poultry farms — AIMA programme for the poultry industry — C 59/2001 (ex N 97/1999) (notified under document number C(2004) 1802)
Date: 2004-05-19
Institutions: European Commission
Subjects: State aid, aid system, control of State aid, poultry farming, support policy

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COMMISSION DECISION

of 19 May 2004

concerning the aid scheme that Italy plans to implement for poultry farms — AIMA programme for
the poultry industry — C 59/2001 (ex N 97/1999)

(notified under document number C(2004) 1802)

(Only the Italian text is authentic)

(2007/52/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

2001. The Commission received no comments from other
interested parties.

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

Having called on interested parties to submit their comments
pursuant to the provision cited above,

Whereas:

I.

PROCEDURE

(1)

(2)

(3)

(4)

By letter dated 17 December 1999, registered as received
on 22 December 1999, the Italian Permanent Representa-
tion to the European Union notified the Commission, in
accordance with Article 88(3) of the Treaty, the above aid
scheme relating to assistance from AIMA (Associazione
italiana dei mercati agricoli — Italian Association for
Agricultural Markets) to the Italian poultry market, which
was said to have suffered a drastic fall in the consumption
and sales of poultry as a result of the 1999 dioxin crisis.

By letters dated 8 August 2000, registered as received on 9
registered on 21
August 2000, 15 November 2000,
November 2000, 27 February 2001, registered on 1 March
2001, and 23 May 2001, registered on 28 May 2001, the
Italian Permanent Representation to the European Union
sent the Commission the additional
information sought
from the Italian authorities by letters dated 18 February
2000 (ref. AGR 5073), 2 October 2000 (ref. AGR 25123),
10 January 2001 (ref. AGR 000449) and 24 April 2001
(ref. AGR 009825).

By letter dated 30 July 2001, the Commission informed
Italy of its decision to initiate the procedure provided for in
Article 88(2) of the Treaty in respect of this aid.

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (1). The Commission invited interested parties to
submit their comments on the measure.

(5)

The Italian authorities submitted their comments by letter
of 24 October 2001, registered as received on 26 October

(1) OJ C 254, 13.9.2001, p. 2.

II.

DESCRIPTION

Legal basis

(6) National programme of AIMA assistance for 1999. The
legal basis for the proposed aid scheme is Article 3(1)(d) of
Law No 610/82, which authorises AIMA,
‘using the
financial resources at its disposal and based on the situation
on the market and according to availability (…), to provide
food products
to developing countries, designated in
agreement with the Ministry for Foreign Affairs and after
consulting the national food institute’.

Context

(7)

(8)

The Italian Unione nazionale dell'avicoltura (UNA) (National
Union of Poultry Farmers) had asked AIMA to intervene on
the market in order to offset the serious impact of the
dioxin crisis on the consumption of poultrymeat.

Initially (see letter dated 17 December 1999), following the
refusal of AIMA to purchase 17 000 tonnes of unsold meat,
worth ITL 40 billion (approximately EUR 20 million), UNA
had proposed selling some of the meat (11 450 tonnes) at
reduced prices on the markets of developing countries; the
difference between the actual commercial value of
the
goods and the selling price (approximately ITL 20 billion
i.e. 50 % of the market value) would have been covered by
AIMA.

(9) After the Commission had stated in its letter dated 18
February 2000 that the aid appeared to be an export refund
covering the difference between the price of poultry in the
third world and its price on the Italian market
(and,
therefore, by its very nature incompatible with the common
market, with the Community’s obligations under the World
Trade Organisation and with the common organisation of
the market), the Italian authorities no longer referred, in
their letter dated 10 August 2000, to the initial purpose of
the aid, but argued that the losses suffered by Italian poultry
farmers were the result of exceptional occurrences (rather
than normal market risks) and were therefore eligible for
the
the derogation provided for in Article 87(2)(b) of
Treaty.

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Measure

(13) The scheme provides for no compensation for disposing of
poultry or poultry products unfit for sale or consumption.

(10) The programme provides for compensation for poultry
farmers following the fall in prices and the collapse in sales
caused by the dioxin crisis and the ensuing alarm among
consumers. The aid corresponds to the difference between
average prices in countries not affected by the crisis and
prices in Italy in June-July 1999 (the period considered for
the purposes of compensation). According to the Italian
authorities, average prices in countries not affected by the
crisis (excluding Italy) were EUR 137,89/100 kg in June and
EUR 132,35/100 kg in July. The price difference was
therefore EUR 53,966/100 kg in June and EUR 46,218/100
kg in July (2). The maximum aid is ITL 21 150/100 kg (EUR
10,92/100 kg) and ITL 15 400/100 kg (EUR 7,95/100 kg).
Aid is granted for meat produced and marketed in June and
July 2001 and the total amount of aid is EUR 10 329 138.

(11)

In support of their argument, the Italian authorities state
that
the dioxin crisis caused not only a collapse in
production and trade (due to disturbances on the market
following the outbreak of the crisis) but also a sharp fall in
the consumption of poultry products. According to data
provided by the Italian authorities, 34 700 000 kg of meat
was sold at reduced prices in June 1999 (compared with
52 000 000 kg of meat sold in June 1998), followed by
30 200 000 kg in July 1999 (compared with 51 000 000
kg of meat sold in July 1998 (3). In spite of the preventive
measures taken by UNA to avoid a crisis of overproduction
of poultrymeat (involving the slaughter, in March, of chicks
that would have reached maturity in the next few months),
the measures were unsuccessful because of the dioxin crisis.

(12)

In their letters dated 21 November 2000 and 28 May 2001,
the Italian authorities stress the vital role played by the
media during the crisis and claim that the alarm triggered
by the media aggravated the sharp fall in the consumption
of poultrymeat (29,1 % in June, 10,1 % in July, 16,2 % in
August and 5,9 % for the year as a whole compared with a
year earlier). The collapse in demand caused a sharp
reduction in prices, particularly in June and July (down
30 % and 30,1 % respectively compared with the same
months of the previous year). In addition, in order to cope
with this situation, Italian producers had to place 4 150
tonnes of chicken in storage in June, 9 271 tonnes in July
and 2 595 tonnes in August because they could not dispose
of it on the market.

Amount of aid

(14) The maximum aid
(EUR 10 329 138).

planned

is

ITL

20

billion

Reasons for initiating the procedure

(15) The Commission initiated the procedure provided for in
Article 88(2) of the Treaty because of its doubts as to the
compatibility of the scheme with the common market.
These doubts concerned whether or not the aid in question
could be viewed as an aid to compensate for losses due to
an exceptional occurrence. The Italian authorities referred
to Article 87(2)(b) of the Treaty, under which aid to make
good the losses caused by exceptional occurrences is
compatible with the common market. The notification
refers to the dioxin crisis as an exceptional occurrence.

(16) The Treaty does not define the concept of exceptional
occurrence and the Commission applies this provision on a
case-by-case basis after making a detailed assessment of the
event concerned. In the case of the dioxin crisis affecting
food and feedingstuffs produced in Belgium, the Commis-
sion had concluded that this was an exceptional occurrence
the Treaty
within the meaning of Article 87(2)(b) of
because of the nature and extent of the restrictions that had
to be imposed to protect public health in that Member
State (4).

involving,

in particular

(17) There are also other precedents as regards the definition of
those
exceptional occurrence,
relating to aid granted by the United Kingdom (5) during
the BSE crisis: the Commission had concluded that it was
an exceptional occurrence, in view, in particular, of the ban
on exporting beef and veal and the fall in the consumption
of beef and veal due to the uncertainties and concern
caused by the news about BSE. It must however be stressed
that the examples quoted involve countries directly affected
(the United Kingdom in the case of BSE and Belgium in that
of dioxin) and not, as in this case, a country where the
market was disturbed because of consumers’ concerns
(about dioxin).

(2) Prices in Italy were EUR 83,924/100 kg and EUR 86,132/100 kg

respectively.

(3) These figures include products purchased by both private consumers

and organisations.

(4) See in particular its decisions on state aid Nos NN 87/99, NN 88/99,
NN 89/99, N 380/99, N 386/99, NN 95/99 and N 384/99.
(5) See state aids Nos N 299/96, N 290/96, N 278/96 and N 289/96.

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(18)

that prevented normal

In the cases cited, the Commission approved the compen-
sation paid to producers for losses of income because the
losses of market share and the fall in consumption were
caused not only by consumer alarm but also by exceptional
factors
trade in the products
concerned (a series of measures taken by the authorities,
combined with extraordinary behaviour on the part of
consumers and the media).
In the above-mentioned
decisions, a direct and immediate link could be established
between all the facts considered to comprise an exceptional
occurrence and the losses suffered by the undertakings
concerned.

(19) The Italian authorities have so far been unable to offer
convincing proof of a link between the losses of income
suffered by agricultural producers and an exceptional
occurrence, which would allow the Commission to approve
the payment of compensation under Article 87(2)(b) of the
Treaty. The rapid spread of alarm among consumers,
resulting in a serious disturbance of the market on which
Italian poultry farmers operate, the loss of market share
and, consequently, a reduction in the normal
level of
turnover, does not appear, on the basis of the information
available, to constitute in itself an exceptional occurrence
within the meaning of the Treaty. In addition, there is
nothing to show that
the national or Community
authorities adopted measures to prevent sales.

(20) Even were it to be concluded that the media impact in Italy
was greater than in other European countries, because of
food safety and the
public sensitivity to questions of
existence of a strand of public opinion that was very critical
of livestock-rearing systems, this would still not demon-
strate the exceptional nature of the event.

(21) The Commission looked into why Italian producers had not
taken advantage of the situation to increase their sales of
poultry products abroad (or even in Italy), since Italy, unlike
Belgium, was not one of the countries directly affected by
the dioxin crisis.

(22) Another aspect to be clarified is the statement by the Italian
authorities that poultry farmers were forced to freeze
unsold meat (4 150,8 tonnes in June, 9 271,3 tonnes in
July and 2 595,9 tonnes in August). This does not serve to
rule out the possibility that the poultry products remaining
unsold during the crisis could have been sold at a later date,
in which case the losses incurred would be less than those
declared during examination of this case. In addition, the
Commission was not
in a position to establish the
in
quantities of meat remaining unsold due to the fall
demand caused by the fear of dioxin or the extent of

overproduction based on an incorrect estimate of demand
over the summer.

(23)

In the light of the above, the Commission could not rule
the aid was intended simply to improve the
out
that
in any way
financial
situation of producers without
contributing to the development of
the sector and,
moreover, that since the aid was granted solely on the
basis of price, quantity or unit of production it was to be
regarded as constituting operating aid within the meaning
of point 3.5 of the Community guidelines for State aid in
the agriculture sector (6)
referred to as the
‘guidelines’) and, therefore as being incompatible with the
common market.

(hereafter

(24) The Commission accordingly expressed doubts about the
existence of a link between the loss of income suffered by
Italian poultry farmers and an exceptional occurrence and
about whether the aid could meet the requirements for
approval under Article 87(2)(b) or Article 87(3)(c) of the
Treaty (since, as regards the latter subparagraph, the aid did
not appear to facilitate the development of a particular
economic activity) or those for approval under one of the
points of the guidelines.

III.

OBSERVATIONS SUBMITTED BY ITALY

(25)

In their letter dated 24 October 2001, registered on 26
October 2001, the Italian authorities pointed out, among
other things, that the fall in the consumption of poultry
products in June, July, August and, to a lesser extent, up
until December 1999 had not been questioned in the
decision to initiate the procedure.

(26) According to the Italian authorities, since the losses caused
by a fall in sales and prices were not questioned by the
Commission, they only had to establish a link between
those losses and the dioxin crisis. They claim that such a
link is proven by the fact that the first news about dioxin in
poultry was broadcast at 7 p.m. on 28 May 1999 and the
sudden downturn in sales occurred from June 1999
onwards (29 % fall compared with June 1998). They affirm
that the consumption trend in Italy closely followed the
public alarm triggered by the media, with a sharp drop in
sales when the news concerning dioxin was first broadcast,
a resumption of sales in July, when media interest declined,
and a further reduction in August following news of the
the maximum
European Union decision to double
permissible level of dioxin in certain products. They add
that,
from September onwards, with the media paying
increasingly less attention to the matter, the consumption
of poultry products gradually returned to its normal level.

(6) OJ C 232, 12.8.2000.

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(27) Consequently, the Italian authorities believe there is an
undeniable link between consumer concern following news
broadcasts about dioxin in Belgium and the fall
in
consumption and prices.

IV.

LEGAL ASSESSMENT

The existence of aid

(28)

It therefore remains to be proven that the dioxin crisis in
Italy can be regarded as an exceptional occurrence within
the meaning of Article 87(2)(b) of
the Treaty. The
said to have already recognised the
Commission is
in
exceptional character of the dioxin crisis in Belgium,
view of the nature and extent of the restrictions imposed to
safeguard public health. While Italy may not have been
directly affected by the dioxin crisis, according to the Italian
authorities there is no question that the effects of the crisis
went beyond national borders and also affected neighbour-
ing countries, including Italy.

(29) The Italian authorities argue that an ‘exceptional occur-
rence’ within the meaning of Article 87(2)(b) of the Treaty
is any unforeseeable event or any event that is difficult to
predict, such as a natural disaster. Therefore, it is the event
in itself that should be assessed, rather than the measures
adopted to cope with the resulting crisis, which are simply a
consequence of the event. They state that, in the case of BSE
in the United Kingdom, the Commission had accepted the
exceptional nature of the event because of the ban on meat
exports, but especially because of the fall in the consump-
tion of beef and veal caused by the uncertainty and fear
aroused by the news concerning BSE. The Italian authorities
claim that
the same situation arose in Italy in 1999
following the dioxin scare. The ban on UK exports did not
contribute to any major extent to the fall in consumption,
since, even without the ban, consumers abroad would in
any case have reduced their consumption of beef and veal
(just as consumers
thus preventing
producers from finding other outlets abroad for their
products. In the case of dioxin in 1999, it should be added
countries banned imports of
that
poultrymeat from the EU at the time of the crisis.

in the UK did),

all non-member

(30) The Italian authorities argue that the reason why Italian
producers neither turned to foreign markets nor exploited
the Italian market is related to the transnational character of
the event, which went well beyond the borders of Belgium.

(32) Under Article 87(1) of the Treaty, any aid granted by a
Member State or through state resources in any form
whatsoever that distorts or threatens to distort competition
by favouring certain undertakings or the production of
certain goods is,
in so far as it affects trade between
Member States, incompatible with the common market.

(33) Article 19 of Council Regulation (EEC) No 2777/75 of 29
October 1975 on the common organisation of the market
in poultrymeat (7)
lays down that, save as otherwise
provided in that Regulation, Articles 87, 88 and 89 of
the Treaty apply to the production of and trade in the
products covered by that Regulation.

(34) The planned measure provides for the payment of public
funds (totalling ITL 20 billion) to certain undertakings and
is granted on a selective basis to poultry farmers presumed
to have suffered losses resulting from the dioxin crisis. In
addition, this measure favours certain products (poultry
products) and, in view of Italy’s share of total EU poultry
production (13,2 %), is likely to affect trade. In 2001, gross
Italian poultry production amounted to 1 134 000 tonnes
out of an EU-15 total of 9 088 000 tonnes (8).

(35) The measure under examination therefore constitutes state

aid as defined in Article 87(1) of the Treaty.

Compatibility of the aid

(36) The prohibition on state aid is not absolute. In this case, the
Italian authorities invoked the derogations provided for in
Article 87(2)(b) of the Treaty, under the terms of which aid
to make good the damage caused by natural disasters or
exceptional occurrences can be considered to be compatible
with the common market.

(37) Since the Treaty gives no definition of

‘exceptional
occurrence’, it must be verified whether the dioxin crisis
in Italy can be treated as an exceptional occurrence within
the meaning of Article 87(2)(b) of the Treaty.

(31) The incomes of certain Italian poultry undertakings over
the period June-August 1999 clearly attests, according to
the Italian authorities, to this fall in prices and sales.

(7) OJ L 282, 1.11.1975, p. 77.
(8) Source: Eurostat and the European Commission.

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(38)

In accordance with the Community guidelines for state aid
in the agricultural sector (9), in assessing aid to compensate
for
losses caused by natural disasters or exceptional
occurrences, because they constitute exceptions from the
general principle of the incompatibility of state aid with the
common market enshrined in Article 87(1) of the Treaty,
the Commission has consistently held that the concepts of
natural disaster and exceptional occurrence found in Article
87(2)(b) must be interpreted restrictively. Hitherto the
Commission has accepted that earthquakes, avalanches,
landslides and floods may constitute natural disasters.
Exceptional occurrences that have hitherto been accepted
by the Commission include war, internal disturbances or
strikes and, with certain reservations and depending on
their extent, major nuclear or industrial accidents and fires
that result in widespread loss. On the other hand, the
Commission did not accept that a fire at a single processing
plant which was covered by normal commercial insurance
could be considered as an exceptional occurrence. As a
that
general
outbreaks of animal or plant diseases can be considered
to constitute natural disasters or exceptional occurrences.
However, in one case the Commission did recognise the
very widespread outbreak of a completely new animal
disease as an exceptional occurrence. Given the inherent
difficulties in foreseeing such events, the Commission will
continue to evaluate proposals to grant aid in accordance
with Article 87(2)(b) on a case-by-case basis, having regard
to its previous practice in this field. Such a case-by-case
analysis is particularly necessary in such a sensitive sector as
poultry farming, where any market measure could conflict
with measures laid down under the common organisation
of the market.

the Commission does not accept

rule,

(39) Generally speaking, the Commission cannot accept that the
chemical contamination of foodstuffs intended for human
in itself, an exceptional occur-
consumption constitutes,
rence within the meaning of Article 87(2)(b) of the Treaty.
In fact, the risk of contamination is a consequence of a
failure to guarantee the highest quality standards through-
out the food chain.

(40)

In the case of the dioxin crisis in Belgium, numerous
elements had to be taken into account before it could
finally be established that
this crisis constituted an
exceptional occurrence. The Commission first of all looked
at the scope of the measures adopted to deal with the crisis
including a ban on the
and protect human health,
marketing and retail sale of poultrymeat, a ban on the
trade in and the export to third countries of certain animal
products intended for human and animal consumption and
including the
the imposition of a series of conditions,

(9) OJ C 28, 1.2.2000, p. 2.

monitoring, the traceability and the control of the products
concerned (10). The crisis was declared to be an exceptional
occurrence on the basis of
two facts, namely the
announcement made by the Belgian authorities, along with
the emergency measures subsequently adopted and the
consequent impossibility of marketing production, which
created a crisis situation for Belgian producers. This crisis
situation, by its nature and its effects on the operators
concerned, differed sharply from the usual situation and the
conditions under which the market normally operates. The
rapid spread of alarm among consumers and the ban on
Belgian animals and animal products imposed by various
third countries seriously aggravated the crisis and severely
disrupted the market on which Belgian producers sold their
products, led to a loss of market share and, consequently, a
reduction in turnover compared with what would have
been expected in a normal market situation.

(41) Neither the chemical contamination of products nor the fall
in sales was sufficient in itself to conclude that this was an
exceptional occurrence, which was the result of significant
measures to restrict the marketing and exportation of these
products, combined with the sharp fall in sales and prices.
The alarm among consumers and their reaction to the
dioxin contamination of poultrymeat were only contribut-
ing factors to the exceptional nature of the occurrence.

(42)

In the case of Italian producers, it should be noted that no
measures were adopted restricting the marketing or
exportation of products and no restrictive measures were
adopted to protect consumer health, since the country was
not directly affected by the crisis. The only unforeseeable
factor that created disruption on the market was the
spreading of alarm among consumers and their reaction to
contamination detected elsewhere.

(43) The situation in Italy cannot be compared with that in the
countries directly affected by the crisis. The dioxin crisis
was declared to be an exceptional occurrence in Belgium,
not an exceptional occurrence in itself. As stressed in

(10) These measures were laid down in three Commission Decisions:
Commission Decision 1999/363/EC of 3 June 1999 on protective
measures with regards to contamination by dioxins of certain animal
products intended for human or animal consumption (OJ L 141,
4.6.1999, p. 24). These measures
in particular,
poultrymeat and all poultry products, such as eggs and egg products,
fats and animal proteins used as raw materials in food production,
etc.; Commission Decision 1999/368/EC of 4 June 1999 and
Commission Decision 1999/389/EC of 11 June 1999 on protective
measures with regards to contamination by dioxins of products
intended for human or animal consumption derived from bovine
animals and pigs (OJ L 142, 5.6.1999, p. 46 and OJ L 147,
12.6.1999, p. 26). These measures concerned, in particular, beef and
veal, pigmeat and milk and all products manufactured therefrom.

concerned,

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recitals 37 to 40, neither the chemical contamination of
foodstuffs intended for human consumption nor the spread
of alarm among consumers constitutes an exceptional
occurrence within the meaning of Article 87(2)(b).

2000), this was not the case with the market for chicken in
Italy, on which there was already overproduction and falling
prices.

In that case,

(44) The Italian authorities also referred to the first BSE crisis in
the United Kingdom.
the extraordinary
situation in the beef and veal sector was caused by the
total ban imposed on the exportation of live animals and of
beef and veal from the United Kingdom to other Member
States and to non-member countries. The effects of the
market measures adopted in response to the problem of
BSE in the United Kingdom were unprecedented. The
Commission pointed out
the
that,
measures adopted to deal with the crisis, that there was a
total ban on all British meat and meat products that might
enter
food chain and an
unprecedented fall in domestic meat consumption. The fall
in consumption was related to the stringent restrictions
imposed on the market, which had created a situation that
could be described as exceptional.

the human and animal

in the context of

(45)

In addition, concerning more recent cases of BSE in
Europe (11), the Commission pointed out that a fall in sales
or incomes was not regarded as an exceptional event. The
collapse in sales is regarded as the consequence of an
exceptional occurrence, caused by an unusual combination
of factors. As in the cases referred to above, aid intended to
deal with an exceptional occurrence within the meaning of
Article 87(2)(b) was approved in the countries directly
concerned,
in which various factors contributed to the
exceptional nature of the crisis: the very serious negative
repercussions on European agricultural producers,
the
alarm that spread among consumers, the ban imposed by
a large number of non-member countries on animals and
meat products from the EU and a series of incidents beyond
the control of livestock farmers that aggravated the crisis
situation and spread fear among consumers. All this caused
the market on which European
serious disruption of
producers sell their products, a subsequent loss of market
share and a reduction in turnover compared with what
would have been expected in a normal market situation.

(46) A major factor that the Commission took into account in
recognising that crisis as an exceptional occurrence was the
stable and balanced situation on the market for beef and
veal before the crisis. However, as shown below (see recitals
54 to 57 below) and as declared by the Italian authorities
themselves (see letters dated 28 August and 15 November

(11) See, inter alia, aids N 113/A/2001 (Decision SG 01 290550 of 27
July 2001), N 437/2001 (Decision SG 01 290526D of 27 July
2001), N 657/2001 (Decision SG 01 292096 of 9 November 2001)
and NN 46/2001 (Decision SG 01 290558 of 27 July 2001).

(47)

In all the cases referred to above, and in particular those
referred to by the Italian authorities,
the exceptional
occurrence occurred in the country concerned and led to
the adoption of a series of restrictive, market-control and
health measures which contributed to a fall in sales and
prices of the products concerned.

(48)

In addition, an exceptional occurrence must at least, by its
nature and its effects on the operators concerned, differ
sharply from the usual situation and the conditions under
which the market normally operates. The unforeseeable
nature of an occurrence and the difficulty in predicting it
can contribute to its exceptional nature, but are not in
themselves sufficient to declare it ‘exceptional’ within the
meaning of Article 87(2)(b) of the Treaty.

(49)

In this case, the alleged fall in sales is no different from
other events that determine demand, such as closure of an
export market. Such events are just as unforeseeable, but
form part of the normal commercial risks to which an
undertaking is exposed and are in no way exceptional
within the meaning of Article 87(2)(b) of the Treaty.

(50) According to the Italian authorities, Italian producers had
no other market outlets, because the crisis had spread well
beyond the borders of Belgium and the consumption of
poultrymeat had fallen throughout Europe.

(51) However, according to information available to the
Commission, intra-Community exports of poultry in June
and August 1999 remained at their usual levels and were
actually slightly higher than in the previous year. Intra-
Community exports in July were higher than the average
for 1999 and than in the corresponding month of the
previous year. Although this increase was not enough to
absorb all the unsold production declared by the Italian
authorities,
the crisis on
producers, allowing them to sell a part of their production
on the Community market. The Italian authorities provided
no figures to prove the absence of other outlets on the
Community market, simply stating that, because of the
crisis, the consumption of chicken in all other European
countries had also fallen. At the same time, they state that
certain countries, such as Denmark, Greece, Spain, Ireland,
Austria, Portugal, Finland, Sweden and the United King-

it mitigated the impact of

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dom, could be taken as reference countries for comparing
prices (see recital 7 above) because they were not affected
by the crisis. They could therefore have provided an outlet
for at least a part of this surplus production.

Monthly market price of whole chickens

EUR/100 kg

(52)

In addition, in view of the policy of the Commission as
regards the application of Article 87(2)(b) of the Treaty in
the agricultural sector, any overcompensation of
losses
must be ruled out.

(53) The compensation mechanism planned by the Italian
authorities is based on aid for meat produced and marketed
during June and July 1999, calculated on the basis of the
difference between the average price in countries not
affected by the crisis and the average price in Italy.
According to the Italian authorities, this difference was
EUR 53,966/100 kg in June and EUR 46,218/100 kg in
July. The aid is ITL 21 150/100 kg (or EUR 10,92/100 kg)
and ITL 15 400/100 kg (or EUR 7,95/100 kg.

(54) This calculation method raises two problems. The first
concerns the statement by the Italian authorities that
farmers had to freeze unsold meat (12). This would have
allowed poultry products unsold during the crisis to be sold
at a later date and losses would have been less than declared
during examination of this case. The Italian authorities
made no comment on this point. Consequently, the risk of
overcompensation for the losses, with a part of production
being sold at a later date, probably at normal prices, cannot
be ruled out. In addition, the Italian authorities declared
that 43 170,1 tonnes of chickens were slaughtered in June
1999 and 47 485,9 tonnes in July, making a total of
90 656 tonnes (see letter dated 15 November 2000), while
the quantities of meat sold were 34 700 000 kg in June
1999 and 30 200 000 kg in July, a total of 64 900 tonnes.
The quantities frozen in June and July were 4 150,8 tonnes
respectively, making a total of
and 9 271,3 tonnes
13 422,1 tonnes. No information was provided regarding
what was done with the part of production that was not
sold or frozen and could therefore have been put to another
commercial use.

(56) According to the Italian authorities, the poultrymeat sector
was already experiencing overproduction and, conse-
quently, producers decided in March to slaughter a
percentage of the chickens they had been intending to
slaughter in April and May, the aim being to reduce the
supply of meat in June by 4,8 %. According to the Italian
authorities, because of the dioxin crisis, 10 % of production
in June was not slaughtered and marketed but rather was
kept until July and August, increasing supplies during those
two months. On the basis of the data available to the
Commission, the number of chicks being reared increased
in February, March and April, leading to an estimated 5,6 %
increase in production in June.

(57) A comparison of the data for the slaughter of chickens
between May and August 1999 with those for the same
months of the previous year shows an increase in the
number of chickens slaughtered in May 1999, and therefore
in the supply of chickens, of almost 9 %; in June 1999, the
supply was down 10 % on June 1998 and in July 1999 the
number of chicken slaughtered was almost 10 % up on the
figure for the same month in 1998. This upward trend in
supplies continued in August 1999 (+ 6,5 %). Assuming
that prices follow the supply trend, it can be deduced that
prices would have fallen from their April level, when they
were already lower than the European average because of
overproduction. Consequently, comparing the prices of
chickens in Italy in June and July with the average of prices
in those countries not affected by the dioxin crisis would
lead to an overestimation of the value of chickens in Italy.

(55)

Italy refers to average prices in other European countries
not affected by the crisis, without taking into account the
fact that prices in Italy were already falling before June
1999 and that prices for poultrymeat vary. The table below
shows price trends in Italy in 1998, 1999 and 2000 (13):

(12) See letter dated 23 May 2001, in which the Italian authorities declare
that producers were forced to freeze 4 150,8 tonnes in June, 9 271,3
tonnes in July and 2 595,9 tonnes in August.

(13) The data refer to intra-Community exports of all poultrymeat (by

carcase weight).

(58) Given the variability of prices of chickens in Italy and the
downward trend in prices already seen before the dioxin
crisis broke, no useful comparison can be made between
selling prices in June 1999 and those in June 1998 and any
the over-
comparison would,
for
production that was already affecting the market
chicken in Italy and the resulting fall
in prices already
being felt. The statement by the Italian authorities that
producers had already taken measures to correct
the
situation on the market, slaughtering chicks in March that
were due to be slaughtered in April and May in order to
reduce supplies in June and July, does not tally with the

in any case, not reflect

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Official Journal of the European Union

L 32/21

therefore, with
numbers of chicks being reared and,
estimates for production, which indicate an increase in
supplies in June and a small reduction (1,6 %) in July. Any
attempt to forecast selling prices in June and July 1999
(compared with prices in June 1998 or prices recorded in
other European countries not affected by the dioxin crisis)
using these figures would be no more than guesswork.

reasonable compensation for loss of profit, taking into
account the difficulties involved in restocking the herd or
replanting and any quarantine or waiting period imposed
or recommended by the competent authorities to allow the
elimination of the disease before the holding is restocked or
replanted. The compulsory slaughter of animals by order of
the health/veterinary authorities, under a plan for prevent-
ing and eradicating the animal disease is therefore a
necessary condition for granting this aid.

(59) Consequently, the Commission can conclude that, since
consumer alarm does not in itself constitute an exceptional
occurrence within the meaning of Article 87(2)(b) of the
Treaty and that the method of calculating losses proposed
by the Italian authorities could lead to an overestimate of
the losses suffered by Italian poultrymeat producers, the
measure cannot be considered to be compatible with the
common market under Article 87(2)(b).

(60) Even if the aid is examined in the light of Article 87(3) of
the Treaty, the only conclusion that can be reached is that it
is incompatible with the common market. Article 87(3)(a)
does not apply, because the aid is not intended to promote
the economic development of areas where the standard of
serious
living is abnormally low or where there is
underemployment.

(61) As regards Article 87(3)(b), the aid is not intended to
promote the execution of an important project of common
European interest or to remedy a serious disturbance in the
economy of a Member State.

(62) As regards Article 87(3)(d) of the Treaty, the aid is not
intended to achieve the objectives laid down in that
subparagraph.

(63) As regards Article 87(3)(c) of the Treaty, since the Italian
authorities correctly notified the law for evaluation within
the meaning of Article 88(3), the rules laid down in the
Community guidelines for state aid in the agricultural
sector (14) (hereinafter the guidelines) apply. In accordance
with point 23.3 of the guidelines, the guidelines apply to
new state aid, including that already notified by the Member
States, but on which the Commission has not yet ruled,
with effect from 1 January 2000.

(64) Aid to compensate for losses of income related to animal
It may include

is governed by point 11.4.

diseases

(14) JO C 28, 1.2.2000, p. 2.

(65) From the notification, it is clear that the health/veterinary
authorities issued no order to slaughter animals under a
plan for preventing and eradicating an animal disease, since
the chemical contamination did not affect Italian under-
takings. Consequently, the measure under consideration
does not meet the conditions laid down in point 11.4 of the
guidelines.

(66)

In the light of the above, the aid for undertakings in the
poultrymeat sector cannot be regarded as aid intended to
compensate for losses caused by an exceptional occurrence
within the meaning of Article 87(2)(b) or as aid eligible for
one of
the exemptions provided for in Article 87(3).
Consequently, the aid in question appears to be operating
aid incompatible with the common market in accordance
with point 3.5 of the guidelines (15).

(67) The aid also infringes the rules laid down in Regulation
(EEC) No 2777/75, under which only the following
measures may be taken in respect of the products specified
in Article 1 thereof: measures to promote better organisa-
tion of production, processing and marketing; measures to
improve quality; measures to permit the establishment of
short- and long-term forecasts on the basis of the means of
production used; and measures to facilitate the recording of
market price trends. In addition, in order to take account of
any restrictions on free circulation imposed in consequence
of measures to prevent
the spread of animal disease,
exceptional measures may be taken under the procedure
provided for in Article 17 to support any market affected
by such restrictions. Such measures may be taken only to
the extent that and for such period as is strictly necessary
for the support of that market. In this case, none of these
measures was adopted in Italy. It therefore follows that any
other type of state aid may be granted only under Articles
87 to 89 of the Treaty. As indicated in the previous recital,
the aid in question does not comply with the rules
governing state aid and, consequently, is incompatible with
the common market.

(15) Judgment of the Court of First Instance in Case T 459/1993 (Siemens
SA v Commission of the European Communities) ECR [1995] 1675.

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V.

CONCLUSIONS

Italy may not implement the aid in question.

(68)

the aid provided for under

In the light of the above, the Commission is in a position to
conclude that
the AIMA
programme for poultry farmers constitutes state aid within
the meaning of Article 87(1) of the Treaty and that it is
ineligible for any of the derogations provided for in Article
87(2) and (3).

(69) Since the programme was notified in accordance with
Article 88(3) of
the Treaty, which lays down that the
Member State may implement the aid only after approval
by the European Commission, it is not necessary to provide
for the recovery of the aid,

Article 2

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

Article 3

This Decision is addressed to the Italian Republic.

HAS ADOPTED THIS DECISION:

Done at Brussels, 19 May 2004.

Article 1

The aid Italy intends to grant under the national programme of
AIMA assistance for 1999 is incompatible with the common
market.

For the Commission

Franz FISCHLER

Member of the Commission