2005/474/ECEC: Commission Decision of 14 December 2004 concerning the levy on meat purchases (rendering levy) implemented in France (notified under document number C(2004) 4770)
Date: 2004-12-14
Institutions: European Commission
Subjects: France, State aid, control of State aid, financing, meat, purchase, services of general interest, slaughter of animals, tax system, waste disposal

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 14 December 2004

concerning the levy on meat purchases (rendering levy) implemented in France

(notified under document number C(2004) 4770)

(Only the French text is authentic)

(2005/474/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

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 pur-
suant to the provision cited above (1) and having regard to their
comments,

Whereas:

I. PROCEDURE

(1)

(2)

Following a complaint, the Commission asked the French
authorities on 15 April 1999 for information concerning
a levy on meat purchases (hereinafter the rendering levy) to
finance rendering activities on French territory. The French
authorities replied by letter dated 12 May 1999.

The Commission had already initiated the infringement
proceedings provided for in Article 226 of the Treaty
against the rendering levy (2). A letter of formal notice had
been sent to France on 29 July 1998. This was followed by
a reasoned opinion on 18 September 2000. The Commis-
sion decided to drop the proceedings on 26 June 2002.

(4)

(5)

(6)

The measure was entered in the register of non-notified aid
measures under number NN 17/2001. An addendum to
the complaint was received in March 2001. In the mean-
time, the Commission received another complaint raising
the same points as the first.

By letter dated 10 July 2002, the Commission notified
France of its decision to initiate the procedure laid down in
Article 88(2) of the EC Treaty with respect to the render-
ing levy.

The Commission Decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (3). The Commission asked the other Member States
and interested parties to submit their comments on the aid
scheme.

The French authorities sent their comments by letter dated
10 October 2002. The Commission received comments
from third parties, which were forwarded to the French
authorities by letter dated 11 February 2003 and to which
the French authorities replied by letter dated 9 April 2003.
The French authorities were asked for additional informa-
tion by letter dated 14 July 2004, which was sent by letter
dated 23 September 2004.

(1) OJ C 226, 21.9.2002, p. 2.
(2) No A/97/4309.

(3) See footnote 1.

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(7)

(8)

(9)

(10)

This Decision concerns only the financing of the public
rendering service (hereinafter referred to as the PRS)
between 1 January 1997 and 31 December 2002, the year
in which the investigation procedure was initiated. The
financing of the PRS from 1 January 2003 is being dealt
with under State Aid No NN 8/2004.

The rendering levy was abolished as from 1 January 2004.
The PRS is now financed by the proceeds of a ‘slaughter
levy’, against which the Commission did not raise any
objections (1). During examination of that levy, the French
authorities sent the Commission information that was rel-
evant to the present case, in particular by letter dated
29 December 2003.

II. DESCRIPTION

1.

THE RENDERING LEVY

The rendering levy was introduced by Article 302bis ZD of
the French Code général des impôts (General Tax Code), itself
introduced by Article 1 of French Law No 96-1139 of
26 December 1996 on the collection and destruction of
animal carcases and slaughterhouse waste and amending
the Code rural (Rural Code) (2). Under that provision, the
levy entered into force on 1 January 1997.

Law No 96-1139 amended Article 264 of the French Code
rural, which now lays down that ‘the collection and destruc-
tion of animal carcases, meat and offal seized at slaughter-
houses and recognised as being unfit for human or animal
consumption are tasks that come within the remit of the
State’.

(11) On the other hand, under Article 271 of the Code rural, also
amended by the above Law, ‘the destruction of material
seized under the veterinary regulations other than that
referred to in Article 264 and of animal waste from slaugh-
terhouses or establishments in which animal foodstuffs
and foodstuffs of animal origin are handled or prepared is
not within the remit of the public rendering service. This
is the sole responsibility of the slaughterhouses and estab-
lishments concerned. Except where they themselves are
approved or registered for that purpose, they must entrust
the treatment of such material to establishments approved
or registered for that purpose by the authorities.’

(12)

(13)

The remit of the public service covers the collection of
fallen stock on national territory, in particular animals
killed in French slaughterhouses and unsuitable for human
consumption. Carcases are collected only where the ani-
mal, or the lot, weighs a minimum of 40 kg. The legisla-
tion explicitly excludes the use of the PRS financed by the
rendering levy by persons who own or hold an animal car-
cass and ‘could’ hand it over to an approved person, with-
out, however, being obliged to do so (Article 265 II of the
Code Rural). This therefore excludes all pets owned by pri-
vate individuals, who pay for the rendering services
provided.

The prefects select the private undertakings to carry out
rendering by means of a tendering procedure, the rules on
which are laid down in the Code rural. The specifications
stipulate how payment is to be made for the work awarded
to the successful tenderer, this payment being exclusive of
any payment received from users of the public service.
Accordingly, the rendering undertakings providing the PRS
must provide their collection and destruction services free
of charge to users (mainly livestock farmers and slaughter-
houses) and are paid exclusively by the State (Article 264-2
of the Code rural).

(14)

The rendering levy applies to purchases of meat and other
specified products by all retailers of those products.

(15)

The levy is in theory due from anyone who carries out
retail sales. The taxable base is the value net of VAT of pur-
chases from any source of:

— fresh, cooked, chilled or frozen meats and offal of
poultry, rabbit and game, of animals of the bovine,
ovine, caprine and porcine species and of horses, asses
and their crosses,

— salted meats, cured meat products,

lard, preserved

meats and processed offal,

— meat- and offal-based animal feed.

Undertakings whose turnover in the previous calendar year
is less than FRF 2 500 000 (3) (EUR 381 122) excluding
VAT are exempt from payment of the levy. The rate of the
levy is 0,5 % on monthly purchases of up to FRF 125 000
(EUR 19 056) excluding VAT and 0,9 % on monthly pur-
chases above that amount. It was subsequently increased
to 2,1 % and 3,9 % respectively (see recital 18).

(1) State Aid N 515/2003, letter to the French authorities No C(2004)

936 final of 30 March 2004.

(2) Journal officiel de la République française (JORF) 301, 27.12.1996,

p. 19184.

(3) On the basis of FRF 1 = EUR 0,15.

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(16)

(17)

Initially, i.e. from 1 January 1997, revenue from the levy
was paid into an ad hoc fund used to finance the collection
and destruction of animal carcases and material seized at
slaughterhouses and recognised as being unfit for human
or animal consumption, i.e. the activities defined under
Article 264 of the Code rural as falling within the remit of a
public service. The fund was managed by the Centre national
pour l’aménagement des structures des exploitations agricoles
(CNASEA - The National Centre for the Development of
Farm Structures).

Law No 98-546 of 2 July 1998 laying down various eco-
nomic and financial provisions (1) imposed an additional
levy on the same operators during the period from 1 July
to 31 December 1998, mainly to finance the destruction
of mammal meal not in compliance with Community rules
on the deactivation of bovine spongiform encephalopathy
(BSE) agents, and in particular expenditure on purchasing,
transporting, storing and processing such meal. Undertak-
ings whose turnover in the previous calendar year was less
than FRF 3 500 000 (EUR 533 571) excluding VAT were
exempted from this additional levy. The rate of the levy
was 0,3 % on monthly purchases of up to FRF 125 000
(EUR 19 056) excluding VAT and 0,5 % on monthly pur-
chases above that amount

(18) Article 35 of the Loi de finances rectificative pour 2000
(Amending Finance Act for 2000) (Law No 2000-1353 of
30 December 2000) (2) made a number of amendments to
the rendering levy scheme, which entered into force on
1 January 2001. These amendments are claimed to be to
offset the effects of the BSE crisis and the resulting extra
costs. Consequently,
the levy was also
the scope of
extended to cover ‘other meat products’. The levy was
increased to 2,1 % on monthly purchases of up to
FRF 125 000 (EUR 19 056) and 3,9 % on monthly pur-
chases above that amount. In addition, all undertakings
with a turnover in the previous calendar year of less than
FRF 5 000 000 (EUR 762 245) excluding VAT were
exempt from the levy. Finally, as from 31 December 2000,
revenue from the levy was assigned directly to the national
budget rather than to the fund referred to in recital 16.

(19)

This increase in the rendering levy is claimed, among other
things, to be in response to the need to destroy not only
animal carcases and material seized at slaughterhouses and
recognised as being unfit for human or animal consump-
tion, of which there is probably more than in the past
because of the BSE crisis, and the parts of carcases that
were previously used for manufacturing animal meal and
other products, but also animal meal whose use was tem-
porarily banned by Council Decision 2000/766/EC of
4 December 2000 concerning certain protection measures
with regard to transmissible spongiform encephalopathies
and the feeding of animal proteins (3).

2.

THE ARGUMENTS PUT FORWARD BY THE COMMISSION
WHEN OPENING THE INVESTIGATION PROCEDURE

2.1. REGARDING THE EXISTENCE OF AID

(20) Article 86(2) of the Treaty lays down that undertakings
entrusted with the operation of services of general eco-
nomic interest are subject to the rules contained in that
Treaty, in particular to the rules on competition, insofar as
the application of such rules does not obstruct the perfor-
mance, 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.

(21)

(22)

The French authorities consider that the measures financed
are in the public interest. In principle, the Commission has
no objection to the decision to make the rendering service
a public service, which is justified on the grounds of pub-
lic health and the protection of the environment. However,
the Commission asked the French authorities to detail all
the measures financed from the rendering levy so that it
could assess its scope. It would appear that activities not
provided for in Law No 96-1139, such as the destruction
of animal meal banned from sale, are also financed from
the levy.

The Court of Justice of the European Communities has
ruled (4) that Article 86(2) is to be interpreted as meaning
that it does not cover a public aid paid to undertakings
entrusted with the operation of services of general eco-
nomic interest in so far as that aid exceeds the additional
costs of performing the public service. When the investi-
gation procedure was opened, there were a number of
cases before the Court in which the issue was whether a
measure must be considered State aid within the meaning
of Article 87(1) of the Treaty if the advantage enjoyed by
certain undertakings does not exceed the additional costs
they bear to fulfil the public service obligations imposed by
national legislation. The Commission took the view that it
had therefore first of all to be determined whether the pub-
lic payments made to rendering undertakings could be
considered to be the financing of a public service. It had
then to be determined whether those payments exceeded
the costs to those undertakings of carrying out those
activities.

(1) JORF 152, 3.7.1998, p. 10127.
(2) JORF 303, 31.12.2000, p. 21177.
(3) OJ L 306, 7.12.2000, p. 32. Decision repealed by Commission Regu-

lation (EC) No 1234/2003 (OJ L 173, 11.7.2003, p. 6).

(4) Judgment of the Court in Case No C-53/2000 Ferring SA v Agence
[2001]

centrale des organismes de sécurité sociale (ACOSS)
ECR I-9067.

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(23) When the investigation procedure was opened, however,
the Commission did not have all the information required
to determine whether all the criteria for the introduction of
a public service had been fulfilled. In order to be able to
reach a conclusion on the nature of the tendering proce-
dures used to select the rendering undertakings, the Com-
mission asked the French authorities for full details of the
procedures so that it could decide whether they complied
with the
and in particular with Council
Directive 92/50/EEC relating to the coordination of proce-
dures for the award of public service contracts (1), in the
light of judgments handed down by the Court of Justice in
this field (2).

rules,

(24)

The Commission also sought details of the impact of the
aid on the undertakings concerned and proof that it cov-
ered only the additional costs of performing the services
carried out in the general interest and that it could not have
been diverted to other competitive activities that those
undertakings might carry out. The Commission, while
accepting that the rendering service might be a service of
general economic interest, was of the opinion that there
were, when the investigation procedure was opened, a
number of doubts regarding the effects of the aid on the
direct beneficiaries of the service and the way in which the
service was financed.

(25) When the investigation procedure was opened, point 5.6.2
of the Community Guidelines for State aid in the agricul-
ture sector (3) (hereafter referred to as the agricultural
guidelines) provided for aid in the agricultural sector, such
as aid for the collection, recovery and processing of waste
of agricultural origin, to be examined on a case-by-case
basis. That examination had to be made in the light of the
principles set out in the EC Treaty and the Community
guidelines on State aid for environmental protection (4).
According to those guidelines, where such aid is indispens-
able, it must only compensate for extra production costs
by comparison with the market price of the products

(1) OJ L 209, 24.7.1992, p. 1. Directive repealed by Directive 2004/18/EC
of the European Parliament and of the Council (OJ L 134, 30.4.2004,
p. 114).

(2) In particular, Judgment of the Court in Case C-324/98 Telaustria Ver-
lags GmbH and Telefonadress GmbH v Telekom Austria AG [2000]
ECR I-10745.

(3) OJ C 28, 1.2.2000, p. 2.
(4) OJ C 72, 10.3.1994, p. 3 when the aid scheme was introduced, sub-
sequently replaced by the guidelines published in OJ C 37, 3.2.2001,
p. 3.

or services concerned. Such aid must also be temporary
and, as a general rule, degressive, so as to provide an incen-
tive for prices to reflect costs reasonably rapidly. The Com-
mission also based its position on point 11.4.5 of the
agricultural guidelines regarding the combating of animal
diseases.

(26) However, in France, the beneficiary agricultural holdings
and slaughterhouses did not appear to make any contribu-
tion to the expenditure involved in providing the service.
The Commission therefore took the view that the aid might
not fulfil the conditions laid down by Community rules
and therefore had doubts regarding the compatibility of
the aid, which covered the cost to agricultural holdings and
slaughterhouses of collecting and destroying animal car-
cases and meat and offal seized at slaughterhouses.

State

basis.

case of

(27) Under the French scheme, the beneficiary agricultural hold-
ings and slaughterhouses did not appear to make any con-
tribution to the cost of processing the animal carcases. In
addition, the service seemed to be free on a permanent and
non-degressive
aid
In the
NN 76/2000 (5), the Commission took the view that aid
for the removal of carcases served to stop the practice of
farmers burning, burying or abandoning highly contami-
nating carcases that were harmful to the environment and
to health. The Commission also pointed out that it does
not usually authorise operating aid that reduces the finan-
cial cost to undertakings of the pollution or harmful effects
for which they are responsible. The Commission notes that
derogations from that principle have already been granted,
in particular for waste management. When the investiga-
tion procedure was opened, the Commission had no infor-
mation indicating that permanent and non-degressive aid
to cover the cost of collecting and processing carcases was
necessary and consequently justifiable, particularly as part
of a comprehensive programme to combat certain diseases
and/or to protect human health. The Commission also
noted that the French legislation introducing the obligation
to remove carcases did not apply to all farmers.

(5) Commission Decision of 4 October 2000 in the case of State Aid
No NN 76/2000 - Measures to promote the quality and hygiene stan-
dards of milk and livestock products (OJ C 334, 25.11.2000, p. 4).

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(28) As regards meat and offal seized at slaughterhouses, at the
time the investigation procedure was opened, the Commis-
sion authorised the national authorities to cover 100 % of
certain costs normally borne by producers but only in very
specific situations. The Commission took the view that the
aid provided by means of the rendering service vis-à-vis
animal waste recognised as unfit for consumption might
fulfil the conditions laid down in point 11.4.5 of the agri-
cultural guidelines and benefit from the derogation pro-
vided for in Article 87(3)(c) of the Treaty. However, in
order to grant that derogation, the Commission asked the
French authorities to show, in the case of each species of
animal covered by the service, that all the waste was from
sick animals or animals whose destruction was intended to
prevent the spread of an animal disease. This also applied
to the additional levy imposed from 1 July to 31 Decem-
ber 1998.

(29) As regards marketing undertakings exempted from pay-
ment of the levy, at the time the investigation procedure
was opened the Commission had reason to believe that aid
there was covered by point 3.5 of the agricultural guide-
lines. This lays down that, in order to be considered com-
patible with the common market, any aid measure must
contain some incentive element or require some counter-
part on the part of the beneficiary. In the case in point, the
exemption appeared to reduce costs without providing any
incentive or requiring any counterpart on the part of the
beneficiary and its compatibility with the competition rules
was not, at the time the investigation procedure was
opened, proven.

(30) As regards the destruction of animal meal, at the time the
investigation procedure was opened the Commission was
not in a position to decide whether or not the financing of
the destruction complied with the rules since it did not
know for exactly what type of product the aid was paid or
whether the aid had been paid for meal produced after the
introduction of the Community ban in December 2000.
Nor did the Commission know whether the aid paid for
destruction was such as to overcompensate either the own-
ers of the meal or the undertakings responsible for destroy-
ing it. The Commission asked the French authorities to
specify the type of products for which the aid was paid and
their date of production and to provide information show-
ing how any overcompensation was avoided.

2.2. THE FINANCING OF THE AID

that it normally took the view that the financing of State
aid by means of compulsory charges could affect the aid in
that it may have a protective effect going beyond the actual
aid itself and consequently aid may not be financed by
means of parafiscal charges that also affect products
imported from other Member States. At the time the inves-
tigation procedure was opened, the Commission was of
the opinion that imposing the levy on products imported
from other Member States to finance the rendering service
may be incompatible with the competition rules and that
the State aid so financed may be incompatible with the
Treaty.

(32)

From 1 January 2001, revenue from the levy was assigned
directly to the national budget. The Commission pointed
out that, in accordance with its usual practice, it takes the
view that, generally speaking, the payment of the revenue
from a levy into the national budget makes it impossible
to trace the link between that levy and a particular service
provided and financed by the national authorities. It is
therefore impossible to say that a levy discriminates against
other products since the revenue from the levy becomes
merged with other Government revenue and the financing
of the aid cannot be directly attributed to the levy.

(33) However, there were serious doubts as to whether the link
between the revenue and the use made of it had been bro-
ken, since it appeared that, after being paid into the bud-
get, the revenue from the levy was allocated to a specific
chapter for the Ministry of Agriculture and subsequently
transferred to the budget of the CNASEA, the body respon-
sible for the financial management of the rendering ser-
vice (1). Furthermore, the revenue from the levy and the
amount of financing provided for the service were almost
identical.

(34)

The Court of Justice has acknowledged that the possible
existence of a link between a system of taxation and an aid
scheme represents a serious difficulty in determining
whether that scheme is compatible with the provisions of
the Treaty and that, under such circumstances, only by ini-
tiating the procedure provided for in Article 88(2) of the
Treaty can the Commission be in a position to appreciate
the issues raised in complaints lodged regarding those
provisions (2).

(31)

Before 31 December 2000, the PRS was financed by means
of a parafiscal charge imposed on retailers of meat and
meat products. Revenue from the levy was paid into a fund
via which it was managed. The Commission pointed out

(1) Rapport Collectif budgétaire pour 2000, Document No 2775, Volume II.
(2) Judgment of the Court in Case C-204/97 Portuguese Republic v Com-

mission of the European Communities [2001] ECR I-3175.

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(35) At the time the investigation procedure was opened, the
Commission was not in a position to decide whether or
not the scheme was compatible with the Treaty since it
potentially discriminated against products imported from
other Member States, on which the levy was also imposed.

(36)

The Commission pointed out that, so long as the financ-
ing of a State aid was considered to be incompatible with
the competition rules, the aid so financed must also be
considered to be incompatible. In fact, it is a necessary con-
dition for aid being declared compatible that its method of
financing is in compliance with the rules.

2.3. ARTICLE 86(2) OF THE TREATY

(37)

The Commission also said that any infringement of the
competition rules justifiable under Article 86(2) of the
Treaty must be limited to the measures strictly necessary
for the operation of a service of general economic interest.
However, at the time the investigation procedure was
opened the Commission did not see how the smooth
operation of the scheme and the service of general eco-
nomic interest required that the rendering service be pro-
vided to farmers and slaughterhouses free of charge.
Similarly, the Commission could not see why the smooth
operation of the rendering service required the payment of
what was possibly operating aid to undertakings not sub-
ject to the levy or payments to rendering undertakings that
were possibly above what was necessary to cover the net
cost of providing the rendering service. Neither did it
understand why it was necessary to impose the levy on
products from other Member States.

(38)

Finally, the Commission could not, at the time the inves-
tigation procedure was opened, rule out the possibility that
the total effect of the French rendering scheme could affect
trade between Member States to an extent contrary to the
Community interest, thus making Article 86(2) of the
Treaty inapplicable. As stated above, the scheme could
affect both trade in meat and slaughterhouse services.

3. OTHER RELEVANT FACTS

(39) As stated in the second recital, on 18 September 2000 the
Commission issued a reasoned opinion on the rendering
levy. In that opinion, the Commission noted that the ren-
dering levy scheme constituted a discriminatory tax mea-
sure incompatible with Article 90 of the Treaty because it
was applied to meat imported from other Member States
whereas only French meat producers had access to the PRS
financed by the product of the levy.

(40)

(41)

(42)

In addition, under Article 234 of the Treaty, the Lyon
Administrative Court of Appeal referred a question to the
Court of Justice for a preliminary ruling concerning the
interpretation of Article 87(1) of the Treaty (1) with regard
to the rendering levy. The Court gave its judgment in this
case on 20 November 2003 (hereafter the GEMO case).

In the GEMO case, the Lyon Administrative Court of
Appeal asked the Court of Justice to give a preliminary rul-
ing on whether the levy on purchases of meat provided for
in Article 302 ZD of the Code général des impôts could be
regarded as aid within the meaning of Article 87 of the
Treaty.

The Court replied that the State was responsible for the
collection and destruction of animal carcases and slaugh-
terhouse waste from French livestock farmers and slaugh-
terhouses. The Court
correct
interpretation of Article 87(1) of the Treaty was that a
scheme that provided, for livestock farmers and slaughter-
houses, for the collection and destruction free of charge of
slaughterhouse waste was State aid.

concluded that

the

III. COMMENTS SUBMITTED BY THIRD PARTIES

(43)

The interested parties submitted the following comments,
which were forwarded to the French authorities on 11 Feb-
ruary 2003.

1.

COMMENTS
UNDERTAKINGS

SUBMITTED

BY

INTERESTED

(44)

The undertakings submitting the following comments
requested that their identity remain confidential. The Com-
mission, after examining the reasons given, took the view
that their request should be granted.

(45) According to these undertakings, the rendering levy is aid
within the meaning of Article 87 of the Treaty in favour,
in particular, of livestock farmers and slaughterhouses.
Therefore, under Article 87(1) of Treaty, by releasing live-
stock farmers and slaughterhouse from a financial burden,
the rendering levy gives a financial advantage to ‘certain
undertakings’, affecting ‘trade between Member States’ and
‘distort(ing) competition’, by reducing the cost of French
meat exports and burdening meat imports with the cost of
they
destroying dangerous livestock products, a cost
already bear in their country of origin.

(1) Judgment of the Court of 20 November 2003 in Case C-126/01
Ministry of Economic Affairs, Finance and Industry v S.A. GEMO. Not
yet published.

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(46)

(47)

Furthermore, they claim the measure is illegal, since it was
not notified to the Commission. A final Commission deci-
sion that the aid is compatible would not regularise ex post
the rules implementing the aid since they were adopted in
infringement of the prohibition laid down in Article 88(3)
of the Treaty. They assert that this in itself makes the aid
incompatible.

(50) ADEPALE also points out that the levy is, in practice, a tax
on consumption, imposed in a discriminatory manner on
the retail price of certain products. This results in a signifi-
cant difference in the competitiveness of products contain-
ing more than 10 % meat and all other foodstuffs, i.e. milk
products, egg products, plant products and all prepared
products containing less than 10 % meat.

Finally, they argue that the rendering service is not covered
by Article 86(2) of the Treaty. So, although the rendering
service must be financed somehow, it does not have to be
financed by means of incompatible aid. Financing could
perfectly well be provided by a charge on users of the ser-
vice that would then be reflected in the price paid for meat
by consumers. In addition, the levy discriminates between
national products and similar imported products in a way
likely to affect the development of trade to such an extent
as is contrary to the interests of the Community. They
claim that this prevents the application of Article 86(2) of
the Treaty.

(51)

Finally, if the reason for the levy is to ensure public health,
the financing of health monitoring is in theory, according
ADEPALE, covered by Council Directive 96/43/EC amend-
ing and consolidating Directive 85/73/EEC in order to
ensure financing of veterinary inspections and controls on
live animals and certain animal products and amending
Directives 90/675/EEC and 91/496/EEC (1) and its trans-
posal into French law.

3.

COMMENTS SUBMITTED BY THE FÉDÉRATION DES
ENTREPRISES DU COMMERCE ET DE LA DISTRIBUTION
(FCD) (FEDERATION OF TRADERS AND DISTRIBUTORS)

2.

COMMENTS SUBMITTED BY THE L’ASSOCIATION DES
ENTREPRISES DE PRODUITS ALIMENTAIRES ÉLABORÉS
(ASSOCIATION OF FOOD PROCESSING
(ADEPALE)
INDUSTRIES)

(52)

(48) ADEPALE points out that the levy was introduced against
the background of serious problems in destroying bovine
carcases following the outbreak of BSE. However, most of
the carcases that had to be destroyed were from dairy
cattle, which produce meat only incidentally. Conse-
quently, ADEPALE considers that imposing the levy spe-
cifically on ‘meat’ and totally exempting milk products is
unacceptable. More generally, if a levy had to be imposed
on the sectors producing carcases to be destroyed, this
should at least have been done in a non-discriminatory
way. Therefore egg products should also have been
included.

(53)

(54)

The FCD already took the view that the aid conferred two
advantages, reducing the business risks that rendering
undertakings normally had to face and eliminating a cost
normally borne by livestock farmers and slaughterhouses,
as producers of
seized at
slaughterhouses.

and material

carcases

financing the PRS was not

The FCD stressed in particular that the French mechanism
for
compatible with
Article 86(2) of the Treaty because no satisfactory mea-
sures had been introduced to ensure effective competition
when public contracts were awarded for the rendering ser-
vice and because the financing overcompensated for the
cost of the service.

The FCD also pointed out that the public financing received
by the French rendering undertakings was intended not
only to finance the PRS as defined by the legislation, but
also to finance other activities not falling within the scope
of that legislation, such as the destruction of animal meal
produced both before and after the Community ban of
December 2000, for which aid of EUR 205 million was
paid to rendering undertakings as an emergency measure
and without an invitation to tender.

(49)

Since the levy is applies to the value of meat products con-
taining at least 10 % by weight of meat, it affects the vari-
ous and varied ingredients of prepared dishes, such as plant
products, packaging and, more generally, the fixed over-
heads and labour costs of undertakings producing pre-
pared dishes. ADEPALE rejects the threshold of 10 %
chosen by the French administration and takes the view
that a meat product is a product in which meat accounts
for most of the product weight.

(1) OJ L 162, 1.7.1996, p. 1.

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(55)

The FCD complained about a new illegal State aid intro-
duced in 2002 and financed by means of the levy on meat
purchases, granted to small butchers who themselves
destroy the bones of the spinal column in direct contact
with the spinal cord of bovine animals of more than
12 months old. They alleged that the aid amounted to
EUR 20 million.

— a Decree of 10 September 1996 suspending the mar-
keting and release for consumption of certain rumi-
nant tissue and of products incorporating such tissue,
known as specified risk material (SRM). This Decree
suspended the marketing and use of the brain, the spi-
nal cord and the eyes of certain bovine, ovine
and caprine animals on the same conditions as high-
risk products.

(56)

(57)

(58)

(59)

4.

COMMENTS SUBMITTED BY SPAIN

Spain criticises the fact that the scheme discriminates
against imports of meat and meat products from other
countries, since a levy was imposed on them but nothing
was given in return and that the product of the levy solely
benefited French livestock farmers and slaughterhouses.

(60)

It argues that the situation was aggravated in Spain by the
abolition of all national aid with effect from 1 January
2002 and claim that all the costs of destroying meat waste
were already included in the price of exported products.
With regard to fallen animals on holdings, they state that
all aid was abolished from that same date and any expen-
diture incurred by farmers was covered by an insurance
scheme.

These Decrees, adopted to ensure consumer health, pro-
hibited, as a precautionary measure, the introduction of the
listed products into the food chain and made their incin-
eration obligatory. According to the French authorities,
these provisions were pointless unless they formed part of
a system that guaranteed total effectiveness. This was not
the case with the rendering scheme laid down by Law
No 75-1336 of 31 December 1975 supplementing and
amending the Code rural as regards the rendering indus-
try (1), which was based on adding value to the products
collected by the rendering undertaking in exchange for a
monopoly on collection in a given area.

IV. COMMENTS SUBMITTED BY FRANCE

(61) Under these conditions, the French authorities decided to
establish a public rendering service responsible for collect-
ing and destroying all specified high-risk material intended
for incineration.

By letter dated 10 October 2002, the French authorities
presented their comments on the Commission’s Decision
to initiate the procedure provided for in Article 88(2) of
the Treaty with regard to the aid in question. In response
to a request from the Commission, additional information
was sent by letter dated 23 September 2004.

The French authorities deemed it necessary briefly to recall
the general financing of the PRS. They explained that the
PRS was established by Law No 96-1139 of 26 December
1996 against the background of the BSE crisis. This Law
forms part of a health system comprising two basic
Decrees:

— a Decree of 28 June 1996 amending a Decree of
30 December 1991 and providing for the incineration
of finished products manufactured from high-risk
material, defined as farm animals not slaughtered for
human consumption, other animal carcases, animals
slaughtered as a disease-control measure, animal waste
presenting clinical signs of a disease communicable to
man or other animals, animals dying during transport
and animal waste presenting a risk to human or ani-
mal health,

(62) Article 264 of

the Code rural, as amended by Law
No 96-1139 of 26 December 1996, lays down that ‘the
collection and destruction of animal carcases and meat and
offal seized at slaughterhouses recognised as being unfit for
human or animal consumption are tasks that come within
the remit of the State’.

(63)

Since the adoption of Law No 2001-1275 of 28 Decem-
ber 2001, the previsions have explicitly mentioned SRM,
which the PRS dealt with in the form of material seized at
slaughterhouses.

(1) JORF, 3.1.1976, p. 150.

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(64)

The French authorities pointed out to the Commission that
the PRS only covered products presenting a risk to human
or animal health, i.e. approximately 10 % of animal waste
in 1996, with other by-products of animal production
continuing to be collected under contracts governed by
private law. This increased to 30 % as from 2000, because
the list of specified risk material was extended. This scheme
differs from that established by Decree No 2000-1166 of
1 December 2000 (1) instituting a compensation scheme
for manufacturers of certain meals and fats prohibited in
the manufacture of animal feedingstuffs by the Decree of
14 November 2000. This latter scheme was notified to the
Commission on 18 January 2002.

(65) With regard to meal, the French authorities point out that
the PRS is only responsible for the incineration of meal
manufactured from the products collected by the PRS. It
does not finance the incineration of products resulting
from the ban on using meal in animal feedingstuffs.

(66)

The PRS was financed from 1 January 1997 to 31 Decem-
ber 2000 by a levy, provided for in Article 1 of Law
No 96-1139 of 26 December 1996, the product of which
was paid into a fund managed by the CNASEA. From
1 January 2001, the service was financed from the national
budget.

(67)

(68)

1.

REGARDING THE EXISTENCE OF AID TO RENDERING
UNDERTAKINGS

The French authorities point out that, under points 27
to 48 of the Decision to open the procedure, the Commis-
sion admits that the PRS, justified for reasons of public
health and environmental protection, could be of general
interest within the meaning of Article 86(2) of the Treaty.
The Commission questioned, in particular, the remunera-
tion from public funds of the undertakings responsible for
the PRS.

The French authorities explained that the total amount
paid to rendering undertakings for the period 1997-2002
was EUR 828 552 389 and corresponded to the total
expenditure on the public rendering service (PRS).
Amounts were paid to the undertakings either following
the award of public contracts or following requisition
orders. Invitations to tender were usually issued at depart-
mental or regional level, as were requisitions, for which
prefectoral decrees were issued.

(69) Given the rules for awarding public contracts and those
governing requisitions, the French authorities take the view
that the payments made could not have had an impact on
any competitive activities of the beneficiary undertakings.

(70)

The French authorities state that, under Article 264-2 of
the Code rural, as amended by Decree No 96-1229 of
27 December 1996 on the public rendering service and
amending the Code rural (2), as amended by Decree
No 97-1005 of 30 October 1997 (3), the PRS is subject to
the procedures for the award of public contracts. Thus,
Article 264-2 of the Code rural lays down in particular:

‘I – The prefect shall, in each department, be responsible
for establishing a public rendering service and shall con-
clude, in accordance with the procedures laid down in the
Code des Marches Publics, the necessary contracts, for
which he shall be the responsible person within the mean-
ing of Article 44 of that Code. However where the nature
of the operations justifies, contracts may be concluded
with the same undertaking, for all or part of the service, for
several departments […].

II – Notwithstanding paragraph I of this Article, certain
contracts necessary for establishing the public rendering
service may be concluded at national level where technical
or economic considerations justify coordination at that
level […]’.

(71)

The French authorities explain that, under Article 264-2 of
the Code rural, these contracts include a set of administra-
tive clauses stipulating the nature of the services covered
by the contract, the method of payment for the operations
that the successful tender is to provide, that payment being
exclusive of all payments received from users of the public
service, and information concerning evaluation of the qual-
ity of the service, and a set of technical specifications set-
ting out
the technical conditions for the collection,
transport, processing and, where necessary, destruction of
animal carcases and slaughterhouse waste in accordance
with health requirements.

(1) JORF 279, 2.12.2000, p. 19178.

(2) JORF 204, 31.12.1996, p. 19697.
(3) JORF 255, 1.11.1997, p. 15908.

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(72) On this basis, public contracts were awarded as follows:

— in 1997, departmental tendering procedures included
three lots: collection, processing into meal and incin-
eration of the meal. In almost all cases, no contracts
were awarded for incineration, which explains why
substantial stocks built up of meal from products col-
lected by the public rendering service,

— in 1998, contracts were awarded at departmental
level only for collection and processing into meal.
A national invitation to tender was issued but was
unsuccessful owing to a lack of suitable infrastruc-
tures. Cement factories, which appeared to be the
most suitable installations in the urgency situation
prevailing in which to incinerate the meal as a substi-
tute fuel, had to carry out technical adjustments and
were not necessarily located in the regions producing
the animal waste concerned,

— in 1999 and 2000, the contracts for collection and
processing were renewed at departmental
level
and contracts for incineration were awarded only in
those departments ‘producing’ meal, either because
they had a processing installation or because they had
stocks of meal.

(73)

The French authorities stressed that the majority of the
public contract procedures did not allow services essential
to the smooth operation of the PRS to be provided.

(74)

The French authorities had, on numerous occasions and in
particular for the incineration of meal, to use requisitions
because of the emergency situation and for reasons of
health and public order. These requisitions were issued
under Order No 59-63 of 6 January 1959 on the requisi-
tion of goods and services (1) and implementing Decree
No 62-367 of 26 March 1962 (2).

(75) According to these provisions, remuneration for requisi-
tioned services must take the form of compensation cov-
ering solely proven, direct, material loss incurred by the
service provider as a result of the requisition. The compen-
actual,
sation

exclusively

account

takes

the

of

(1) JORF, 8.1.1959, p. 548.
(2) JORF, 4.4.1962, p. 3542.

necessary expenditure declared by the service provider in
respect of remuneration of work, depreciation and return
on capital, assessed on normal bases. No compensation is
payable, however, for the loss of potential profit suffered
by the service provider as a result of the loss of the free dis-
posal of the facilities requisitioned and of the free pursuit
of his occupation.

(76)

The French authorities sent a table summarising, by year
and by department, the public contracts awarded and the
requisitions issued. The table was drawn up following a
survey of the departments.

(77)

(78)

The French authorities explained that public contracts were
concluded, preferably at departmental level, for varying
periods (from six months to three years). Requisitions were
necessary to overcome problems caused by unsuccessful
tendering procedures, to ensure the continued operation of
the public rendering service while contracts were being
prepared or to cope with sudden increases in the quanti-
ties and changes in the nature of by-products to be
destroyed as new health-protection measures were
adopted.

The table referred to in recital 76 shows how requisitions
were used from the time the PRS was set up in 1997 to
deal with the health emergency. Subsequently, public con-
tracts were awarded on a regular basis for the collection
and processing of by-products from 1998 to 2000. As
from 2000, it became difficult to renew contracts because
of very substantial changes in the range of risk material
concerned. In 2001, regional tendering procedures were
launched based on a national model in accordance with
the new Code des marchés publics but were unsuccessful and,
in view of the emergency situation, the use of requisitions
became the norm as from 2002. Consequently, the French
authorities state that they did not want to commit them-
selves to long-term contracts because of the legal incerti-
tude cast on the French scheme by the initial discussions
on the draft Commission Guidelines.

(79)

In this legal context, several undertakings provide render-
ing services. The most
important ones, CAILLAUD,
SARIA, FERSO-BIO and Équarrissage Moderne du Var, have
thirteen installations processing raw waste from the PRS
into animal meal. Other undertakings, such as VERDAN-
NET and SOTRAMO, only collect waste. Four other under-
takings, the cement manufacturers, LAFARGE, CALCIA,
VICAT and HOLCIM, are only involved in incinerating
meal.

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(80)

The French authorities state that, at all stages of collection
and processing, PRS waste is treated separately. Processing
is carried out in installations specifically authorised by
decree as installations approved to treat high-risk material.
In view of their specialised nature, the processing of PRS
material accounts for almost the entire activity of these
installations. The services provided can consequently be
precisely identified. Payments for these services can there-
fore be estimated at an average of 30 % of the turnover of
the industrial processors.

(81)

In conclusion, given that the PRS was established by means
of a legislative act and in view of the rules on the award of
public contracts and requisitions, the French authorities
consider that the payments made to the undertakings pro-
viding the PRS do not exceed the additional cost of fulfill-
ing their obligations.

2.

REGARDING THE EXISTENCE OF AID TO LIVESTOCK
FARMERS AND SLAUGHTERHOUSES

(82)

The French authorities point out that the Commission
takes the view that totally exempting livestock farmers and
slaughterhouses from payment for the collection of car-
cases and waste could constitute aid in that they should be
responsible for the cost of collecting and destroying waste.
Even if aid could be justified for the purpose of combating
disease, the Commission considers that it could be incom-
patible with the common market in that it goes beyond the
measures authorised under the agricultural guidelines.

(83)

Firstly, the French authorities draw the Commission’s
attention to the special nature of the meat market over the
period from 1996 to 2000. Indeed, while carcases and
other waste were recognised as unsuitable for consump-
tion in France and had to be incinerated under the Decrees
of 28 June and 10 September 1996, the same products
continued to be processed in the other Member States.

(84) At Community level, the Decisions requiring the with-
drawal from the market and the destruction of the prod-
ucts concerned took effect only on 1 October 2000
for
Commission
Decision 2000/418/EC regulating the use of material pre-
senting risks as regards transmissible spongiform encepha-
lopathies and amending Decision 94/474/EC (1), and on

risk material,

specified

under

(85)

(86)

(87)

1 March 2001, under Commission Decision 2001/25/EC
prohibiting the use of certain animal by-products in ani-
mal feed (2).

In the absence of harmonisation, according to the French
authorities, for four years the price of beef and veal in the
other Member States, which took account of any cost
involved in collecting carcases and other waste, could also
be regarded as taking account of the value added to those
products. In France, exemption from the cost of rendering
those same products might have had an impact on the
price of beef and veal but, according to the French authori-
ties, this could not have been greater than the impact of the
cost, downstream, of the rendering levy.

The French authorities are of the opinion that, if the effect
of establishing the PRS had been to reduce the price of
meat, this would have conferred a clear advantage on
exports of French meat to the other Member States, but
claim that this was not the case. They also argue that there
was no increase in exports to the United Kingdom, the
only Member State in which, because of the extent of the
BSE crisis, a large-scale system for processing and inciner-
ating carcases had been set up.

If the Commission were to conclude that there was aid
within the meaning of Article 87 of the Treaty, the French
authorities take the view that this is justified as a measure
forming part of a mechanism to combat animal diseases.
Its compatibility could be examined in the light of the
working paper of 10 November 1986, applicable when the
public rendering service was established or the agricultural
guidelines, and in particular points 11.4 et seq. The mea-
sures adopted in France have only one objective, i.e. to
eliminate any risk of contamination.

(88) On whatever basis the Commission chooses, in the opin-
ion of the French authorities the aid can be authorised
since Community and national provisions allow an official
framework to be established for combating diseases, with
a view, in particular, to eradicating them by means of com-
pulsory measures for which compensation is paid. In this
case, measures to combat BSE were clearly part of a whole
series of measures adopted at the both Community and
national level.

(1) OJ L 158, 30.6.2000, p. 76. Decision repealed by Regulation (EC)

(2) OJ L 6, 11.1.2001, p. 16 Decision repealed by Regulation (EC)

No 1326/2001 (OJ L 177, 30.6.2001, p. 60).

No 446/2004 (OJ L 72, 11.3.2004, p. 62).

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(89)

The BSE crisis demonstrated the risk to health of using car-
cases and waste designated as ‘high-risk’ and specified risk
material in animal feedingstuffs. Against this background,
products considered to be dangerous must be completely
destroyed under conditions that prevent any risks to
human and animal health.

(96)

From 1997 to 2000, the levy was due from all persons
making retail sales of meat and other products such as
salted meats, cured meat products, lard, preserved meats,
processed offal and meat- and offal-based animal feed and
whose turnover during the previous calendar year was at
least FRF 2,5 million excluding VAT.

(90) With regard to carcases, the French authorities affirm that
the Commission itself realised the need to prohibit the use
of these products by banning the use in feed intended for
livestock not only of animals slaughtered on holdings as
part of disease control measures by also of all bovine ani-
mals, sheep, goats, solipeds and poultry dying on holdings
but not slaughtered for human consumption (abovemen-
tioned Decision 2001/25/EC).

(91)

(92)

The French authorities state that, in addition, it appeared
that in the other Member States involved the withdrawal of
carcases from the animal food chain in 2001 led to the
adoption of official provisions giving the authorities full
responsibility for the destruction of carcases.

For the French authorities, material seized at slaughter-
houses falls into the same category of products posing a
risk to human and animal health. It consists of products
declared unfit for human consumption, the list of which
was laid down in the Decree of 17 March 1992 on the
conditions that installations slaughtering animals for the
production and marketing of fresh meat must satisfy and
laying down the rules for health inspections of those estab-
lishments and the Decree of 8 June 1996 laying down rules
for post mortem health inspections of poultry and transpos-
ing various Community health Directives.

(97) Article 35 of the Loi de finances rectificative pour 2000

extended the levy to all meat products.

(98) As from 1 January 2001, the rate of the levy was increased
from 0,6 % to 2,1 % on monthly purchases of up to
FRF 125 000 and from 1,0 % to 3,9 % on monthly pur-
chases above that amount. At the same time, the threshold
for the levy was increased to FRF 5 million (EUR 763 000)
excluding VAT.

(99) According to the French authorities, the threshold is fixed
on the basis of an objective and rational criterion. Since it
is calculated on the basis of the turnover of those liable to
pay the levy, they claim that it does not distort competi-
tion between those concerned.

(100) They argue that the criterion is objective because in fixing
the threshold no account of is taken of any consideration
other than that of revenue. They argue that it is rational
because the threshold is the same as that for the payment
of VAT. The French authorities point out that the levy on
meat purchases is collected and inspected according to the
rules applicable to VAT. The same thresholds have been
used for a range of different taxes, such as the tax on cer-
tain advertising expenditure, for example.

(93) During collection and processing, carcases and material
seized at slaughterhouses, including SRM, are kept separate
from other waste.

(101)

In fact, the undertakings exempted from payment of the
levy are primarily small butchers from which collecting the
levy would have been too costly.

(94) Accordingly, the French authorities take the view that the
measures financed by the PRS are justified as measures
to combat animal diseases.

(102)

In addition, the French authorities point out that, even if
the Commission’s argument that the choice of threshold
could affect intra-Community trade is accepted, the conse-
quences would be very limited in that:

3.

REGARDING
TO
UNDERTAKINGS EXEMPTED FROM PAYMENT OF THE
LEVY

EXISTENCE

THE

AID

OF

(95)

Regarding the possible existence of aid to undertakings
exempted from payment of the levy provided for in
Article 1 of Law No 96-1139 of 26 December 1996
and codified in Article 302bis ZD of the Code général des
impôts, the French authorities put forward the following
arguments.

— supermarkets obtain most of their supplies on the
French market. Imports of meat from other Member
States amount to approximately 16 % of all meat con-
sumed in France and are mainly intended for home
catering. Supermarkets do not therefore market sub-
stantial quantities of meat from other Member States,

— specialised butchers do not sell meat exclusively of
regional or national origin. On the contrary, certain
butcheries obtain most of their supplies abroad.

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4.

REGARDING THE FINANCING OF THE SCHEME

(103) The French authorities state that the Commission is of the
opinion that the PRS might be financed by means of a tax
that is incompatible with Article 90 of the Treaty, which
prohibits discriminatory internal taxation. They refer, in
particular, to the infringement proceedings initiated in
1998.

(104) On this point, the French authorities referred the Commis-
sion to the arguments put forward in their letter to the
Commission dated 18 September 1998 in response to the
letter giving formal notice dated 29 July 1998. In that let-
ter, the French authorities concluded that the rendering
levy fulfilled none of the criteria for being classified as a
customs duty or a levy having an equivalent effect to a cus-
toms duty or even as discriminatory taxation within the
meaning of the Treaty. However, they drew the Commis-
sion’s attention to the fact that, in the interests of concili-
ation, the levy was assigned to the general national budget
as from 1 January 2001 (Article 35 of the Loi de finances
rectificative pour 2000).

(105) The French authorities consider the allegation that the link
between the revenue from the levy and the use made of it
was not broken on 1 January 2001 to be unfounded. The
levy, in the same way as other comparable resources, is
assigned to the general national budget and is not assigned
to a specific chapter of expenditure by the Ministry of Agri-
culture. Since this Ministry is responsible for the operation
of the PRS, it is essential that it be allocated appropriations
for fulfilling this task. The French authorities give assur-
ances that these appropriations under no circumstances
come from the product of the levy.

(106) The French authorities point out that the purpose of Law
No 96-1139 of 26 December 1996 was to lay down rules
on the collection and destruction of animal carcases and
slaughterhouse waste unfit for human consumption. It
established the PRS and provided for its financing by
means of a new levy. To that end, Law No 96-1139 amends
both the Code rural and the Code général des impôts. The pro-
vision inserted in the Code général des impôts by Article 1 of
Law No 96-1139 could have been inserted quite as legiti-
mately in the 1997 Loi de finances. Nevertheless, for reasons
of procedure, to ensure parallelism between new Govern-
ment expenditure and the necessary revenue and because
of their similar objectives, revenue from the levy at that
time being intended to finance a fund from which the PRS
would in turn be financed, Article 302bis ZD was inserted
in the Code général des impôts by Law No 96-1139.

(107) The French authorities point out that the levy introduced
by Article 302bis ZD of the Code général des impôts is a levy
on meat purchases. Although commonly known as the
‘rendering levy’ because of its original objective, it was
never officially called that. Article 1(B) of Law No 96-1139
stipulated that revenue from the levy collected under
Article 302bis ZD of the Code général des impôts was
assigned to a fund intended to finance the collection and
destruction of carcases and slaughterhouse waste unfit for
consumption.

(108) The Loi de finances rectificative pour 2000 stopped the rev-
enue from the levy on meat purchases going to the fund
after 31 December 2000. Consequently, the levy on meat
purchases, which has appeared as such in the tax revenue
in the national budget since 1 January 2001, is no longer
assigned to specific expenditure but is paid into the gen-
eral national budget. The fund established by Law
No 96-1139 is no longer financed. The funds were cleared
and expenditure relating to the PRS is entered directly in
the budget of the Ministry of Agriculture along with any
other expenditure for which it is responsible. The Loi de
finances rectificative pour 2000 is an amending financial act,
the purpose of which is not to amend the title of Law
No 96-1139 of 26 December 1996, whose purpose
remains the establishment of the PRS, but to amend the
Code général des impôts and the method of financing the
public service concerned by inserting a specific budget
chapter.

(109) As regards changes in the amount of the levy after 2000,
the French authorities state that they changed the rates and
the base of the levy on meat purchases on 1 January 2001,
when the revenue from it was assigned to the national bud-
get. There were no other changes until 1 January 2004.
The increases made in the Loi de finances rectificative pour
2000 were intended, along with other tax and budgetary
measures, to adjust Government expenditure and revenue.

(110) The French authorities admit that the financing of the PRS
by the Ministry of Agriculture constituted significant new
expenditure that had an impact on the rebalancing of Gov-
ernment financial resources carried out at the time. Since
that date, the rate of the levy has not been indexed in line
with the financing needs of the PRS. In addition, the French
authorities explain that, as a result of the changes in the
rates and base of the levy, since 2001 the revenue it has
generated has been significantly greater than expenditure
on the PRS for more general reasons of budgetary equilib-
rium (see Table 1).

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(111) The French authorities specified that the financing assigned
to the PRS was not used for ends other than financing the
service. From 1997 to 2000, the fund managed by the
CNASEA was used only for the collection, processing
and incineration by the PRS of high-risk products. It could
not have been used for any other purpose since, according
to the French authorities, during that period, other render-
ing by-products were put to use.

(112) Furthermore, revenue from the levy was much lower than
the cost of the PRS over that period. After 1 January 2001,
the financing necessary for the operation of the PRS was
allocated by Parliament on an annual basis to the Ministry
of Agriculture, responsible for financing and operating the
PRS. The amounts concerned were determined exclusively
on the basis of forecasts of expenditure on the PRS with-
out any account being taken of revenue from the levy.

(113) Finally, the French authorities point out that the revenue
from the levy was assigned to a special fund intended to

finance the PRS from 1997 to 2000 only. Over that period,
the Ministry of Agriculture did not therefore allocate
appropriations to cover expenditure on the PRS. Budget
Chapter 44-71 was created in 2001. From 1997 to 2000,
the fund to which revenue from the levy on meat pur-
chases was assigned had no surpluses.

(114) According to the French authorities, after 1 January 2001,
no correlation can be established between collection of the
levy and appropriations assigned by the Ministry of Agri-
culture, which are allocated from national budgetary
resources.

(115) Table 1, sent by the French authorities, shows the revenue
from the levy and expenditure on the PRS. The total rev-
enue from the rendering levy between 1997 and 2002 was
EUR 1 337 676 215 and total expenditure on the PRS was
EUR 828 552 389.

Table 1

Revenue from the levy
recorded by the
Treasury

Expenditure on the
PRS

Revenue from the
levy recorded by the
Treasury

Budget assigned to the
CNASEA

Expenditure on the PRS

(in EUR)

83 702 949

63 577 613

111 557 213

101 235 325

98 223 855

93 868 217

104 428 265

147 839 108

Subtotal 1

387 352 234

417 080 311

1997

1998

1999

2000

2001

2002

Subtotal 2

423 083 271

185 684 975

527 240 710

224 891 780

950 323 981

410 576 755

181 777 656

229 694 422

411 472 078

5.

REMARKS ON THE COMMENTS SUBMITTED BY THIRD
PARTIES

(118) With regard to the comments of the FCD, the French
authorities stress that the PRS collects and destroys high-
risk products, of whatever origin, and that therefore all
users of the PRS are treated equally.

(116) By letter dated 9 April 2003, the French authorities
responded to the comments submitted by third parties,
putting forward the arguments set out below.

(117) Regarding the claim that the PRS does not fall within the
scope of Article 86(2) of the Treaty, the French authorities
take the view that the undertakings responsible for the PRS
should be regarded as undertakings responsible for a ser-
vice of general economic interest, for reasons in particular
of the protection of public health.

(119) With regard to the alleged over-compensation provided by
payments for the PRS, the French authorities argue that
there cannot be any over-compensation in the payments
made to the rendering undertakings, in that payment for
the service is made under the procedures for the award of
public contracts or under requisition procedures, meaning
that compensation is granted for the proven, direct, mate-
rial loss incurred by service providers in fulfilling the obli-
gations placed on them.

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(120) The French authorities explain that, contrary to what the
FCD claims, the financing assigned to the PRS is not used
to finance other activities not falling within the scope of
the legislation concerned. Consequently, the PRS differs
from the mechanism established to destroy meal follow-
ing the ban on its use in animal feed.

(121) The French authorities point out that extending the remit
of the PRS to cover all SRM, referred to by the FCD, was
simply implementing the provisions of Regulation (EC)
No 1774/2002 of the European Parliament and of the
Council
laying down health rules concerning animal
by-products not intended for human consumption (1).
Before the entry into force of that Regulation, the spinal
columns of bovine animals of more than 12 months old
were not considered to be SRM. According to the French
authorities, all SRM, which was not referred to as such
under French legislation, came under material seized at
slaughterhouses. The French authorities claim that they
specifically identified SRM in the legislation following the
introduction of spinal columns in the list of SRM, although
these are not removed at the slaughterhouse but rather on
the butcher’s premises. They argue that the amendment to
the Law simply applied the principle of equal treatment,
allowing all those holding SRM to benefit from the PRS on
the same conditions.

(122) With regard to the comments made by the Spanish
the French authorities provided figures
Government,
showing that Spanish exports of fresh and frozen meat to
both non-member countries and other Member States have
increased since 1995, unlike French exports, which have
fallen. Under these circumstances, the French authorities
take the view that the Spanish authorities cannot claim
that the provision free of charge of the PRS in France has
unfavourably modified the pattern of trade in meat, an
argument for which they provide no supporting data.

(124) Articles 87, 88 and 89 of the Treaty are applicable to the
pigmeat sector pursuant to Article 21 of Council Regula-
tion (EEC) No 2759/75 on the common organisation of
the market in pigmeat (2). They are applicable to the beef
and veal sector pursuant to Article 40 of Council Regula-
tion (EC) No 1254/1999 on the common organisation of
the market in beef and veal (3). Before the latter was
adopted, they were applicable to that sector pursuant to
Article 24 of Council Regulation (EEC) No 805/68 of
27 June 1968 on the common organisation of the market
in beef and veal (4). They are applicable to the poultrymeat
sector pursuant to Article 19 of Council Regulation (EEC)
No 2777/75 of 29 October 1975 on the common organi-
sation of the market in poultrymeat (5).

1.1.

EXISTENCE OF A SELECTIVE ADVANTAGE
FINANCED BY STATE RESOURCES

(125) The Court of Justice has already had occasion to express its
views on the French public rendering service (PRS) in con-
nection with the GEMO case. As the Court said in that
case, pursuant to Article 87(1) of the Treaty it must be
determined whether, under a given legal system, a State
measure is likely to favour ‘certain undertakings or the pro-
duction of certain goods’ over others. If that is so, the mea-
sure meets the condition of selectivity that is inherent in
the concept of State aid in those provisions.

(126) Furthermore, according to the Court, assistance of any
form whatsoever which is likely to favour certain under-
takings directly or indirectly or which must be regarded as
an economic advantage which the beneficiary undertaking
would not have obtained under normal market conditions
must be regarded as aid (6).

V. ASSESSMENT

(127)

1. ARTICLE 87(1) OF THE TREATY

In addition, according to the Court’s case law, in particular
measures which, in various forms, mitigate the charges
which are normally included in the budget of an undertak-
ing and which, without therefore being subsidies in the
strict meaning of the word, are similar in character and
have the same effect, are considered to constitute aid (7).

(123)

In accordance with Article 87(1) of the Treaty, save as oth-
erwise provided in the Treaty itself, any aid granted by a
Member State or through State resources in any form
whatsoever which distorts or threatens to distort compe-
tition by favouring certain undertakings or the production
of certain goods is, in so far as it affects trade between
Member States, incompatible with the common market.

(1) OJ L 273, 10.10.2002, p. 1. Regulation as last amended by Commis-
sion Regulation (EC) No 668/2004 (OJ L 112, 19.4.2004, p. 1).

(2) OJ L 282, 1.11.1975, p. 1. Regulation as last amended by Regulation

(EC) No 1365/2000 (OJ L 156, 29.6.2000, p. 5).

(3) OJ L 160, 26.6.1999, p. 21. Regulation as last amended by Commis-
sion Regulation (EC) No 1899/2004 (OJ L 328, 30.10.2004, p. 67).
(4) OJ L 148, 28.6.1968, p. 24. Regulation repealed by Regulation (EC)

No 1254/1999.

(5) OJ L 282, 1.11.1975, p. 77. Regulation as last amended by Regula-

tion (EC) No 806/2003 (OJ L 122, 16.5.2003, p. 1).

(6) Case C-280/00 Altmark [2003] ECR I-07747 and judgment of
22 November 2003 in joined Cases C-34/01 and C-38/01 Enirisorse
(not yet published).

(7) Case C-355/00 Freskot [2003] ECR I-5263.

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(128)

In the case in point, the system is financed by a parafiscal
charge introduced by the authorities and the State is
accordingly responsible for it, as the Court made clear,
moreover, in its judgment in the GEMO case.

(133) The fact that SRM is financed by the proceeds of a parafis-
cal charge levied on vendors of meat implies that the
undertakings performing this service receive public funds
to cover the costs of that service.

(129) The existence and indeed the nature of the aid must be
established at the level of the potential beneficiaries of the
PRS and the way it is financed. When it initiated the inves-
tigation, the Commission identified the following main
categories of potential beneficiaries of the PRS:

(134) Rendering is also an economic activity. In France, the sec-
tor is dominated by two major undertakings, which
between them account for between 80 % and 90 % of the
market and have a turnover, at least in one case, of over
EUR 152 million (1).

— rendering undertakings,

— livestock farmers and slaughterhouses,

— holders of meat and bone meal,

— enterprises retailing meat with an annual turnover of
less than FRF 2,5 million (FRF 5 million from 2001).

In the course of the investigation and on the basis of the
information supplied to the Commission, a further
category of beneficiaries was identified:

— butchers and cutting plants holding SRM.

1.1.1. Aid to rendering plants

(130) When opening the investigation, the Commission took the
view that it first had to decide whether the public money
paid to rendering undertakings could be regarded as remu-
neration of an activity that could be considered a public
service. Subsequently, it needed to decide whether such
payments had exceeded the costs borne by those undertak-
ing in the performance of those activities.

(131) According to the French legislation, rendering undertak-
ings perform a public-service mission enshrined in law
involving the collection and disposal of animal carcases
and meat and offal seized at slaughterhouses and recogn-
ised as unfit for human or animal consumption.

(135) The Court of Justice’s judgment of 24 July 2003 in the
Altmark case (2) shows that public subsidies intended to
allow public services to operate do not fall within the scope
of Article 87 of the Treaty in so far as such subsidies should
be regarded as compensation for the services performed by
the recipient undertakings in discharge of public service
obligations. Nonetheless, the Court requires the following
conditions to be met:

(a)

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

(b)

second, the parameters on the basis of which the com-
pensation is calculated must be established in advance
in an objective and transparent manner;

(c)

third, the compensation cannot exceed what is neces-
sary to cover all or part of the costs incurred in the dis-
charge of public service obligations,
taking into
account the relevant receipts and a reasonable profit
for discharging those obligations;

(d)

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 analy-
sis of the costs which a typical undertaking, well run
and adequately provided with means of transport 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.

(132) The Court of Justice pointed out in the GEMO case that
according to Article 264-1 of the Rural Code, the PRS is
assigned to undertakings awarded public procurement
contracts concluded with the Prefects of each department.

(1) Figures from French Senate Report No 131 (1996-97 session) by

Roger Rigaudière.

(2) Case C-280/00, already mentioned.

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(136) Recitals 137 to 153 below set out the Commission’s
remarks regarding the conditions laid down in the Altmark
judgment.

affording total transparency regarding the determination of
the needs and nature of the services to be provided. Over
300 invitations to tender have been published in the Offi-
cial Journal of the European Communities.

(137) As regards the first condition, the PRS was laid down by
French Act No 96-1139 of 26 December 1996, consoli-
dated in Articles L 226-1 to L 226-10 of the Rural Code.
Article L 226-1 of the Rural Code provides that:

‘the collection and disposal of animal carcases, meat, offal
and animal by-products seized at slaughterhouses and rec-
ognised as unfit for human or animal consumption, and of
materials presenting a specific risk with respect to trans-
missible subacute spongiform encephalopathies, known as
specified risk materials, the list of which has been laid
down by the Minister responsible for agriculture,
is a
public-service function falling under State responsibility.’

(142) Only where invitations to tender have been unsuccessful,
i.e. where no bids or no suitable bids have been received,
have requisition orders been made on the basis of the Code
général des collectivités territoriales and in accordance with
Order No 59-63 of 6 January 1959 and implementing
Decree No 62-367 of 26 March 1962, which provide for
remuneration in the form of compensation only covering
necessary expenses actually incurred by the service pro-
vider, with no compensation for the loss of potential profit
suffered by the latter through not being able to continue
operating freely.

(138) On the basis of the information available to it, the Com-
mission considers that the first condition in the Altmark
judgment is fulfilled.

(143) The French authorities have forwarded a table to the Com-
mission, with a breakdown by year and department, show-
ing that rendering services have always been put out to
tender or have involved requisition orders.

(139) As regards the second condition, the Commission consid-
ers that the parameters on the basis of which the compen-
sation is calculated have been established beforehand in an
objective and transparent manner. Implementing Decree
No 96-1229 of 27 December 1996 provides that the PRS
is to be put out to tender for public procurement contracts
under specific conditions.

(140) According to the French authorities, Article R 226-7 of the
Rural Code provides in particular that the Prefect of each
department is to be charged with the performance of the
PRS and is to award the requisite contracts in accordance
with the procedures laid down in the Public Procurement
Code. By way of derogation, where this is justified on tech-
nical or economic grounds, the contracts are to be awarded
at national level. Pursuant to Article R 226-10 of the Rural
Code, such contracts are in particular to include adminis-
trative terms and conditions defining the nature of the ser-
vices to be provided under the contract, the remuneration
arrangements for the operations to be performed by the
contractor, the information on which to base an assess-
ment of the quality/cost of the service, the arrangements
concerning public information on the organisation and
operation of the service and technical specifications for the
collection, transport, processing and, where applicable,
destruction of animal carcases and slaughterhouse waste in
compliance with the required health standards.

(141) The procedure for awarding public contracts, which fall
within the scope of Annex IA of Directive 92/50/EEC, is
therefore capable, according to the French authorities, of

(144) On the basis of the information available to it, the Com-
mission considers that the second condition in the Altmark
judgment is fulfilled.

(145) As regards the third condition, the French authorities claim
that the level of the compensation does not exceed what is
necessary to cover all or part of the costs incurred in dis-
charging the public service obligations. Putting the con-
tracts out to tender has meant that those bidding have been
forced to compete with each other and this has encouraged
the emergence of the bid most advantageous to the authori-
ties. Where invitations to tender have proved unsuccess-
ful, as was pointed out above, requisition orders have been
applied. Because the French regulations on requisition have
been applied, the compensation has also been kept as low
as possible.

(146) The regulations in force in France provide that remunera-
tion for requisitioned services is to be paid in the form of
compensation solely covering proven direct material loss
incurred by the service provider as a result of the requisi-
tion. The compensation only covers all necessary expendi-
ture actually incurred by the service provider in terms of
remuneration of work, depreciation and return on capital,
assessed on normal bases. No compensation is payable,
however, for the loss of potential profit suffered by the ser-
vice provider as a result of loss of the free disposal of the
facilities requisitioned and of the freedom to continue
operating.

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(147) The third condition in the Altmark judgment calls for the
following remarks. When the investigation into this case
was initiated, the Commission asked the French authori-
ties to supply it with all details relating in particular to aid
paid to the undertakings concerned and evidence that it
covered only the additional costs of performing a service
of general economic interest within the meaning of
Article 86(2) of the Treaty. The French authorities were
also asked to show that resources could not have been
diverted to other competitive activities that those under-
takings might carry out (cross-subsidies).

(152)

It is, however, true that the complainants’ claims were not
backed up by precise figures on payments made to render-
ing undertakings and on the costs of operations arising
from performance of the PRS showing that those under-
takings received overcompensation. Furthermore, the fact
that the proceeds of the levy and the cost of the PRS do not
tally is not sufficient to demonstrate an imbalance between
the payments made and the cost of rendering.

(148) The Commission notes that the French authorities simply
explained that the total sums paid to rendering under-
takings for the period 1997 to 2002 amounted to
EUR 828 552 389 and that this corresponds to the total
cost of the PRS. The Commission can therefore state a
position only on the basis of that information.

(149)

In the case in point, the lack of more detailed information
and figures covering payments made to rendering under-
takings during the period 1997 to 2002 and proving that
such payments have in no case exceeded the additional
costs of providing the PRS means the Commission cannot
be certain that the third condition in the Altmark judgment
has actually been respected. In addition, lacking more pre-
cise information, the Commission has not been able
to inquire into the existence of any cross-subsidies within
those undertakings.

(150) These doubts are also confirmed by a report drafted in
1997 by the Comité Permanent de Coordination des Inspections
(COPERCI Report) at the request of the French Agriculture
Minister; according to the Report, ‘the rendering undertak-
ings may have benefited from generous hand-outs when
the proceeds of the levy used to pay for their services was
collected’; the Report goes on say that ‘there is a potential
risk of double payment for incineration operations since
payments were made without the operations actually being
performed’ and that ‘rendering, which was structurally in
deficit before the BSE crisis, is now profitable again’.

(153)

In the light of the foregoing and the information provided
by the French authorities, the Commission cannot there-
fore conclude that all the conditions set out in the Altmark
judgment have been met and payments made to rendering
undertakings are therefore not caught by the definition of
State aid within the meaning of Article 87(1) of the Treaty.

(154) Even if the main beneficiaries of the measures financed by
(see
the charge were farmers and slaughterhouses
point 1.1.2), the Commission cannot rule out an element
of aid within the meaning of Article 87 of the Treaty in
payments made to rendering undertakings.

1.1.2. Aid for livestock farmers and slaughterhouses

(155)

In the GEMO case, the Court of Justice ruled that the fact
that the collection and disposal of animal carcases and
slaughterhouse waste which the farmers and slaughter-
houses benefited from was performed by private undertak-
ings could not affect their possible classification as State
aid since the arrangements governing those activities were
put in place by the authorities. They are therefore the
responsibility of the State.

(156) The Court concluded that Article 87(1) of the Treaty must
be interpreted to mean that a scheme that provides for the
collection and removal of slaughterhouse waste free of
charge for livestock farmers and slaughterhouses must be
classified as State aid benefiting those farmers and
slaughterhouses.

(151) As a consequence, the Commission considers that it can-
not be stated, as the Court requires, that the compensation
does not 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.

(157)

In the case in point, there is no doubt about the fact that
the measures for livestock farmers and slaughterhouses are
financed by public resources, and in particular budget
appropriations and/or the proceeds of a compulsory
charge levied by the authorities.

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1.1.3. Holders of meat and bone meal

1.1.5. Aid for trade exempt from payment of the levy

(158) Since the meat and bone meal concerned by the PRS comes
from the processing of waste from the PRS and does not
involve meal affected by the marketing ban in force since
2000, it must be concluded that the destruction of the
meal is a necessary stage in the PRS and that the destruc-
tion of this material, which is of no commercial value, is
an operation covered by the PRS. As a result, the disposal
of this material must be examined in the same way as the
‘aid to livestock farmers and slaughterhouses’, since it sim-
ply represents an advanced stage in the destruction of the
waste they produce. The cost of destroying the waste is
part of the total cost that the producer of the waste is
responsible for, and by bearing this cost on behalf of the
producer, the State is simply offering the latter extra aid.

(159) The French authorities have provided assurances that the
PRS defrays only the cost of incinerating meal produced by
processing products collected in the performance of the
service. It does not finance the incineration of products
resulting from the ban on using the meal in animal feed.
This issue is, moreover, being looked at by the Commis-
sion in relation to another measure currently under exami-
nation (NN 44/2002). For that reason, it is not covered by
this Decision.

1.1.4. Aid to butcheries and cutting plants holding

SRM

(160) This measure has been in force since 1 January 2002 and is
also financed by the rendering levy and benefits butchers,
who in particular remove the bones of the spinal column
in direct contact with the spinal cord in bovine animals
over 12 months.

(161) The French authorities have explained that, prior to 2002,
the spinal columns of bovine animals over 12 months were
not listed as SRM. Including these spinal columns, which
are not removed at the slaughterhouse but at the butchery,
on the list of SRM, has meant that the French authorities
identified SRM explicitly in the legislation as waste quali-
fying for the PRS. The French authorities are of the opin-
ion that all SRM not specified as such in the French
legislation fall
into the category of material seized at
slaughterhouses.

(162)

In so far as such waste qualifies for the PRS and does not
pass through the slaughterhouses, it must be concluded
that its destruction is a charge that falls first on the butch-
ers responsible for dealing with the spinal column of
bovine animals over 12 months.

(164) The concept of aid is interpreted by the Court as not cov-
ering measures that distinguish between enterprises in
terms of charges where that distinction stems from the
nature or general scheme of the system of charges con-
cerned. It is for the Member State which has made such a
distinction between enterprises in terms of charges to show
that it is actually justified by the nature and the general
scheme of the tax system (1).

(165) French Act No 96-1139 provides for exemption for enter-
prises retailing meat whose annual turnover is less that
FRF 2,5 million (this ceiling was subsequently raised to
FRF 5 million: see recital 18). Such an exemption implies a
loss of resources for the State (2) and does not appear to be
justified by the nature and the general scheme of the tax
system, which is designed to provide the State with
revenue.

(166) The exemption refers to the overall turnover, not just the
turnover on meat sales. For instance, an enterprise selling
meat alone and realising a turnover of FRF 2,4 million on
meat sales would therefore not be subject to the levy. But
a general food enterprise realising an overall turnover of
FRF 10 million, of which FRF 1 million is on meat sales,
would be subject to the levy. As the levy is calculated on
the value of meat products, enterprises with a higher turn-
over on meat sales should hardly be exempt from the levy
when their competitors with a lower turnover on meat
products have to pay it.

(167) As a consequence, that exemption is a selective advantage
for trade exempted from payment (3). It is therefore aid in
favour of the exempted vendors, whose tax burden is
lighter as a result. On the basis of the figures for trade in
meat set out in recital 171, the Commission concludes that
exempting traders with a turnover of less than FRF 2,5 mil-
lion (and subsequently FRF 5 million) from the levy is an
advantage constituting State aid within the meaning of
Article 87(1) of the Treaty.

(163) The remarks made regarding the ‘aid for livestock farmers
and slaughterhouses’ are applicable mutatis mutandis to
butchers holding SRM concerned by this aspect of the PRS.
As a consequence, the removal free of charge of the spinal
columns from butchers’ premises and cutting plants from
1 January 2002 constitutes State aid to these undertakings.

(1) Judgment of 29 April 2004 in Case C-159/01 Netherlands v Commis-

sion (not yet published).

(2) On exemptions, see judgment in Case C-387/92 Banco Exterior de
España SA v Ayuntamiento de Valencia [1994] ECR I-877, point 13.
(3) On the nature and general scheme of the system, see the judgment in
Case C-75/97 Belgium v Commission [1999] ECR I-3671, point 33,
which refers to the judgment in Case 173/73 Italy v Commission
[1974] ECR 709, point 33.

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1.2.

EFFECT ON TRADE

(172)

(168) To establish whether the aid in question falls within the
scope of Article 87(1) of the Treaty, it must lastly be deter-
mined whether it is likely to affect trade between Member
States.

It is also worth pointing out that, according to figures pro-
vided to the Commission,
live animals imported into
France in 1999 were worth FRF 2 297 million, while
French imports of meat and edible offal amounted to
nearly FRF 17 000 million. Rendering was therefore car-
ried out in the country of origin on the bulk of meat prod-
ucts imported into France.

(169) The Court noted that where an advantage granted by a
Member State strengthens the position of one category of
enterprises over other enterprises competing in intra-
Community trade, the latter must be regarded as affected
by that advantage (1).

(173) Accordingly, as the Commission stated when the investi-
gation was initiated, the complainants also cite a circular
published by the French Direction Générale de la Concur-
rence, de la Consommation et de la Répression des Fraudes,
to the effect that the levy on purchases of meat ‘may affect
foreign producers’ profit margins or reduce their sales’ and
accordingly ‘it carries the risk of adversely affecting trad-
ing conditions.’

(170) Rendering is a service that can be supplied across borders.
This is shown, moreover, by the fact that several major
multinational enterprises operating in this sector offer their
services in several Member States, including France. The
Commission therefore notes that the payments granted to
the French rendering undertakings affect trade between
Member States within the meaning of Article 87(1) of the
Treaty.

(174) The Commission therefore concludes that the measure in
favour of livestock farmers and slaughterhouses has at least
potential impact on trade.

(175) As regards trade exempted from the levy, the Commission
is of the opinion that the exemption from the levy has at
least potential impact, in particular in border areas, and
therefore on cross-border trade.

(171) As far as rendering undertakings, livestock farmers and
slaughterhouses, cutting plants and butchers holding SRM
are concerned, the fact that there is trade in meat products
between Member States is plain from the existence of vari-
ous market organisations in the sector, which are listed in
recital 124. Table 2 shows the level of trade between France
and the other Member States in the most significant prod-
ucts in the first year of application of the rendering levy.

(176) By way of a conclusion, all these aid measures taken
together appear likely to affect trade between Member
States. The sectors concerned are wide open to competi-
tion at Community level and are accordingly sensitive to
any measure favouring enterprises in any particular Mem-
ber State.

Table 2

France/EU-14

Beef

Pigmeat

Poultrymeat

1.3.

DISTORTION OF COMPETITION

1997 imports

Tonnes

ECU million

1997 exports

Tonnes

286 000

465 000

140 000

831

1 003

258

(177)

779 000

453 000

468 000

ECU million

1 967

954

1 069

(1) Judgment in Case 730/79 Philip Morris [1980] ECR 2671, point 11.

In its judgment on the GEMO case, the Court of Justice also
took the view that assistance by the public authorities to
free farmers and slaughterhouses from financial charges in
connection with the PRS appears to be an economic advan-
tage that is likely to distort competition. The Commission
considers that this conclusion also applies in the case of
rendering undertakings, butcheries and cutting plants
holding SRM and trade exempted from payment. All these
economic sectors operate on a market that is open to com-
petition and where the volume of trade, as described in
recital 171, is very large, since some agri-food enterprises
affected by the aid are very large.

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1.4.

CONCLUSIONS ON THE MEASURE’S STATUS AS AID
WITHIN THE MEANING OF ARTICLE 87(1) OF THE
TREATY

(178)

In the light of the foregoing, the Commission considers
that the measures in favour of rendering undertakings, live-
stock farmers and slaughterhouses, cutting plants and
butchers holding SRM and traders exempted from the levy
grant them an advantage from which other operators can-
not benefit. That advantage distorts or threatens to distort
competition by favouring certain enterprises and the pro-
duction of certain goods in so far as it is likely to affect
trade between Member States. As a consequence, the Com-
mission concludes that those measures fall within the
scope of Article 87(1) of the Treaty.

2.

COMPATIBILITY OF THE AID MEASURES

of certain economic areas can be considered compatible
with the common market where such aid does not
adversely affect trading conditions to an extent contrary to
the common interest. To qualify under the exception
referred to in that point, the aid must contribute to the
development of the sector in question.

2.1.

UNLAWFULNESS OF THE AID

(183) The Commission must point out, first, that France did not
inform it, pursuant to Article 88(3) of the Treaty, of the
provisions introducing the rendering levy and the mea-
sures financed by it. Article 1(f) of Council Regulation (EC)
No 659/1999 of 22 March 1999 laying down detailed
rules for the application of Article 88 of the EC Treaty (1)
defines unlawful aid as new aid put into effect in contra-
vention of Article 88(3) of the Treaty. The obligation to
notify State aid is set down in Article 1(c) of
that
Regulation (2).

(179) Article 87 of the Treaty makes provision, however, for
exceptions from the general principle that State aid is
incompatible with the Treaty, although some of those
exceptions clearly do not apply, and in particular those laid
down in paragraph 2 of that Article. The French authori-
ties have not invoked those exceptions.

(184) The measures implemented by France contain elements of
State aid; they involve new aid that has not been notified
to the Commission, which means they are unlawful under
the Treaty.

(180) The exceptions laid down in Article 87(3) of the Treaty
must be interpreted strictly when any regional or sectoral
aid programme or any individual case of application of
general aid schemes is being examined. In particular, they
can only be allowed where the Commission can establish
that the aid is necessary to achieve one of the objectives in
question. Granting the benefit of those exceptions to aid
measures where this is not the case would be tantamount
to permitting trade between Member States to be affected
and distortion of competition that has no justification in
the Community interest to occur and, by the same token,
to allowing operators in some Member States to enjoy
undue advantages.

(181) The Commission considers that the aid in question is not
intended to favour the economic development of a region
where the standard of living is abnormally low or there is
serious unemployment in accordance with Article 87(3)(a)
of the Treaty. It 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 Mem-
ber State in accordance with Article 87(3)(b) of the Treaty.
And it is not intended to promote culture and heritage
conservation in accordance with Article 87(3)(d) of the
Treaty.

(182) Article 87(3)(c) of the Treaty provides, however, that aid to
facilitate the development of certain economic activities or

2.2.

GUIDELINES APPLICABLE TO MEASURES NOT
NOTIFIED

(185) Since State aid financed by a parafiscal charge is involved,
the Commission must examine both the measures
financed,
i.e. the aid, and the way they are financed.
According to the Court, where the method of financing the
aid, in particular through compulsory contributions, forms
an integral part of the aid measure, the Commission must
take that method of financing into account when examin-
ing the aid (3).

(186)

In accordance with point 23.3 of the Community Guide-
lines for State aid in the agriculture sector and the Com-
mission Notice on the determination of the applicable rules
for the assessment of unlawful State aid (4), any unlawful
aid within the meaning of Article 1(f) of Regulation (EC)
No 659/1999 must be assessed in accordance with the
rules and guidelines in force at the time the aid was granted.

(1) OJ L 83, 27.3.99, p. 1. Regulation as last amended by the 2003 Act of

Accession.

(2) ‘New aid’ is defined as all aid, that is to say, aid schemes and individual
aid, which is not existing aid, including alterations to existing aid.
(3) Judgment of 21 October 2003 in joined Cases C-261/01

and C-262/01 Van Calster et al (not yet published).

(4) OJ C 119, 22.5.2002, p. 22.

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(187)

In 2002, the Commission adopted Community Guidelines
for State aid concerning TSE tests, fallen stock and slaugh-
terhouse waste (1) (hereinafter referred to as the TSE Guide-
lines). Those Guidelines have been applicable since
1 January 2003. Point 44 of the TSE Guidelines provides
that, leaving aside cases relating to fallen stock and slaugh-
terhouse waste, unlawful aid within the meaning of
Article 1(f) of Regulation (EC) No 659/1999(5) is to be
assessed in accordance with the rules and guidelines appli-
cable at the time when the aid was granted. In the case of
these two types of aid, therefore, the TSE Guidelines lay
down the rules relevant to the case in point.

(191) Any operating aid in favour of other operators must be
considered in the light of the agriculture Guidelines.

2.3.

ANALYSIS IN THE LIGHT OF THE APPLICABLE
PROVISIONS

2.3.1. Aid

(188) Points 46 and 47 of the TSE Guidelines lay down a set of
provisions concerning fallen stock and slaughterhouse
waste that are applicable in the case in point.

2.3.1.1. Aid to rendering undertakings

(189) According to point 46 of the TSE Guidelines, to date the
Commission has not clearly defined its policy on State aid
towards fallen stock,
in particular as regards the link
between, on the one hand, the rules for combating diseases
as set out in point 11.4. of the agriculture Guidelines,
which allow State aid of up to 100 %, and, on the other
hand, the application of the ‘polluter pays’ principle and
the rules on aid for dealing with waste. As a consequence,
as far as unlawful State aid to cover the costs of removing
and destroying fallen stock, granted at the production, pro-
cessing and marketing stages before the date of application
of the TSE Guidelines, is concerned and without prejudice
to compliance with other provisions of Community law,
the Commission will authorise State aid of up to 100 % of
such costs.

(192) As regards unlawful State aid to cover the costs of remov-
ing and destroying fallen stock, granted at the production,
processing and marketing stages before the date of imple-
mentation of those Guidelines and without prejudice to
other provisions of Community legislation, point 46 of the
TSE Guidelines provides that the Commission will autho-
rise State aid of up to 100 % of those costs.

(193) As regards State aid for slaughterhouse waste, point 47 of
the TSE Guidelines states that a series of individual deci-
sions have been taken by the Commission since Janu-
ary 2001, authorising State aid covering up to 100 % of
the cost of disposing of SRM, meat and bone meal, and
animal feed containing such products, which must be dis-
posed of under the new Community legislation on TSEs.

(190)

In accordance with point 47 of the TSE Guidelines, as far
as State aid for slaughterhouse waste is concerned, a series
of individual decisions have been taken by the Commission
since January 2001 authorising State aid of up to 100 % of
the costs of disposing of SRM, meat and bone meal, and
animal feed containing such products, which must be dis-
posed of under the new Community legislation on TSEs
(transmissible spongiform encephalopathies). Those deci-
sions were based in particular on point 11.4 of the agri-
culture Guidelines, bearing in mind the short-term
character of the aid and of the need for long-term obser-
vance of the ‘polluter pays’ principle. By way of an excep-
tion, the Commission has allowed such State aid to be
granted in addition to operators other than those active in
the production of live animals, e.g. slaughterhouses. The
Commission will apply the same principles to unlawful
State aid granted before the end of 2002 for comparable
costs in relation to new Community legislation on TSEs,
and without prejudice to compliance with other provisions
of Community law.

(1) OJ C 324, 24.12.2002, p. 2.

(194)

In addition, the Commission notes that,
in line with
points 33 and 34 of the TSE Guidelines, the undertakings
were chosen and remunerated according to market prin-
ciples, in a non-discriminatory manner, where necessary
by issuing an invitation to tender in accordance with Com-
munity law, and in any event using advertising on a scale
sufficient to ensure the services market was open to free
competition and the impartiality of the procurement rules
could be reviewed. The Commission agrees that requisi-
tioning was also a suitable method under the circum-
stances, given the urgency of the measures to be taken and
the lack of response to the invitations to tender.

(195) Point 47 of the TSE Guidelines points out that, by way of
an exception, the Commission has agreed that such State
aid should also be granted to operators other than those
active in the production of live animals, such as slaughter-
houses. The Commission is of the opinion that this excep-
tion must also cover other enterprises performing tasks
closely linked to the production of live animals, such as
rendering undertakings.

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(196) On the basis of the facts outlined, the Commission is in a
position to conclude that the aid for rendering undertak-
ings in the case in point, granted in France during the
period 1 January 1997 to 31 December 2002 and cover-
ing 100 % of the costs incurred, meets the conditions in
the TSE Guidelines.

(202) On the basis of the facts outlined, the Commission is thus
in a position to conclude that the aid for butchers holding
SRM that may have been granted in France during the
period 1 January 1997 to 31 December 2002, covering
100 % of the costs incurred, meets the conditions laid
down in the TSE Guidelines.

2.3.1.2. Aid to livestock farmers – Fallen stock

(197) As regards unlawful State aid to cover the costs of remov-
ing and destroying fallen stock granted at the production,
processing and marketing stages before the date of appli-
cation of the TSE Guidelines and without prejudice to com-
pliance with other provisions of Community law, point 46
of the TSE Guidelines provides that the Commission will
authorise State aid of up to 100 % of such costs.

(198) On the basis of the facts outlined, the Commission is there-
fore in a position to conclude that the aid for farmers
granted in France during the period 1 January 1997 to
31 December 2002 and covering 100 % of the costs
incurred meets the conditions laid down in the TSE
Guidelines.

2.3.1.3. Aid to slaughterhouses – Meat and offal seized

at slaughterhouses

(199) Point 47 of the TSE Guidelines provides that as regards
State aid for slaughterhouse waste, the Commission autho-
rises unlawful State aid granted before the end of 2002
and covering up to 100 % of the cost of disposing of SRM,
meat and bone meal, and animal feed containing such
products, which must be disposed of under the new Com-
munity legislation on TSEs.

(200) On the basis of the facts outlined, the Commission is there-
fore in a position to conclude that the aid for slaughter-
houses in the case in point, granted in France during the
period 1 January 1997 to 31 December 2002 and cover-
ing 100 % of the costs incurred, meets the conditions laid
down in the TSE Guidelines.

2.3.1.4. Aid to butchers – SRM seized at butcheries

(201) Point 47 of the TSE Guidelines is applicable mutatis mutan-
dis to SRM – in the case in point, spinal columns of bovine
animals over 12 months – seized at butcheries and cutting
plants.

2.3.1.5. Enterprises exempted from the levy

(203) The Commission has noted that the exemption of under-
takings with an annual turnover of less than FRF 2,5 mil-
lion entails a loss of resources for the State and does not
appear to be justified by the nature and the general scheme
of the tax system. While the latter can of course provide for
the measures necessary for it to function rationally and
effectively, such as flat-rate levies on small enterprises in
order to ease their accounting requirements in particu-
lar (1), it is highly unlikely that such measures can go as far
as outright exemptions. Furthermore, even if such exemp-
tions were acceptable, the Commission is of the opinion
that they should be limited to very marginal cases (2) where
accounting requirements and management by the tax
authorities both prove to be more costly than the antici-
pated revenue.

(204)

In the case in point, it is by no means clear that setting the
ceiling at FRF 2,5 million, which is a substantial sum, is
justified and this does not appear to have been the case in
the preparatory work for law No 96-1139 (3). The selec-
tive scope of the exemption in question is plain when it is
borne in mind that, according to the Commission’s infor-
mation, 80 % of meat and meat products is sold in super-
stores whose average overall turnover and even their
specific turnover on meat is, according to the Commis-
sion’s information, well above that ceiling (4), while small
shops (butcheries), whose average turnover is below the
ceiling (FRF 1.6 million), are in competition with the large
stores.

(1) See 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).

(2) From this viewpoint, see the other exemption provided for in point V
of Article 302bis ZD of the Code Général des Impôts: ‘the levy is not pay-
able where monthly purchases are less than F20 000 excluding VAT’,
which appears to concern smaller vendors.

(3) Note that the problem is made even more serious by Article 35 of the
loi de finances rectificative pour 2000, which raises the limit to FRF 5 mil-
lion.

(4) The average turnover of a supermarket is around FRF 40 million, half
of which comes from fresh products; poultrymeat accounts for only
22 % of the latter figure, which gives a turnover on meat of around
FRF 4 million.

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(205) The effect of the ceiling therefore appears to be to exempt
butchers and other stores, while the large majority of dis-
tributors, which is made up of large stores, have to pay the
levy. Furthermore, in so far as the ceiling relates to overall
turnover (and not just to turnover on meat), a butchery
with a turnover of FRF 2,4 million, for example, is exempt
from the tax while a large store that sells less meat but has
an overall turnover in excess of the ceiling must pay the
levy. The exemption in question thus seems to result in dis-
crimination in the way different meat retailers are treated
on the basis of a criterion that does not appear to corre-
spond to any inherent logic in the parafiscal system.

(210)

In the light of the foregoing, the Commission concludes
that the tax exemption in the case in point is aid that is
incompatible with the competition rules applicable.

2.3.2.

Financing of the aid

2.3.2.1. Prior to 31 December 2000

(206) The Commission does not consider that it has been proved
that such an exemption is justified by the overall scheme
of the tax system, no evidence to that effect having been
provided by the French authorities.

(211) Until 31 December 2000, the French authorities chose to
finance the PRS by means of a parafiscal charge levied on
retailers of meat and meat products and paid into a fund
for managing it.

(207) Since enterprises marketing agricultural products are con-
cerned (as well as products not listed in Annex I to the
Treaty, seeing that the levy is also payable on products
containing meat), and since the Commission considers that
intra-Community trade is affected, it is of the view that the
aid falls within the scope of point 3.5 of the agriculture
Guidelines. The latter provides that, for any aid measure to
be regarded as compatible with the common market, it
must contain some incentive element or require some
compensation on the part of the beneficiary. Thus, leaving
aside exceptions explicitly provided for in Community leg-
islation or in the agriculture Guidelines, State aid granted
unilaterally simply to improve producers’ financial situa-
tion but making no contribution to the development of the
sector, and in particular aid granted solely on the basis of
the price, quantity, production unit or unit of means of
production should be treated in the same way as operating
aid, which is incompatible with the common market.

(208) The exemption in question involves a reduction in charges
that does not entail any incentive element or any compen-
sation on the part of the beneficiaries, and its compatibil-
ity with the competition rules has not been established.

(212)

In the course of the infringement procedure referred to in
recital 2, the Commission noted that the method of financ-
ing the rendering service excluded any fees levied on those
using the service. The fact that the State defrays the costs
of rendering operations means that the cost price of French
production is reduced. The levy thus appears as compen-
sation for the advantage afforded by full public financing
of the collection and destruction of animal carcases and
products seized at slaughterhouses.

(213) However, with the exception of live animals imported into
France and slaughtered there, the levy was paid under the
same conditions and without distinction on products from
other Member States marketed in France, but these did not
benefit from any of the advantages stemming from the way
the funds were financed. It therefore represented a clear
monetary levy on such products. In other words, while the
levy was paid on products of national origin and on prod-
ucts from other Member States on exactly the same con-
ditions in terms of the rules on the tax base, settlement
and chargeability, this equality of conditions no longer
applied as regards the way the product of the levy is used.

(214) Under that infringement procedure, the Commission con-
sidered the compatibility of the rendering levy having
regard to Articles 25 and 90 of the Treaty.

(209) As regards aid granted prior to 1 January 2000, the Com-
mission’s practice at the time involved the concept of oper-
ating aid referred to in point 3.5 of the agriculture
the exception laid down in
Guidelines. As a result,
Article 87(3)(c) of the Treaty is not applicable.

(215) The Commission took the view that the rendering levy did
not infringe Article 25 of the Treaty and that it could not,
therefore, be regarded as a charge equivalent in effect to a
customs duty, since the French authorities had shown that
it is not exclusively used for activities that benefit national
products, i.e. French meat.

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(216) As regards Article 90 of the Treaty, the Commission con-
cluded that France had failed to meet its obligations under
Article 90 of the Treaty by applying the so-called ‘render-
ing levy’ to purchases of meat and other products speci-
fied by any person retailing such products, and that the
levy was offset, at least in part, in the case of French prod-
ucts, by full public financing of rendering and the collec-
tion of
seized at
slaughterhouses, whereas the levy was paid on products
from other Member States under the same conditions but
they did not benefit from the advantages of the fund into
which the levy is paid.

and products

carcases

animal

(217) The Commission therefore considered that the rendering
levy contravened Article 90 of the Treaty because it dis-
criminated fiscally against products from other Member
States. This concerned all meat imports as well as live ani-
mals in so far as they did not benefit from the rendering
service. On this point it is worth pointing out that meat is
imported into France from other Member States in much
larger quantities than live animals.

(218)

In accordance with the case law of the Court of Justice (1),
the Commission normally takes the view that the financ-
ing of State aid by means of compulsory charges can have
an impact on the aid by having a protective effect that goes
beyond the aid itself. The levy in question was a compul-
sory charge. In line with the case law, the Commission
considers that an aid measure cannot be financed by
parafiscal charges that are levied on products imported
from other Member States too.

(219)

In the light of the case law and the fact that the levy was
used to finance State aid within the meaning of Article 87
of the Treaty and was discriminatory in contravention of
Article 90 of the Treaty in so far as it was charged on prod-
ucts from other Member States that cannot benefit from
the advantages of the fund into which it was paid, the
Commission considered that the proceeds of the levy rea-
lised on products imported from other Member States were
against the rules on competition.

2.3.2.2. After 31 December 2000

into the national budget system means it becomes impos-
sible to link the levy and the financing of a given service
provided and financed by the State. It accordingly becomes
impossible to say whether a levy discriminates against
other products because the proceeds of the levy are merged
with the rest of the State’s revenue and the financing of the
aid can no longer be attributed directly to it.

(221) The Commission closed the infringement procedure on
26 June 2002. Nonetheless, the complaint presented to the
Commission put forward arguments that deserve to be
considered under this procedure. Those arguments raised
doubts as to whether the resource and the way it is used
were truly separate and distinct.

(222) Thus, while the new system designed by the French
authorities did involve paying the proceeds of the levy into
the general budget of the State, once they were paid into
the budget, the proceeds appear to have been allocated to
a particular chapter of the Ministry of Agriculture, from
where they could then be transferred to the budget of
CNASEA, the body responsible for the financial manage-
ment of the rendering service. The figures in the Commis-
sion’s possession also appeared to raise doubts about that
separation.

(223) After considering the French legislative documents, the
Commission looked at the claimed separation between the
resource and the way it is used. Such a separation could in
practice amount to the tax system that was called into
question by the Commission under Article 90 of the Treaty,
under the infringement procedure referred to in recital 2.

(224) The French authorities admit that, when the new provi-
sions on the levy were presented, the emphasis was laid on
the need to continue financing the PRS. This was all the
more logical as the levy had been earmarked for that pre-
cise purpose since 1 January 1997.

(220) Since 1 January 2001, the proceeds of the rendering levy
are paid directly into the general budget of the State and no
longer into the fund set up for that purpose. The Commis-
sion considers that, in general, paying the product of a levy

(1) Judgment in Case 47/69 France v Commission [1970] ECR 487.

(225) From the legal viewpoint, no binding text has been adopted
to date on the financing of the PRS using the proceeds of
the rendering levy, as was the case in 1997. At that time,
Article 1 of Law No 96-1139 of 26 December 1996 pro-
vided that the proceeds of the levy were to be paid into a
fund with the aim of financing the collection and destruc-
tion of animal carcases and products seized at slaughter-
houses and recognised as unfit for human and animal
consumption.

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(226) The French authorities explain that since 1 January 2001,
the fund to finance the PRS has ceased to exist and the
appropriations allocated to the PRS are entered in the bud-
get of the Ministry of Agriculture in the same way as other
expenditure. In addition, the proceeds of the levy and the
cost of the PRS are not equivalent. The proceeds of the levy
amounted to EUR 550 million in 2003 whereas the total
appropriations allocated to the PRS by the Ministry of
Agriculture for that year amounted to EUR 280 million.

(227) As a consequence, the French authorities consider that the
amounts are no longer earmarked for the PRS although the
original heading stands.

(228)

In a case currently before the Court of Justice (1), the Com-
mission notes that the Advocate-General remarked that the
to the existence of a direct
following criteria point
and indissoluble link between a tax and a State aid mea-
sure: (a) the degree to which the aid concerned is funded
by the proceeds of the tax; (b) the degree to which the pro-
ceeds of the tax are earmarked for the aid; (c) the degree,
as shown by the regulations concerned, to which the link
between the proceeds of the tax and their earmarking as
aid is binding; (d) the degree to which and the way in which
the combination between the tax and the aid affects com-
petitive relationships in the (sub-)sector or category of
enterprises concerned.

(229) Considering those criteria relevant, the Commission notes
that, since 1 January 2001, French legislation no longer
refers to the earmarking of the rendering levy for a specific
objective; the levy does not appear, therefore, to have been
earmarked for the financing of the PRS since that date. It
also does not seem possible to establish any link between
the proceeds of the rendering levy and their utilisation for
a specific purpose.

(230) The Commission notes the remarks of the French authori-
ties to the effect that the funds allocated to the PRS have
not been used for purposes other than to finance that ser-
vice. Furthermore, Table 1 shows that the proceeds of the
levy for the 2001 and 2002 tax years (EUR 950 323 981)
and the total amount paid for the PRS (EUR 411 472 078)
are far from equivalent, that this is also true for each of
those years, and that only part of the proceeds of the levy
was intended to finance the PRS, which is a strong argu-
ment that the rendering levy is quite separate from the way
the PRS has been financed since 1 January 2001.

(1) Conclusions of Advocate-General Geelhoed on 4 March 2004 in Case
C-174/02 Streekgewest Westelijk Noord-Brabant (not yet published).

(231)

In addition, the Commission notes that, following the
opening of the investigation, it has not received other
information from the complainants providing clear, defini-
tive backing for their arguments on the subject. The argu-
ments put forward by the complainant have not enabled
the Commission to establish a link between the parafiscal
charge and the aid scheme.

(232) The Commission therefore reaffirms its conclusions under
the closed infringement procedure and concludes that
there is a separation between the rendering levy and the
way the PRS has been financed since 1 January 2001.

2.3.2.3. Conclusions on the two periods

(233) Where the financing of a State aid measure is considered
incompatible with the applicable competition rules, the
Commission must also regard the aid financed as incom-
patible for the whole period during which financing has
failed to comply with the rules. The financing of a State aid
measure in compliance with the rules is an indispensable
condition for it to be found compatible with those rules.

VI. CONCLUSION

(234) The State aid scheme in favour of rendering undertakings,
livestock farmers and slaughterhouses implemented by
France between 1 January 1997 and 31 December 2000 to
fund the public rendering service, financed by a levy on
meat purchases and on products coming from other Mem-
ber States satisfied the Community provisions applicable to
those beneficiaries. The Commission has also established,
however, that there was a breach of Article 90 of the Treaty
as regards the financing of the scheme. For that reason the
Commission cannot state that the scheme was compatible,
since it discriminated between imported products and
national ones.

(235) The Commission considers it appropriate in this case to
adopt a conditional decision by making use of the possi-
bility afforded by Article 7(4) of Regulation (EC)
No 659/1999, which allows it to attach to its positive deci-
sion conditions making it possible for it to recognise the
compatibility with the common market and obligations
enabling it to monitor compliance with that decision.

(236)

In order to make good the breach of Article 90 and elimi-
nate the discrimination retroactively, France must reim-
burse the part of the levy imposed on products coming
from other Member States within a period and under con-
ditions set by the Commission. Making good the breach
would make the aid in question compatible with Article 87
of the Treaty.

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(237) The Commission is laying down the conditions that must
be met for that reimbursement. France therefore must
reimburse the persons liable for payment of the levy the
part levied on meat coming from other Member States
between 1 January 1997 and 31 December 2000 in com-
pliance with the following conditions:

would be the more appropriate one in this case. Such a
possibility could, as provided for in Article 14 of the Regu-
lation, result in the adoption of a final negative decision
with recovery of all the aid granted during the period con-
cerned, which is estimated to amount to EUR 417 080 311.

— France will notify the parties responsible for payment
of the levy individually within a period of not more
than six months from the date of notification of this
decision of their individual right to reimbursement,

— in order to submit a request for reimbursement the
persons liable for payment of the levy must be given a
period that complies with national law, and in any
case not less than six months,

— reimbursement must be made within a maximum
period of six months from the date of submission of
the request,

— the amounts reimbursed must be updated to take
account of interest from the date on which they were
levied up to the date of actual reimbursement. The
interest will be calculated on the basis of the Commis-
sion reference rate laid down by the method used for
setting the reference and discount rates (1),

— the French authorities will accept any reasonable evi-
dence from the parties liable for payment showing the
part of the levy paid on meat coming from other
Member States,

— the right to reimbursement may not be made subject
to other conditions, in particular that of not having
passed on the levy,

— where a levy payer has not yet paid the levy, the French
authorities will formally waive their right to payment
of it, including any interest on arrears,

— the French authorities will send the Commission,
within a period of not more than 20 months from the
date of notification of this decision, a full report show-
ing that the reimbursement measure has been prop-
erly executed.

(238) By letter of 9 December 2004, France gave an undertaking

to comply with these conditions.

(239)

If France failed to fulfil its undertaking regarding those con-
ditions, the Commission could re-open the formal investi-
gation procedure, as provided for in Article 16 of
Regulation (EC) No 659/1999, or refer the matter to the
Court of Justice, as provided for in Article 23 of the Regu-
lation. The Commission considers that the first possibility

(1) Commission communication on the method used for setting the ref-

(240) The State aid scheme which France implemented between
1 January 2001 and 31 December 2002 in favour of ren-
dering undertakings, livestock farmers and slaughterhouses
to finance the public rendering service, financed by a levy
on meat purchases, is compatible with the common mar-
ket under Article 87(3)(c) of the Treaty.

(241) The State aid scheme which France implemented in 2002
in favour of butchers and cutting plants holding specified
risk material (SRM) to finance the public rendering service,
financed by a levy on meat purchases, is compatible with
the common market under Article 87(3)(c) of the Treaty.

(242) The measure in the form of exemption from payment of
the levy on meat purchases in favour of certain undertak-
ings marketing meat, in force from 1 January 1997 to
31 December 2002, constitutes State aid which is incom-
patible with the common market.

(243) The measures covered by this decision have not been noti-
fied to the Commission in accordance with Article 88(3) of
the Treaty and therefore constitute unlawful aid within the
meaning of Article 1(f) of Regulation (EC) No 659/1999.

(244) The Commission regrets that France implemented the mea-

sures in breach of Article 88(3) of the Treaty.

(245) Since the aid in question was implemented without await-
ing a final decision of the Commission, it should be borne
that, in view of the mandatory nature of the rules of pro-
cedure laid down in Article 88(3) of the Treaty, whose
direct effect the Court of Justice recognised in its judg-
ments in Carmine Capolongo v Azienda Agricola Maya (2),
Gebrueder Lorenz GmbH v Germany (3) and Steinicke and
Weinlig v Germany (4), the unlawfulness of the aid con-
cerned cannot be remedied a posteriori (judgment in Fédéra-
tion nationale du commerce extérieur des produits
alimentaires et al v France (5)).

(2) Case 77/72 Carmine Capolongo v Azienda Agricola Maya [1973]

ECR 611.

(3) Case 120/73 Gebrueder Lorenz GmbH v Germany [1973] ECR 1471.
(4) Case 78/76 Steinicke and Weinlig v Germany [1977] ECR 595.
(5) Case C-354/90 Fédération nationale du commerce extérieur des pro-

erence and discount rates (OJ C 273, 9.9.1997, p. 3).

duits alimentaires et al v France [1991] ECR I-5505.

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(246) The Court of Justice has held that where an aid measure, of
which the method of financing is an integral part, has been
implemented in breach of the obligation to notify, the
national courts must in principle order reimbursement of
charges or contributions levied specifically for the purpose
of financing that aid. The Court has also held that it is the
responsibility of the national courts to safeguard the rights
of individuals faced with any breach, by the national
authorities, of the prohibition on the implementation of
aid which is referred to in the last sentence of Article 88(3)
of the Treaty and has direct effect. Such a breach, relied on
by the individuals who may contest its legality and estab-
lished by the national courts, must induce them to draw
the necessary consequences,
in accordance with their
law, concerning both the validity of the acts
national
involving the implementation of the aid measures con-
cerned and the recovery of
support
granted (1).

the financial

(247) The Commission has no details of the way in which reim-
bursements of the levy made or to be made on that basis
will actually lead to full reimbursement, in particular of any
levy on meat from other Member States.

(248) Where unlawful aid is incompatible with the common
market, Article 14(1) of Regulation (EC) No 659/1999
provides that the Commission will decide that the Mem-
ber State concerned should take all necessary measures to
recover the aid from the beneficiary. This reimbursement
is necessary for re-establishing the ex ante situation by abol-
ishing all the economic advantages from which the benefi-
ciary of the unlawfully granted aid was able to benefit
improperly since the date the aid was granted.

(249) France must recover the incompatible aid in the case under
consideration, in particular that in favour of undertakings
which are exempt from payment of the levy on meat pur-
chases. The total amount of aid to be recovered comprises
amounts paid in the form of exemption from payment of
a levy on meat purchases in favour of certain undertakings
marketing meat during the period concerned.

(251) The aid must be reimbursed in accordance with the proce-
dure laid down by French law. The amount will include
interest from the date on which the aid was paid up to the
date on which it is actually recovered. It will be based on
the Commission reference rate calculated by the method
used for setting the reference and discount rates (2).

(252) This Decision is without prejudice to the consequences the
Commission will draw, where appropriate, regarding the
financing of the common agricultural policy by the Euro-
pean Agricultural Guidance and Guarantee Fund (EAGGF),

HAS ADOPTED THIS DECISION:

Article 1

1.
The State aid scheme in favour of rendering undertakings,
livestock farmers and slaughterhouses which France implemented
between 1 January 1997 and 31 December 2000 to fund the pub-
lic rendering service, financed by a levy on meat purchases and on
products coming from other Member States, is compatible with
the common market under Article 87(3)(c) of the Treaty, on con-
dition that France fulfils the undertakings set out in paragraph 4
of this Article.

The State aid scheme in favour of livestock farmers imple-
2.
mented by France between 1 January 1997 and 31 December
2000 to fund the public rendering service, financed by a levy on
meat purchases and on products coming from other Member
States,
common market under
Article 87(3)(c) of the Treaty, on condition that France fulfils the
undertakings set out in paragraph 4 of this Article.

compatible with the

is

The State aid scheme in favour of slaughterhouses imple-
3.
mented by France between 1 January 1997 and 31 December
2000 to fund the public rendering service, financed by a levy on
meat purchases and on products coming from other Member
States,
common market under
Article 87(3)(c) of the Treaty, on condition that France fulfils the
undertakings set out in paragraph 4 of this Article.

compatible with the

is

France shall reimburse the persons liable for payment of the
4.
levy on meat purchases the part levied on meat coming from
other Member States between 1 January 1997 and 31 December
2000. This shall be done in full compliance with the following
conditions:

(250) Article 14(2) of Regulation (EC) No 659/1999 provides for
the aid to be recovered to include interest at an appropri-
ate rate fixed by the Commission. This interest will be pay-
able from the date on which the unlawful aid was available
to the beneficiary.

— France shall notify the persons liable for payment of the levy
individually, within a maximum of six months from the date
of notification of this decision, of their individual right to
reimbursement,

(1) Judgment of the Court in Van Calster et al referred to above.

erence and discount rates.

(2) Commission communication on the method used for setting the ref-

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L 176/29

— in order to submit a request for reimbursement the persons
liable for payment of the levy shall be given a period that
complies with national law, and in any case not less than six
months,

— reimbursement shall be made within a maximum period of
six months from the date of submission of the request,

— the amounts reimbursed shall be updated to take account of
interest from the date on which they were levied up to the
date of actual reimbursement. The interest shall be based on
the Commission reference rate calculated by the method used
for setting the reference and discount rates,

— the French authorities shall accept any reasonable evidence
from the parties liable for payment showing the part of the
levy paid on meat coming from other Member States,

— the right to reimbursement may not be made subject to other
conditions, in particular that of not having passed on the
levy,

— where a levy payer has not yet paid the levy, the French
authorities shall formally waive their right to payment of it,
including any interest on arrears,

— the French authorities shall send the Commission, within a
maximum period of 20 months from the date of notification
of this decision, a full report showing that this Article has
been properly implemented.

This Article shall be without prejudice to rights of reim-
5.
bursement of the levy on meat purchases which payers of the levy
may have under other provisions of Community law.

on meat purchases, is compatible with the common market under
Article 87(3)(c) of the Treaty.

3.
The State aid scheme which France implemented between
1 January 2001 and 31 December 2002 in favour of slaughter-
houses to finance the public rendering service, financed by a levy
on meat purchases, is compatible with the common market under
Article 87(3)(c) of the Treaty.

The State aid scheme which France implemented in 2002 in
4.
favour of butchers and cutting plants holding SRM to finance the
public rendering service, financed by a levy on meat purchases, is
compatible with the common market under Article 87(3)(c) of the
Treaty.

Article 3

The measure in the form of exemption from payment of the levy
on meat purchases in favour of certain undertakings marketing
meat, in force from 1 January 1997 to 31 December 2002, con-
stitutes State aid which is incompatible with the common market.

France shall take the necessary steps to recover the aid paid to
beneficiaries under this scheme. The total amount of aid to be
recovered shall be updated to take account of interest from the
date on which the aid was paid up to the date on which it is actu-
ally recovered. The interest shall be based on the Commission ref-
erence rate calculated by the method used for setting the reference
and discount rates.

Article 4

France shall inform the Commission within two months of noti-
fication of this decision of the measures taken to comply with it.

Article 2

Article 5

1.
The State aid scheme which France implemented between
1 January 2001 and 31 December 2002 in favour of rendering
undertakings to finance the public rendering service, financed by
a levy on meat purchases, is compatible with the common mar-
ket under Article 87(3)(c) of the Treaty.

The State aid scheme which France implemented between
2.
1 January 2001 and 31 December 2002 in favour of livestock
farmers to finance the public rendering service, financed by a levy

This Decision is addressed to the French Republic.

Done at Brussels, 14 December 2004.

For the Commission
Mariann FISCHER BOEL
Member of the Commission