2008/136/EC: Commission Decision of 22 June 2006 on the ad hoc financing of Dutch public service broadcasters C 2/2004 (ex NN 170/2003) (notified under document number C (2006)2084) (Text with EEA relevance)
Date: 2006-06-22
Institutions: European Commission
Subjects: Netherlands, State aid, application of EU law, broadcasting, control of State aid, financing, public service

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II

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

DECISIONS

COMMISSION

COMMISSION DECISION

of 22 June 2006

on the ad hoc financing of Dutch public service broadcasters C 2/2004 (ex NN 170/2003)

(notified under document number C (2006)2084)

(Only the Dutch text is authentic)

(Text with EEA relevance)

(2008/136/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Whereas:

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

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

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

Having regard to their comments,

(1) OJ C 61, 10.3.2004, p. 8.

I.

PROCEDURE AND BACKGROUND

1

PROCEDURE

(1)

(2)

In the course of 2002 (2) and 2003 (3) the Commission
received several complaints alleging that the public funding
system in place for Dutch public broadcasters constitutes
unlawful and incompatible state aid within the meaning of
Article 87(1) of the EC Treaty.

the preliminary investigation of

the
In the course of
complaints, the Commission received additional informa-
tion from the complainants (4), as well as the Dutch
authorities (5).

(2) By letter of 24 May 2002 from CLT-UFA S.A. and the associated
subsidiaries RTL/Holland Media Groep S.A. and Yorin TV BV; by
letter of 10 October 2002 from SBS Broadcasting; by letter of
28 November 2002 from VESTRA.

(3) By letter of 3 June 2003 from the Dutch Newspaper Publishers
Association and by letter of 19 June 2003 from publishing company
De Telegraaf.

(4) By letters of 29 June 2002, 28 October 2002, 21 February 2003 and

two letters dated 19 June 2003.

(5) By letters of 12 September 2002 and 18 September 2002,

in
response to an information request from the Commission of 24 June
2002.

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(3)

(4)

(5)

(6)

Following the preliminary assessment of the alleged aid
measures, the Commission informed the Netherlands, by
letter dated 3 February 2004, that it had decided to initiate
the procedure laid down in Article 88(2) of the EC Treaty
with respect to certain measures which could be qualified as
new aid.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (6).
The Commission invited interested parties to submit their
comments on the aid.

The Netherlands
responded to the decision to open
proceedings by letter dated 30 April 2004. Moreover, the
Commission received comments
from 11 interested
parties (7). By letter of 29 April 2004 the Commission
forwarded the comments to the Netherlands. The reaction
by the Dutch authorities was received by letter dated
13 August 2004.

(8)

(9)

state

through annual

aid No. E-5/2005).

In addition to this procedure on ‘new aid’, the financing of
the public service broadcasters
state
payments
and the Stimulation Fund (Stifo, Stichting
Stimuleringsfonds Nederlandse Culturele Omroepproducties) (8)
is being assessed in a separate ‘existing aid’ procedure
In this Decision the
(cf.
Commission refers to the measures which are the object
of the ‘existing aid procedure’ only insofar as necessary to
provide an overall picture of
the financing of public
broadcasting. This Decision does not, however, concern the
issue of compatibility with state aid rules of the regular
annual payments and of the payments from the Stimulation
Fund.

This Decision will also be limited to assessing the financing
of the public service broadcasters' core activities (the so-
like the new media
called main tasks). Side activities,
services,
the provision of SMS and i-mode, are not,
therefore, examined. Similarly, this Decision will not deal
with the investment by NOS in the network operator
Nozema, which according to complaints might not have
been done on market terms. These issues will be dealt with
separately.

The Commission asked additional questions to the Dutch
authorities by letters of 4 January 2005 and 25 May 2005,
to which the Dutch authorities responded by letters of
27 January 2005 and 25 July 2005. Further information
was received from one of the complainants (De Telegraaf) on
25 July 2005 and from the Dutch authorities on
2 September. The Commission asked the Dutch authorities
for further clarification by e-mails on 22 November 2005,
to which the authorities responded on 25 November 2005.
The Commission decided after a meeting with the
authorities that further clarification was necessary. To this
end a request
to the Dutch
for information was sent
authorities on 22 December 2005, to which the Dutch
authorities, having been granted a delay, responded on
3 February 2006. Regarding this reply further e-mails were
exchanged between the Dutch authorities and the Commis-
sion in February 2006 and April 2006.

(10) Finally,

the decision to open the formal

investigation
procedure covered the procedure as from 1992. Never-
theless, it appears that the first ad hoc payments were made
only in 1994. Furthermore, figures up to 2005 are now
available and should be taken into account. The period
covered by the decision would therefore range from 1994
— when the first ad hoc payment was made — to 2005, the
last year for which final figures are available. It should be
noted that the Dutch authorities invited the Commission
also to take into account 2006. However, the figures for
2006 are only provisional and cannot, therefore, be taken
into account.

(7) A meeting between the Dutch authorities and the
Commission took place on 24 September 2004. A meeting
with De Telegraaf
took place on 27 October 2004. A
meeting with Broadcast Partners took place on 5 January
2005. A meeting between RTL and the Commission took
place on 27 July 2005 and between VESTRA and the
Commission on 23 September 2005. The Commission had
another meeting with the Dutch authorities on 1 February
and 14 February 2006.

(6) See footnote 1.
(7) Association of Commercial Television in Europe (ACT), by letter
dated 15 April 2004; Arbeitsgemeinschaft der öffentlich-rechtlichen
Rundfunkanstalten der Bundesrepublik Deutschland (ARD), by fax
dated 8 April 2004; Broadcast Partners, final version by letter dated
27 April 2004; CLT-UFA, RTL/HMG and Yorin (hereinafter ‘CLT-
UFA’), by letter dated 14 April 2004; De Telegraaf, by letter dated
5 April 2004; Groep Nederlandse Dagbladpers, by letter dated
21 April 2004; Publieke Omroep, by letter dated 21 April 2004; SBS
Broadcasting BV, by letter dated 26 April 2004; Branchevereniging
van Nederlandse kabelbedrijven (VECAI) by letter dated 8 April
2004; Vereniging van Commerciële Radio (VCR), by letter dated
13 April 2004.

2

DETAILED DESCRIPTION OF THE PUBLIC

BROADCASTING SYSTEM

(11) Section 2.1 of this Chapter presents the actors in the
(public) broadcasting sector. This is followed in section 2.2
by a description of the different elements of the financing
system for the Dutch broadcasting sector in general. In
connection with this, the legal provisions entrusting the
broadcasters with a public service mission are described,
the different financing mechanisms (annual payments and
ad hoc payments) are spelled out and, finally, the reserves
the public broadcasters have built up and use for the
fulfilment of their public service mission are explained. The
commercial activities of the Dutch public broadcasters are
then discussed in section 2.5. Section 2.6 explains the
acquisition of football rights by the NOS and section 2.7
deals with the relation between broadcasters and cable
operators. Finally, section 2.8 sets out which measures are
the subject of this procedure.

(8) Case NN 32/91 approved by the Commission in July 1991.

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2.1

Actors in the (public) broadcasting sector

2.2

Statutory regulation of public service

broadcasting

(12) The public service broadcasting system consists of different
organisations, including eight private associations (private
broadcasters with members entrusted with a public service
mission) and ten private foundations (private broadcasters
without members entrusted with a public service mis-
sion) (9).

(13) Besides the broadcasters mentioned in paragraph 12, the
public service broadcasting system includes another actor
— the NOS — which performs a dual role. The first role is
that of a public service broadcaster, responsible for TV and
radio programmes (under the name of ‘NOS RTV’). The
second role is that of coordinator of the entire public
service broadcasting system and is carried out by the
management board of the NOS (the so-called ‘Publieke
Omroep’ hereinafter ‘PO’). The PO, whose functions and
tasks are enshrined in the Media Act, stimulates cooper-
ation between public broadcasters, coordinates the three
public TV channels and reports twice a year on the public
broadcasters' activities to the Media Authority.

(14) The NOS receives funding from the media budget for both
the tasks performed as PO and those performed as NOS
RTV.

(15) The public service TV-programmes are broadcast by the
public service broadcasters over three public channels (10).

(16) The Dutch Broadcast Production Organisation (Nederlands
Omroepbedrijf, hereinafter ‘NOB’) is also part of the public
broadcasting system. The NOB carries out the recording,
transmission preparation and actual transmission of sound,
moving pictures and data to all possible distribution
channels. The NOB provides these services to commercial
broadcasters and public service broadcasters. The services
provided to the public service broadcasters are considered
as public services by the Dutch government and are
publicly funded (11).

(17) A separate foundation (Stichting Ether Reclame, hereinafter
‘STER’) is exclusively responsible for the sale of advertising
space and the broadcasting of advertising on the public
channels. The STER is responsible for the broadcasting time
which it has been allocated. The revenues generated by the
STER are transferred directly to the State.

(18)

In addition to the national public service broadcasters, there
are several commercial broadcasters operating on a national
level. Examples of these commercial broadcasters are RTL
(RTL 4, 5 and 7, all from the CLT-UFA group), SBS6, NET5
and Veronica (from the SBS Broadcasting group) and Talpa
(Talpa Media Holding). They generate their revenues mainly
through TV advertising.

(9) The associations with members are KRO, AVRO, NCRV, EO, TROS,
BNN, VARA and VPRO. The organisations without members are:
NPS, Teleac/NOT, RVU, VKZ, RKK, HOS, NMO, OHM, NIK, BOS.

(10) Nederland 1, 2 and 3.
(11) Cf. Article 90 of the Media Act.

(19) The broadcasting sector is currently regulated by the Media
Act of 21 April 1987 (Stb. 1987, 249) and the Media
Decree. Public broadcasters are allowed by law to perform
four categories of activities, which are defined in the current
Media Act as ‘main task’,
‘side activities’ and
‘association activities’. The public broadcasters are eligible
for state funding for the ‘main task’ and ‘side tasks’.

‘side tasks’,

2.2.1 Legal definitions

Main tasks

(20) Article 13(c)(1) of the Media Act describes the ‘main task’ of

the public service broadcasting as being:

a)

b)

c)

to ensure a pluralistic and high quality offering of
programmes for general broadcast in the areas of
information, culture, education and entertainment on
level and transmitting
national, regional and local
those or having them transmitted on open channels;

to perform all activities relating to the offering of
programmes and the transmission necessary in that
respect;

to broadcast programmes destined for countries and
areas outside the Netherlands and for Dutch citizens
staying abroad.”

(21) Article 13c(2) of the Media Act lays down the general
requirements for the programmes to be broadcast by the
public broadcasters. The programmes must ‘give an image of
society in a balanced way and of interests and viewpoints on
society, culture and philosophy within the population; and

a.

b.

the programmes have
population in the relevant areas;

to be accessible

to the whole

they contribute to pluralism and cultural diversity within the
Netherlands (…)’.

(22)

In addition, the total programming time which should be
allocated to different categories, such as culture, education,
is regulated by means of prescribed
and entertainment,
percentages (12).

limited to,

(23) Article 16 of the Media Act provides that certain tasks shall
be performed by the NOS RTV and lays down the details of
these tasks. The provision of sports coverage, including, but
not
and
international events is covered. The percentage of total
broadcasting time which should be devoted to such sports
events is not pre-determined by statute. In practice the NOS
RTV aims to devote 9-11 % of total broadcasting time to
sports programmes (13).

competition and cup matches

(12) Cf. Articles 50 and 54 of the Media Act.
(13) See the NOS's Policy Plan 2000-2010.

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(24) Broadcasting associations are entitled to broadcasting time
for the provision of national TV-programmes and have the
right, under Article 31(4) of the Media Act, to receive state
funding for providing the programme.

the obligations are not
Authority can impose fines if
respected.
It also checks whether the broadcasters are
complying with the legal restrictions on sponsoring and
advertising.

Side tasks

(25)

In accordance with Article 13c(3) of the Media Act, which
was introduced in 2000, the public broadcasting system
‘can also fulfil its task, as mentioned in the first paragraph, by
providing means of
supply and distribution of programme
materials, other than those included within paragraph (1)(a)’. In
other words, the public service broadcasters can broadcast
the public service content, mentioned in paragraph 20 as a
main task, on other media platforms, such as the Internet.

(32) On the basis of the accountants' reports submitted, the
Authority checks every year whether the annual accounts
of the public broadcasters comply with the requirements of
the Media Act,
the Media Decree and the Financial
Reporting Manual. If they do, the Authority approves the
budgeted amounts
regular programme provision
(Articles 100 and 101 of the Media Act).

for

2.3

Sources of funding of public service

broadcasters

(26) These so-called ‘side tasks’ must comply with a number of
conditions. According to Article 55 of the Media Act, for
example, they must not serve to make profits for third
parties. Maintaining a website or a theme channel are
examples of these side tasks.

(33) The public service broadcasters' main sources of funding
are the annual payments received by the State. In order to
absorb budgetary fluctuations, public service broadcasters
are allowed to keep certain reserves. In addition, the public
service broadcasters have, since 1994, received ad hoc
payments.

(27)

It should also be mentioned that the exploitation of both
the ‘main’ and the ‘side’ tasks generate revenues for the
public service broadcasters to be used for public service
purposes (14).

Side activities and association activities

(28) The Dutch public service broadcasters can also perform
activities which are defined as side activities and association
activities. Side activities (15) must comply with a number of
such side activities
statutory conditions. Examples of
include the sale of programme guides, sponsoring, sale of
programme rights and programme-related material, leasing
office space and organising drive-in shows.

(29) Other activities are the ‘association activities’, which are
activities performed by the broadcasting associations for
their members. They include publishing magazines, and
organising and selling travel arrangements.

2.2.2 Entrustment and supervision

(30) An independent Media Authority (Commissariaat voor de
Media)
is responsible for ensuring compliance with the
programming and financial requirements of the Media Act
and the implementing legislation (Article 9 of the Media
Act).

(31) The Media Authority has a legal duty,

laid down in
Article 134 of the Media Act, to ensure that the public
broadcasters fulfil their obligations, including the quota laid
types of programmes. The Media
down for different

(14) Sponsoring, but also revenues from sales of tickets, subscriptions,
SMS service etc. (See Financial Reporting Manual, version 2005,
p. 18).

(15) Introduced in the Media Act by an Act of 5 July 1997.

(34) Since the assessment of the compatibility of the ad hoc
funding cannot be carried out without taking into account
the following
the other
description covers both the annual payments and the
ad hoc payments, even though the annual payments and the
payments from the Stifo are not subject to this Decision
(see paragraph 8).

sources of public funding,

2.3.1 Annual payments

(35) The Dutch public broadcasters receive annual

financial
contributions from the State's media budget. Over the
period 1994-2005, these payments totalled approximately
€7,1 billion. From this amount, approximately €819,6 mil-
lion was transferred to the PO for its management and
coordinating role; the remaining €6,3 billion was paid to
the individual broadcasters. The media budget is funded
from several sources: the State Broadcasting Contribution
(collected from taxpayers), advertising revenues from STER
and interest revenues from the General Broadcasting Fund
(Algemene Omroepreserve, hereinafter ‘AOR’) (16). The level of
the media budget sets a ceiling on the amount of annual
funding that could be made available to the public
broadcasters and the other media organisations.

2.3.2 Stifo

(36)

In addition to the annual payments, the public broadcasters
have received payments from Stifo (Stimulation Fund for

(16) The AOR is a reserve which is earmarked for public broadcasting and
which is managed by the Media Authority. The AOR serves to cover
deficits caused by lower advertising revenues during the financial
year. It also acts as a reserve in the event of the liquidation of a public
broadcaster which does not have any reserves of its own, and serves
as a current account between the Minister and the Media Authority.
Finally, the AOR in general covers the extra costs incurred as a result
of price increases. The annual payments take the price increase into
account only two years after the increase. The AOR acts as a buffer
for that period.

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Cultural Productions). The funds granted from Stifo qualify
as a state aid measure, but the measure was approved by the
Commission (NN 32/91). The Stifo aid measure is thus to
be considered as existing state aid. The Stifo payments to
the individual public service broadcasters (the PO did not
receive any payments from Stifo) amounted to €155 million
in the period under review.

2.3.3 Ad hoc p a y m e n t s

(37)

In addition to the transfers mentioned in paragraphs 34 and
35 — which are considered to be the public service
broadcasters' regular sources of funding, the public broad-
casters were granted several payments on an ad hoc basis.
These were either made directly to the broadcasters or
channelled through special funds and reserves.

2.3.3.1 Matching funds payments

(38) The matching funds are an earmarked part of the media
budget. In the period 1996-1998, an amount of € [...] (*)
million was transferred from the matching funds to NOS
RTV. The matching funds were introduced in 1996 to co-
finance increased programme right prices. The conditions
under which the funds can be distributed were adopted by
mutual agreement between the State and the public
broadcasters. If the public broadcasters are unable to fund
the purchase of rights which have increased excessively in
price from their regular budget, the State will make a
contribution, i.e. co-finance the acquisition of these rights
by providing a matching amount.

2.3.3.2 Broadcasting Reserve Fund (FOR) payments

(39)

In 1998 the Minister of Education, Culture and Science was
given the possibility, under Article 106a of the Media Act,
of transferring money on an ad hoc basis from the AOR,
to a fund
which is managed by the Media Authority,
intended to finance specific initiatives of the PO and the
public service broadcasters. The fund, referred to as the
FOR, was established in 1999 and is controlled by the PO.

(40) The principle is that, if the AOR exceeds €90,8 million,
there is scope for a transfer to the FOR. This, however, is
not an automatic process. Each year
the Minister of
Education, Culture and Science decides whether a transfer is
possible and if so, how much can be transferred. Where
such a transfer is approved, the rules are laid down in a
protocol. Such protocols were established in 1999 and
2001. On the basis of Article 99 2(d) of the Media Act, the
budget must also contain a description of how the Board of
Management proposes to spend the money. Based on this
proposal, the Minister can then make available to the PO
funds from the FOR, which can be used for purposes

established by the Minister when making the money
available (17). Although the FOR is a fund dedicated to PO
initiatives, it is not a reserve that is part of the assets of the
PO.

(41) The funds available in the FOR make it possible for the PO
to give a qualitative impetus, improve programming and
invest
in general. More
in the public broadcasters
specifically, the goal of the FOR is to:

— offset reduced STER advertising income;

— strengthen the variety and quality of programming

where this involves extra initial costs; and

— fund investments which support Dutch public service

broadcasting as a whole.

(42) By 2005 the public broadcasting system had received
€191,2 million from the FOR, of which €157,4 million was
transferred to the individual public service broadcasters and
€33,8 million to the PO.

2.3.3.3 Co-Production Fund (CoBo) payments

(43) The Co-Production Fund (Coproductiefonds Binnenlandse
Omroep: hereinafter ‘CoBo Fund’) was created to finance
co-productions between Dutch public broadcasters and
other programme producers.
Its income comes from
revenues generated by the copyright payments paid by
Belgian and German cable operators for the distribution of
the three Dutch channels in Belgium and Germany. The
Fund was established by the public broadcasters and is
managed through a foundation. The board of the Fund
consists of managers from the public broadcasters.

(44)

In 1994 the Dutch authorities decided to make payments to
two sub-funds managed by the CoBo Fund, the ‘Film Fund’,
which finances co-productions of films and documentaries,
and the ‘Telefilm’ project, which aims to stimulate the
production of high-quality television films.

(45) The

individual public

received
€31,7 million of public money from the CoBo Fund in
the period 1994-2005. The PO did not
receive any
payments from the CoBo Fund.

service broadcasters

2.4

The reserves held by the individual

broadcasters

(46) Each public service broadcaster maintains certain reserves,
which are, typically, a programme reserve and either an
association or a foundation reserve, depending on whether
the public service broadcaster
is a foundation or an
association.

(*) Covered by the obligation of professional secrecy.

(17) Letter of 24 February 2006, pp. 3 and 4.

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2.4.1 Programme reserves

(47)

Individual public service broadcasters are allowed to
increase their reserves when total revenues exceed total
costs. These programme reserves can be used to cover
programme costs in future years.

of that moment, in principle (18), the profits generated by
association activities and other non-public activities had to
be used for public service activities and could no longer be
transferred to the association reserves. In 2005 the public
service broadcasters
in the Netherlands had a total
association reserve of approximately €131,1 million.

(48) According to the Dutch authorities,

the value of pro-
grammes which have been produced but not yet broadcast
is added to the programme reserves (17). The programme
reserves thus also reflect the value of programmes already
produced. In 2005 the total programme reserves held by
the individual public broadcasters amounted to €78,6 mil-
lion.

2.4.3 Foundation reserve NOS RTV and smaller broad-

casters

(51) The NOS RTV, NPS and other smaller broadcasters without
members (Article 39f of the Media Act) hold a ‘foundation’
reserve’ (‘stichtingsreserve’). The overall level of the founda-
tion reserves was €42,2 million in 2005 (19).

(49)

In 2005 the PO also decided that part of the programme
reserves should be transferred to the PO itself, but the
broadcasters were allowed to maintain reserves of up to
5-10 % of their annual budget. The public broadcasters
transferred to the PO an amount of €42,457 million.

2.4.2 Association reserves

(50) The public service broadcasting associations originated as
private law entities. Over the years they have built up their
own association reserves from contributions and legacies
received from their members. The association reserves thus
originated from private resources.
In 1993 the Dutch
government decided to ‘freeze’ the association reserves. As

2.5

Advertising on public service channels

(52) As explained in paragraph 17, the STER is responsible for
selling advertising time on public service channels.

(53) The other main companies selling TV advertising time
which are active on the Dutch market are IP and SBS. IP
sells advertising time on behalf of the commercial broad-
casters RTL4, RTL5 and Yorin. SBS sells advertising time for
its commercial broadcasters SBS6, Net 5 and Veronica. In
addition to IP and SBS there are a few other commercial
broadcasters who also sell advertising time (20). The rates
charged by the STER are calculated on the basis of forecasts
from advertising agencies, competitors' rates and price
history.

(54) Table 1 below shows the evolution of the audience share of the public service broadcasters for which
STER manages the sale of advertising. The audience share of viewers aged 13+ has declined in recent
years from 38,8 in 1997 to 35,4 % in 2005. For the 20-49 category, the audience share is even lower, at
27,2 %.

Table 1:

Audience share 13+ and 20-49 years old (18.00h - 24.00h), 1997 - 2005

1997

1998

1999

2000

2001

2002

2003

2004

2005

13+

38,8

39,9

37,8

39,8

38,8

37,9

36,8

38,9

35,4

20-49

34,6

35,8

31,6

33,3

33,0

32,5

30,1

31,8

27,2

Source:

Letter of 24.2.2006 from Dutch authorities.

(17) Letter of 27 January, telephone conversation of 3 February 2005 and

(NOS) and €39,119 million (PO).

response to additional request on 25 July 2005.

(20) Like for example Talpa, Nickelodeon, Jetix, TMF and MTV.

(18) There have been a few exceptions to this rule. Some transfers to the
association reserves have been made in cases were previously
association reserves had been used for the financing of public service
activities. See also paragraph 141 ff.

(19) The Foundation Reserves are €2,288 million (NPS), €0,832 million

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(55) Since 1994, the gross revenue (based on list prices) and net revenue (taking into account discounts
granted) generated by the commercial broadcasters on the advertising market have exceeded the revenue
generated by the public broadcasters.

Table 2:

Gross revenues from TV advertising 1994 - 2005 (amounts x €1 million)

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

STER

327

298

225

234

257

290

348

343

383

489

581

471

Commercial
broadcasters

360

438

532

629

715

887 1 028 1 084 1 310 1 623 2 034

2 327

Total

687

736

757

863

972 1 177 1 376 1 426 1 693 2 112 2 615

2 798

Source:

Letter of 24.2.2006 from Dutch authorities.

Table 3:

Net revenues from TV advertising, 1994 - 2005 (amounts x €1 million)

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

STER

223

202

153

150

176

187

218

197

197

197

197

169

Commercial
broadcasters

239

281

324

378

405

448

508

484

520

537

549

599

Total

462

483

477

528

581

635

726

683

717

733

746

768

Source:

Letter of 24.2.2006 from Dutch authorities.

(56) As can be inferred from Tables 1, 2 and 3, there is a difference between gross revenues from TV
advertising and revenues net of discounts. According to the Dutch authorities, not only are the published
tariffs of the public service broadcasters higher, but also the discounts that they grant are lower in
comparison with commercial broadcasters (21).

2.6

Acquisition of football rights by the NOS RTV

2.7

Relation between broadcasters and cable

operators

(57) During the period under

investigation the NOS RTV
obtained broadcasting rights for several important football
events (22). The commercial broadcaster Canal+ (pay-TV)
obtained the rights for the live matches of the Dutch
premier league. The rights for the Champions League were
also partly sublicensed to Canal+ by the NOS RTV. The
commercial broadcaster SBS obtained the broadcasting
rights of two national football cups. It also obtained the
rights
to the Dutch first division matches and the
qualification matches of the Dutch team for the European
Championship 2004. The broadcasting rights for various
foreign football competitions are held by CLT-UFA,
Europe's largest broadcasting group (the parent company
of e.g. RTL).

(21) Cf. letter of 23 February.
(22) These include the final

round of

the 2002 World Cup,

the
Champions League 2002/2003, the summary/highlights rights for
the Dutch premier
the 2004 European
league 2003/2004,
Championship, most of the European cup matches involving Dutch
clubs, and the 2006 World Cup. Some of these events appear on the
list of events in the Media Decree, pursuant to Directive 97/36 of the
European Parliament and of the Council (OJ L 307, 30.07.1997,
p. 60).

(58) Traditional cable transmission is

seen as a separate
publication for the purpose of copyright under Dutch
law. In principle, the permission of all copyright holders is
required, and the copyright holder may claim a payment
from the cable operator for the publication. Since 1985
there has been an agreement between the VECAI
(representing the cable operators) and the NOS RTV
(representing the public broadcasters) under which the
cable operators are exempted from making copyright
payments to the public broadcasters (the copyright holders)
when their programmes are transmitted via cable (23). This
agreement was made at
the Dutch
Government, on the grounds that citizens already paid a
contribution for public broadcasting. It was considered that
a copyright payment from cable operators, which could

the request of

(23) Letter of the Dutch authorities dated 18.9.2002.

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result in higher cable subscription fees, would be undesir-
able. Commercial broadcasters have not asked for copyright
payments from the cable operators either. However, this is
not related to the aforementioned agreement with the
public service broadcasters.

(59)

It should be noted that cable operators are legally obliged to
transmit all
radio and TV
programmes (‘must carry’ obligation) and cannot charge
broadcasters for the transmission costs.

the public broadcasters'

2.8

The measures subject to this Decision

(60) As set out in the decision to open the formal investigation
procedure (24), the following measures are the subject of
this Decision:

(1) The payments to the broadcasters, referred to in
Article 106a and 170c of the Media Act, which are
categorized by the Commission as ad hoc payments.
These are:

(62) Regarding the proportionality of the funding, the Commis-
sion doubted whether costs and revenues were allocated
according to clearly established cost accounting principles.
The Commission doubted whether non-public service
revenues were fully taken into account when calculating
the need for state funding, leading to a risk of funding going
beyond the net costs of the public service.

(63) Furthermore, the Commission considered that the level of
funds in the FOR and the programme reserves was an
indication of structural over-compensation. The Commis-
sion noted that, of the total ad hoc payments, an amount of
€110 million (based on figures of 2001) had not been used.

(64) Moreover,

the Commission expressed its intention to
investigate whether competition in commercial markets
had been unlawfully distorted. The Commission stressed
that such distortion of competition could occur in the
markets for advertising,
intellectual property rights for
cable transmission and football transmission rights.

(a)

(b)

payments to the public service broadcasters
made either from the matching funds or from
the AOR, via the FOR. In the period 1994-2005
these payments
totalled €[...] million. This
amount can be divided into payments made
from the matching funds (€[...] million) and
payments made from the AOR to the FOR and
subsequently from the FOR to the public
broadcasters (€191,2 million).

payments from the Co-production Fund (CoBo).
The CoBo Fund consists of two specific sub-
funds, the Film Fund and the Telefilm project. In
the period 1994-2005 the State
granted
€31,7 million to the public broadcasters via
the CoBo Fund.

(2)

Ensured access to the cable, known as the ‘must carry’
obligation, laid down in Article 82i of the Media Act.

(3)

Provision of technical facilities by NOB free of charge,
provided for in Articles 89 and 90 of the Media Act.

II.

GROUNDS FOR INITIATING THE PROCEDURE

AND ARGUMENTS OF THE PARTIES

3

SUMMARY OF THE GROUNDS FOR INITIATING

THE PROCEDURE

(61) After its initial investigation, the Commission concluded
that certain measures, with the possible exception of the
‘must carry’ obligation, constituted state aid within the
meaning of Article 87(1) of the EC Treaty. The Commission
also expressed doubts about the compatibility of such state
aid under Article 86(2) of the EC Treaty.

(65) Finally,

the NOB is not allowed to charge the public
the services it provides, but receives
broadcasters for
payments
task directly from the State. The
Commission noted that the provision of technical facilities
free of charge could constitute aid to the public broad-
casters.

this

for

4.

COMMENTS FROM INTERESTED PART IES

(66) The following comments relevant for this Decision were

provided.

(67) The Dutch public broadcasters argued that the measures in
question should be considered existing aid because they
constitute part of the general financing system for public
broadcasting. Moreover, they remarked that the Commis-
sion should assess the financing of public broadcasting only
in the light of
the Protocol on the system of public
broadcasting in the Member States, annexed to the EC
Treaty (hereinafter ‘Amsterdam Protocol’), and should not
apply the criteria of the Altmark judgment (25) or Arti-
cle 87(1) or 86(2) of the EC Treaty.

(68) CLT-UFA noted that it was not until 2002 that the accounts
of the public service broadcasting system could be verified
and approved by an independent accountant.

the public broadcasters

(69) The public broadcasters commented that there is no over-
compensation of €110 million as stated by the Commis-
sion. First of all,
and the
government work with different accounting systems. The
government works on a cash receipts basis of accounting
and the public broadcasters work on the basis of costs and
revenues which are entered in the accounts at the moment
of the transaction. This causes discrepancies. In addition,
the FOR are, according to the public
the revenues of

(24) See footnote 1.

(25) Case C-280/00 Altmark Trans [2003] ECR I-7747.

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broadcasters, earmarked for specific future goals. Moreover,
they commented that the excess financing cannot lead to
distortions in other markets, as this financing can only be
used for the public service activities.

(70) ACT stated that STER behaves in an anti-competitive
manner by undercutting prices in the advertising market. It
argues that since the total annual advertising time of public
broadcasters is more limited than that of commercial
broadcasters, the STER should charge higher prices than
commercial operators.

(71) SBS Broadcasting confirmed that prices in the Dutch
television advertising market are set for GRP (Gross Rating
Point) category 20-49. However, as the public broadcasters
attract more viewers than commercial broadcasters outside
this viewer group, advertisers would be willing to pay a
premium on the GRP 20-49. Therefore, a comparison of
the GRP 20-49 would not convey the economic reality of
the product. Moreover, SBS remarked that
for GRP
13+ public broadcasters set lower prices than commercial
broadcasters. To support
its comments SBS submitted
overviews of the average gross GRP 13+ prices for the
different channels during prime time in 1995-2004 and per
month in 2003 and 2004, which show that those of public
broadcasters are lower than those of most commercial
operators.

(72) According to CLT-UFA the NOS RTV has paid excessive
prices for football rights. The prices were far above market
prices. CLT-UFA submitted calculation models (26) to show
football rights and
how they calculate the prices for
concluded on this basis that the bid made by the NOS RTV
for the rights for the Champions League matches of 2002
was significantly higher than that made by CLT-UFA. ACT
and CLT-UFA considered, moreover, that the Commission
should not reach the conclusion that there is insufficient
evidence of overpayment of football rights on the basis of
one example where a commercial operator may have
overbid.

(73) The association of cable operators, VECAI, raises two issues.
First of all, it considers that the cable operators who are
subject to the ‘must carry’ obligation should be able to ask
for a payment from the relevant broadcasters. Due to the
‘must carry’ obligation, the public broadcasters have not
paid a fee for the transmission of the signal over the cable
networks.

(74) Secondly, VECAI argued that the cable operators actually do
pay a fee to the organisations which manage rights on
behalf of the NOS RTV, but the NOS RTV and the Dutch
Government regard this as a management fee. According to
the VECAI it is a fee for intellectual property rights in
disguise.

(26) This calculation model considers a number of factors in calculating
the potential
revenue which can be earned from the sports
transmission rights: expected growth of expenditure in the whole
television market and the expectations regarding potential advertis-
the
ing revenue following meetings with advertisers;
broadcasting of
the
commercial broadcaster (strategic positioning considerations); num-
ber of Dutch clubs (for international events such as the Champions
League).

impact of
the sports event on the market share of

5.

COMMENTS FROM THE DUTCH AUTHORITIES (27)

(75) The Dutch authorities

that

the Commission's
state
assumption that the relevant measures are not part of the
regular, annual financing of the public broadcasters as part
of the state funding is erroneous. The financing which is the
from the regular
subject of
financing mechanism and was an integral part of
the
budget planning which led to the payments to the public
broadcasters. According to the authorities, the FOR, the
matching funds, the CoBo Fund and the payments to the
NOB are part of the regular, annual financing mechanism.

the investigation stems

(76) The Dutch authorities finally remind the Commission that
the assessment should take into account the specific context
in which the public service broadcasters operate. The
authorities request the Commission to take into account the
Amsterdam Protocol. If necessary, the subject of the present
procedure should be qualified as compatible aid within the
meaning of Article 86(2) of the EC Treaty, within the
context of the principles laid down in the Amsterdam
Protocol.

(77) The amount provisionally indicated by the Commission as
possible over-compensation is erroneous. This was inferred
from the resources of funds which were wrongly qualified
as reserves. Since the use of these funds is pre-determined
and is subject to control there cannot be over-compensa-
tion. Moreover, the authorities argue that if the measures
concerned are deemed to be state aid, the aid should be
considered to be existing state aid within the meaning of
Article 88(1) of the EC Treaty.

(78) The Dutch authorities point out that the accounts of the
individual public broadcasting associations have always
been subject to approval by an independent accountant.

(79) The Dutch authorities consider that broadcasts of popular
and less popular sports fall within the definition of the
main task of the public broadcasters. The Dutch authorities
consider that, when determining their bid for transmission
rights, public broadcasters did not pay more than was
necessary to secure the acquisition of important rights in
relation to their public service mission and overall
programming.

(80) The authorities reiterate that the public service mission of
the NOB is part of the public broadcasting system. The fact
that NOB does not charge the public broadcasters for the
service it provides does not imply that aid is granted to the
public service broadcasters.

(27) Summary of the response dated 30 April 2004, by the Dutch
investigation
to the decision to open the formal

authorities
procedure.

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(81) The Dutch authorities state that, given that the commercial
operators do not demand copyright payments from cable
operators either, the NOS RTV could be said to be acting as
a normal market operator in the circumstances of this
particular market.

considered that the transfer of state resources takes place
when the payments are made from the FOR to the
individual broadcasters. This is a transfer of state resources,
which is moreover imputable to the State (28).

III.

ASSESSMENT OF THE MEASURES UNDER STATE

AID RULES

(87)

In the period under investigation the public broadcasters
received an amount of €191,2 million from the FOR and
an amount of €[...] million from the matching funds.

6.

EXISTENCE OF AID WITHIN THE MEANING OF

CoBo Fund payments

ARTICLE 87(1) OF THE EC TREATY

(82) Article 87(1) of

the Treaty lays down the following
conditions for the presence of state aid. First, there must
be an intervention by the State or through state resources.
Second, it must confer an advantage on the recipient. Third,
it must distort or threaten to distort competition. Fourth,
the intervention must be liable to affect trade between
Member States.

6.1

Presence of state resources

6.1.1 Ad hoc p a y m e n t s

(83) The payments referred to in Articles 106a and 170c of the
Media Act, which are categorized by the Commission as
ad hoc payments, can be divided into matching fund
payments, FOR payments and CoBo Fund payments.

Matching fund payments

(84)

In the case of the matching funds, money is first set aside
within the AOR — which is a fund whose resources are
owned by the State and managed by the Media Authority
— for the purpose of matching certain types of higher than
foreseen expenditure of public service broadcasters. In a
second step,
represented by the
matching funds of
the AOR are transferred to the
NOS RTV.

the state resources

FOR payments

(85) The payments made by the FOR fund are considered state
resources. Although the FOR is a fund administered and
managed by the PO, the money comes from the AOR,
which is part of the media budget.

(88) The payments by the CoBo Fund are considered state
resources. As described in paragraph 43, the money in the
CoBo Fund comes from direct contributions from the
media budget and the revenues generated by the copyright
payments paid by Belgian and German cable operators for
the distribution of the three Dutch channels in Belgium and
Germany. The Commission takes the view that not only the
direct contributions from the media budget, but also the
copyright payments can be considered state resources.
Indeed, the copyright payments should have been used to
finance the public service costs of the broadcasters. Setting
them aside in the CoBo Fund had the effect of increasing
the need for public funding proportionally. The copyright
payments are therefore equivalent to resources forgone by
the State.

(89) Moreover, although the CoBo Fund is owned and managed
by a foundation (the board of which is governed by the
public service broadcasters), the transfers from the CoBo
Fund are only made available to the public service
broadcasters under conditions which are determined by
the State.

(90) The public service broadcasters received an amount of
€31,7 million from the CoBo Fund in the period under
investigation. This is a transfer of state resources to the
individual broadcasters.

6.1.2 Free access to cable

(91) The ‘must carry’ obligation imposed on cable operators
does not involve any transfer of state resources, nor can the
forgone revenues of cable operators be regarded as
constituting a transfer of state resources (29). The Commis-
sion has no information to suggest otherwise. Accordingly,
the preliminary view that the measure does not constitute a
state aid within the meaning of Article 87(1) of
the
EC Treaty can be confirmed.

(86) More importantly, as described in section 2.3.3.2, the PO
distributes the money on the basis of agreements that are
made in advance on the use of FOR money. Although it is
the PO which proposes how the money should be used, it is
the Minister of Education, Science and Culture who ‘adopts
the proposal’ and establishes for which purposes the money
can be used. The PO can only take the decision to spend the
money once the Minister has established the criteria for the
distribution of the money. The PO has to take into account
the rules laid down by the Minster. It can therefore be

6.1.3 Free technical facilities from the NOB

(92) The public company NOB receives payments from the State
is obliged to deliver to the public
for the services it
broadcasters. These payments involve the direct transfer of

(28) Cf. Case C-482/99 French Republic v Commission [2002] ECR I-4397,

paragraph 55.

(29) Cf. Case C-379/98 PreussenElektra [2001] ECR I-2099, para-

graphs 54 ff.

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state resources. They ultimately benefit the public broad-
casters who get the services free of charge (30). Indeed the
Dutch authorities themselves have stated that the NOB
simply acts as a ‘vehicle’ for transferring state funding to the
public service broadcasters who receive the services of the
NOB.

means of production so as to be able to meet the
necessary public service requirements, would have
incurred in discharging those obligations, taking into
account the relevant receipts and a reasonable profit
for discharging the obligations.

6.2

Economic advantage

(93) The ad hoc

financing (payments to FOR and via the
matching funds), the transfers to the CoBo Fund and the
provision of free technical facilities provide an economic
advantage to the Dutch public service broadcasters, in the
sense that these measures relieve them from operating costs
that they would otherwise have to bear.

6.2.1 Applicability of the Altmark judgment

(94) The Dutch Government and the public broadcasters have
argued that the measures under investigation compensate
the public broadcasters for the net costs of discharging their
public service mission. This would imply that the measures
would therefore not provide an advantage to public service
broadcasters and not constitute aid, in line with the Altmark
judgment (31).

the EC Treaty if

(95) State measures compensating for the net additional costs of
a SGEI do not qualify as state aid within the meaning of
the compensation is
Article 87(1) of
determined in such a way that a real advantage cannot be
conferred on the undertaking. In the Altmark judgment the
Court of Justice laid down the conditions that have to be
satisfied for compensation not to be classified as state aid.
These conditions are as follows:

— first, the recipient undertaking must actually have
to discharge and the

public service obligations
obligations must be clearly defined;

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

— third,

the compensation cannot exceed what

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

the relevant

(96) The Commission considers that in the present case the last
three conditions set out in paragraph 95 are not fulfilled.
First, the transfer of funds from the FOR, the matching
funds and the financial contribution from the CoBo Fund to
the public service broadcasters is not based on objective
and transparent parameters established in advance.

(97) Moreover, neither the ad hoc financing measures nor the
payments from the CoBo Fund take into account all the
relevant receipts of the public service broadcasters. Nor do
they include the necessary safeguards to exclude over-
compensation. Indeed, as will be assessed in more detail
below, the ad hoc funding actually resulted in considerable
over-compensation.

(98) Finally, the Dutch public broadcasters were not chosen as
providers of a SGEI on the basis of a tender, nor was any
analysis carried out to ensure that the level of compensa-
tion was determined on the basis of an analysis of the costs
which a typical undertaking, well run and adequately
provided with the means of production so as to be able to
meet the necessary public service requirements, would have
incurred in discharging those obligations. The same is true
of the financing of the technical facilities made available to
the public service broadcasters by the NOB.

(99) Consequently,

the Commission considers that not all
conditions set out in the Altmark judgment are fulfilled in
this case.

6.3

Distortion of competition

(100) The advantage provided by the ad hoc

the
financing,
transfers to the CoBo Fund and the provision of
free
technical facilities to the Dutch public service broadcasters
are not available to any other undertaking in a comparable
situation. Given that competition is distorted whenever
the
state aid reinforces
beneficiary undertaking vis-à-vis
the
advantage is capable of distorting competition between
the public service broadcasters and other undertakings (32).

the competitive position of
its competitors,

— fourth, where the undertaking which is to discharge
public service obligations, in a specific case, is not
chosen in a public procurement procedure, the level
of compensation needed must be determined on the
basis of an analysis of
the costs which a typical
undertaking, well run and adequately provided with

6.4

Affecting trade between Member States

(101) When state aid strengthens the position of an undertaking
compared with other undertakings competing in intra-
Community trade, the latter must be regarded as affected

(30) Cf. Case C-126/01 GEMO [2003] ECR I-13769, paragraph 44.
(31) Cf. Case C-280/00 Altmark Trans, cited above, paragraph 95.

(32) See Case 730/79 Philip Morris [1980] ECR 2671, paragraph 11.

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by that aid (33) even if the beneficiary undertaking is itself
not involved in exporting (34). Similarly, where a Member
State grants aid to undertakings operating in the service
and distributive industries, the recipient undertakings need
not themselves carry on their business outside the Member
State for the aid to have an effect on Community trade (35).

(102) In line with this case law the 2001 Communication from
the Commission on the application of state aid rules to
‘the Broadcasting
public service broadcasting (hereinafter:
Communication’) (36) explains that:

‘Thus, state financing of public service broadcasters can
generally be considered to affect trade between Member
States. This is clearly the position as regards the acquisition
and sale of programme rights, which often take place at an
international level. Advertising, too, in the case of public
broadcasters who are allowed to sell advertising space, has a
cross-border effect, especially for homogeneous linguistic
areas across national boundaries. Moreover, the ownership
structure of commercial broadcasters may extend to more
than one Member State (37).’

(103) In the present case, the Dutch public broadcasters are
themselves active on the international market. Through
their membership of the European Broadcasting Union
they can exchange television programmes and participate
in the Eurovision system. Moreover, their programmes are
broadcast
the
Dutch public broadcasters are in direct competition with
commercial broadcasters that are active on the interna-
tional broadcasting market and that have an international
ownership structure.

in Belgium and Germany. Furthermore,

(104) The Commission concludes on these grounds that the
ad hoc financing, the funds provided to the CoBo Fund and
the provision of free technical facilities are such as to affect
trade between Member States within the meaning of
Article 87(1) of the EC Treaty.

6.5

Conclusion

(105) Since all conditions laid down in Article 87(1) of the
EC Treaty are fulfilled and the conditions set out by the
Court of Justice in the Altmark judgment have not been met
in their entirety, the Commission concludes that the ad hoc
financing (financing from FOR and the matching funds),
the funds granted through the CoBo Fund and the
provision of free technical services and facilities to the
Dutch public broadcasters must be deemed to be state aid
within the meaning of Article 87(1) of the EC Treaty. On
the other hand, the advantage deriving from free access to
the cable network does not involve a transfer of state
resources and does not constitute state aid.

(33) See Case 730/79 Philip Morris, cited above, paragraph 11 and
Case 259/85 French Republic v Commission [1987] ECR 4393,
paragraph 24.

(34) Case C-75/97 Belgium v Commission (Maribel bis/ter) [1999] ECR

I-3671, paragraph 45.

(35) Case C-310/99 Italian Republic v Commission [2002] ECR I-2289,

paragraph 66.

(36) OJ C 320, 15.11. 2001, p. 5.
(37) See Broadcasting Communication, paragraph 18.

7.

CLASSIFICATION MEASURES AS ‘NEW’ AID

(106) Pursuant to Article 1(b) of the Council Regulation (EC)
No 659/99 of 22 March 1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (38),
‘existing aid’ means, inter alia:

‘(i) …, all aid which existed prior to the entry into force
of the Treaty in the respective Member States, that is
to say, aid schemes and individual aid which were put
into effect before, and are still applicable after, the
entry into force of the Treaty’.

(107) As stated before, a distinction may be made between the
this

the subject of

annual payments, which are not
Decision, and the ad hoc payments.

7.1

Annual payments

(108) The annual payment are made on the basis of Article 110
of the Media Act, which states that ‘entities which have
been awarded time to broadcast are entitled to funding
from the general budget’. The level of funding and the
availability are laid down in the same Media Act. This
system of funding existed prior to the entry into force of
the Treaty and is regarded as existing aid, as acknowledged
by the Commission in procedure E-5/2005 (39).

7.2

A d h o c payments

(109) The ad hoc payments possess a number of characteristics
which distinguish them from the regular annual payments
and argue against their classification as existing aid:

— The legal base for the payments was established after the
entry into force of the Treaty. It was only in 1996 that
the State introduced the possibility,
through the
matching funds, of matching expenditures made by
the public broadcasters in the event of an excessive
price increase for programme rights. Before 1996, the
possibility of matching the payments made by the
public broadcasters did not exist. Similarly,
the
amendment to the Media Act that makes it possible
to make ad hoc payments from the FOR to the
individual broadcasters was introduced in 1998. As
for the state contribution to the CoBo, it was only in
1994 that the State decided to contribute to this
Fund.

(38) OJ L 83, 27.3.1999, p. 1. Regulation as amended by the Accession

Treaty of 2003.

(39) For a complete assessment see the Article 17 letter from the
Commission to the Dutch authorities E-5/2005, dated 3 March
2005.

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— The actual payments were only made as of 1994. More
specifically, payments from the CoBo Fund were made
as of 1994, from the matching fund as of 1996, and
from the FOR as of 1999.

— Contrary to the regular annual

funding,

funding is

the ad hoc
payments cannot be deemed to be payments to which the
public service broadcasters are entitled. The payment of
thus not an automatic
the ad hoc
process (40). These payments take place upon request
from the individual public service broadcasters and
are granted after a specific and individual decision
made by the Minister of Culture based on Article 106a
of the Media Act. In the case of FOR, for example, the
Minister decides, while taking into account the level of
the FOR, whether funds should be transferred from
the AOR to the FOR.
is then the PO which
It
distributes the money further on the basis of rules laid
down in Protocols.

8.

COMPATIBILITY OF THE AID UNDER

ARTICLE 86(2) OF THE EC TREATY

(112) On the basis of the characteristics of the measures the only
possible grounds for compatibility is Article 86(2) of the
EC Treaty which states that: ‘undertakings entrusted with the
operation of services of general economic interest (…) shall be
subject to the rules contained in this Treaty, in particular to the
rules on competition, insofar as the application of such rules does
not obstruct the performance, in law or in fact, of the particular
tasks assigned to them. The development of trade must not be
affected to such an extent as would be contrary to the interests of
the Community’.

(113) The Court of Justice has consistently held that Article 86(2)
of the EC Treaty may provide for a derogation from the ban
on state aid for undertakings entrusted with a SGEI. The
Court's Altmark judgment implicitly confirmed that state
aid that compensates
incurred by an
undertaking for the provision of a SGEI can be found to
be compatible with the common market if it meets the
conditions of Article 86(2) of the EC Treaty (41).

the costs

for

— The conditions under which the transfers can take
place are laid down in ‘Transfer Protocols’ established
in 1999 and 2002. As in the case of the CoBo Fund,
the State lays down certain conditions for payments
to and from the Fund which only date back to 1994.

to broadcasters

— Finally, the funding is granted for specific purposes, as
indicated in section 2.3.3. These include giving an
to produce better pro-
impetus
grammes,
in advertising
revenues, matching increased prices of sports rights
and stimulating co-productions with Belgian and
German broadcasters.

absorbing fluctuations

7.3

Free technical facilities

(110) The public service broadcasters have received free technical
facilities from the NOB since the entry into force of the
Media Act 1987. In that year the NOB started providing
facilities
to the public service broadcasters, whereas
originally these facilities had been provided by the NOS.
The NOB has been entrusted with a service of general
economic interest. It provides the facilities to the individual
public service broadcasters free of charge and receives
payments from the State directly. This measure can thus
also be considered to be a new aid measure.

7.4

Conclusion on the classification as ‘new aid’

(111) The ad hoc financing (payments from the FOR to the
individual public broadcasters and from the matching
funds), the transfers from the CoBo Fund and the provision
of free technical facilities should all be deemed to be new
aid rather than existing aid.

(114) In line with settled case-law of the Court of Justice (42),
Article 86(2) of the EC Treaty constitutes a derogation that
should be interpreted restrictively. The Court has made
clear that, in order for a measure to qualify for such a
derogation, all of the following conditions must be fulfilled:

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

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

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

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

— the broadcasting activities of Dutch public broad-
casters are clearly and precisely defined by the Dutch
authorities as a service of general economic interest
(definition);

(41) Cf. Altmarkcited above, paragraphs 101-109.
(42) Cf. e.g. Case 127/73 BRT/SABAM [1974] ECR 313, parag-

(40) Letter of 13 May 2004 from the Dutch authorities, see Chapter F.6.

raphs 19-22.

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— the Dutch public broadcasters are officially entrusted
by the Dutch authorities with the provision of that
service (entrustment);

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

8.1

Definition

(116) In this context, it should be mentioned that the ad hoc
financing and the free provision of technical facilities were
designed to support activities which are part of the general
public service remit. An assessment of the overall level of
funding of the public service broadcasters is thus necessary,
but, with the exception of the specific measures referred to
above,
the
mechanism and conditions under which state funding is
provided. Nor does this Decision concern the organisation
of the public service broadcasting system as a whole.

this Decision does not

intend to assess

(117) As stated in paragraph 33 of the Broadcasting Commu-
nication, it is for the Member States to define the public
service remit of a public broadcaster. Given the specific
nature of the broadcasting sector, however, the Commis-
sion considers ‘a “wide” definition entrusting a given broadcaster
with the task of providing balanced and varied programming in
accordance with its remit, to be legitimate under Article 86(2)
EC, in view of the interpretative provisions of the Protocol. Such a
definition would be consistent with the objective of fulfilling the
democratic, social and cultural needs of a particular society and
guaranteeing pluralism, including cultural and linguistic diversity’.

(118) Although the definition may be broad,

it should be
sufficiently clear and precise to leave no doubt as to
whether a given activity performed by the entrusted
operator is intended by the Member State to be included
in the public service remit or not. As stated in paragraph 36
the
of
Commission is limited to checking whether the public
service definition in the broadcasting sector contains any
manifest error.

the Broadcasting Communication,

the role of

(119) The main task of the Dutch public broadcasters is to
provide high quality and varied programmes for general
broadcast on the public channels, in the general interest, as
laid down in Article 13c of
the Media Act. Specific
programming requirements relating to the categories of
content to be covered and the amount of broadcasting time
to be devoted to each category are also contained in the
legislation.

(120) CLT-UFA stated that the Dutch public broadcasters broad-
cast too much sport in general and too much football in
particular. The complainants claimed that the NOS RTV

the majority of all

in the
broadcasts
Netherlands. As stated above, the ad hoc financing was
intended to finance activities which are part of the general
public service remit and were thus also meant for the
acquisition of sports rights.

sports events

(121) The Commission is of the opinion, however, that broad-
casting sports programmes, within a limit of around 10 %
of total broadcasting time, does not constitute a manifest
error. Sports can be part of the broadcasters' public service
mission, and devoting 10 % of broadcasting time to sports
is not inconsistent with the remit of offering a balanced and
varied public service programming mix.

(122) The Commission is of the opinion that the main task, as
defined in Article 13c(1) of the Media Act, is rather broadly
defined, but can be considered to meet — in accordance
with the wording of
the Amsterdam protocol — the
‘democratic, social and cultural needs’ of Dutch society.
Thus, the definition in the legislation is sufficiently clear
and precise in relation to the main task, and does not
contain any manifest errors.

8.2

Entrustment

in order

to benefit

(123) Paragraph 40 of the Broadcasting Communication states
that
from the exemption under
Article 86(2) of the EC Treaty, the public service remit
should be entrusted to the Dutch public broadcasters by
means of an official act. The Commission notes that the
Media Act formally entrusts the NOS with the task of
performing the public service task defined in Article 13c
and the supporting legislation. The public broadcasters are
given the right to broadcast programmes on the public
channels by Article 31 of
the Media Act, and the
Commission considers that the main task of broadcasting
programmes is clearly entrusted to the public broadcasters.

8.3

Proportionality

(124) In Chapter 6.3 of the Broadcasting Communication, it is
explained that the proportionality test that the Commission
must carry out is twofold (43).

(125) On the one hand, the Commission has to calculate the net
cost of the public service task entrusted to the Dutch public
broadcasters and verify whether or not this cost has been
over-compensated. When compensating an undertaking,
the state aid must not exceed the net costs of the public
service mission. To arrive at the net cost, account should
also be taken of other direct or indirect revenues derived
from the public service mission. Therefore, the net benefit
of the exploitation of the public service activities will be
taken into account in assessing the proportionality of the
aid.

(43) Cf. Broadcasting Communication paragraphs 57 and 58.

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(126) On the other hand, the Commission has to investigate any
information at its disposal suggesting that public broad-
casters have distorted competition in commercial markets
more than is necessary for the fulfilment of the public
service mission. For example, a public service broadcaster,
in so far as lower revenues would be covered by the state
aid, might be tempted to depress prices of advertising or of
other non-public service activities on the market, so as to
reduce the revenue of competitors. Such a practice would
require additional state funding to compensate for the
revenues forgone from commercial activities and would
therefore indicate the presence of over-compensation of
public service obligations.

(130) However, the Commission notes that the Decree does not
determine how the public broadcasters have to allocate
costs that are shared by the public service and the non-
Information from the Dutch
public service activities.
that
authorities confirms, moreover,
the public broad-
to allocate costs. The
casters use different methods
authorities argue that on an individual level the allocation
is correct, but that due to the choices individual broad-
casters make regarding the allocation, the allocation may
differ from one broadcaster to the other. The Commission
finds, however, that the fact that there is no consistency
between the different broadcasters is an indication that the
Decree does not
sufficiently prescribe how the cost
allocation should take place.

8.3.1 Transparency and cost-allocation

(127) The Commission first needs to determine the cost of the
SGEI. As the Dutch public broadcasters also carry out non-
public service activities, they are required by Commission
Directive 80/723/EEC of 25 June 1980 on the transpar-
ency of financial relations between Member States and
public undertakings (44), as amended by Commission
Directive 2000/52/EC (45), to keep separate accounts for
the different activities carried out. Costs and revenues must
be correctly assigned on the basis of clearly established,
objective cost accounting principles. Costs that are entirely
attributable to public service activities, while benefiting also
commercial activities, need not be apportioned between
the two and can be entirely allocated to public service (46).

(131) Therefore, on the basis of the information submitted by the
Dutch authorities, it cannot be concluded that the costs are
correctly allocated on the basis of accepted cost-allocation
methods. Consequently, the Commission considers that all
the net revenues of the commercial activities of the public
in
service broadcasters should be taken into account
determining whether state funding has been proportional
to the public service costs. This is also consistent with the
Dutch legislative framework that applies to the public
service broadcasting system and which obliges broadcasters
to use for public service purposes all of their profits,
including those from commercial activities (49).

8.3.2 Proportionality of public funding

(128) The Transparency Directive has been implemented in the
Netherlands through an amendment of the Competition
Act (‘Mededingingswet’) (47). Moreover, a special Decree (48)
obliges public broadcasters to keep separate accounts for all
side activities and association activities. On the basis of this,
the Dutch authorities have provided information on the
costs and revenues of public broadcasters in the period
1994-2005.

(132) According to paragraph 57 of the Broadcasting Commu-
nication, state aid must not exceed the net costs of the
public service incurred by the broadcaster. Thus, after
having determined the net costs of the public service it has
to be established whether the total amount of state funding
does not exceed this figure.

(129) Under

the Transparency Directive, Member States are
required to ensure not only that separate accounts are kept
for public service and non-public service activities, but also
that all costs and revenues are correctly allocated on the
basis of consistently applied and objectively justifiable cost
accounting principles and that the cost-allocation princi-
ples according to which the separate accounts are
maintained are clearly established.

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

2005/81/EC (OJ L 312, 29.11.2005, p. 47).

(45) OJ L 193, 29.7.2000, p. 75.
(46) Cf. Broadcasting Communication paragraphs 53-56.
(47) Cf. Article 25a of the Dutch Competition Act.
(48) Decree of the Secretary of State of 13 June 2001, which includes the

annex ‘Financial Reporting Manual’.

the net revenues of all

(133) If a complete or meaningful cost allocation has not taken
the activities that have
place,
benefited directly or indirectly from public funding have to
be taken into account for the calculation of the net public
service costs (50). Only the revenues of the commercial
‘stand-alone’ activities do not have to be taken into account
in establishing the net costs of the public service mission.
These are activities which have not benefited directly or
indirectly — for example by way of cheaper production
inputs — from state funding or which have paid the full
value of inputs which they share with or result from the
public service activity.

(49) The figures provided by the Dutch authorities show that in the
period under investigation the commercial activities of public service
broadcasters were generally been profit-making.

(50) Cf. Broadcasting Communication, paragraphs 55 and 56.

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the concept of

(134) In the Dutch public service broadcasting system, there is
neither
‘stand-alone’ activities nor a
meaningful and complete allocation of resources between
different activities of broadcasters. Moreover, the Media Act
stipulates that all
the net revenues of main and side
tasks (51), side activities and association activities (52) have
to be used for
the public service
the fulfilment of
mission (53).

(135) Consequently, the net costs of the public service activities
are determined by taking into account the revenues from
all activities of
the public service broadcasters. The
calculation is therefore as follows:

— first, the net costs of the public service are determined
by deducting from the total costs of providing the
public services, the net revenues derived from the
exploitation of
the public service (main and side
tasks) (54);

— second, all other net commercial revenues are taken

into account (side and association activities);

the annual

— third, all the forms of public funding are added up.
First,
state financing and the Stifo
payments which are considered to be ‘existing aid’
measures. Then the ad hoc financing (payments from
the FOR and the matching funds) and payments from
the CoBo Fund, which are considered as ‘new aid’
measures.

(136) The sum of all the above items determines whether or not
the total state funding exceeds the total net public service
costs or, in other words, whether or not there has been
over-compensation of the public service tasks.

in the assessment of

(137) As regards the free provision of technical services and
facilities by the NOB, the measure should, in principle, be
taken into account
the over-
compensation. However, it is not necessary to explicitly
include the measure in the calculations, since the benefits
from the free technical service can be considered to be
compensating costs that would otherwise have had to be
financed. Thus, having to pay the costs in question would
have increased by the same amount the costs of the public
service entrusted to the Dutch public broadcasters. The

(51) Revenues from intellectual property rights, revenues from SMS,
sponsoring, advertising, sales of tickets, etc. This can be inferred
from the aforementioned Financial Reporting Manual, which lays
down the accounting rules and principles as they should be applied
by the individual public broadcasters (Version 2005, Model VII,
page 18).

(52) Revenues from side and association activities consist of:

(1)

(2)

(3)

(4)

Revenues from association activities: these are generally in the
form of contributions by members, revenues from association
magazines and legacies received;
revenues from capital: these are revenues from interest, leasing
and holdings;
revenues from programme magazines: revenues from publish-
(magazines with programme
ing programme magazines
details, reviews, advertising, etc.);
revenues from other activities: revenues from sales of CDs and
DVDs, sales of programme formats.

(53) Letter by Dutch authorities in the context of case E-5/2005, dated

2 June 2005 and registered on 7 June 2005.

(54) Cf. paragraph 26.

inclusion of these costs would therefore not alter the final
net result (55).

8.4

Decision to initiate the procedure and period

under investigation

(138) In the decision to initiate the procedure, the Commission
quantified over-compensation, on a preliminary basis, as
€110 million. The calculation was based on incomplete
figures on the actual amount of transfers to the reserves
and of the level of reserves held by the public service
broadcasting system as
a whole during the years
1992-2002. The authorities had not at the time provided
complete data on individual broadcasters.

(139) After initiating the procedure the Commission received the
cost and revenue figures of the individual broadcasters,
which are more detailed than the overall figures provided at
the time of the opening of the procedure. Moreover, the
new information provides actual data up to 2005 and also
includes an estimate for 2006.

(140) This Decision concerns the ad hoc payments which were
paid as of 1994 and covers the period up to 2005. As
regards the end date, the Dutch authorities invited the
Commission to take into account the figures from 2006
too. However, the Commission does not consider this to be
appropriate, since figures from 2006 are only estimates for
the ongoing budget year.

8.4.1 Assessment of the compensation of the individual

public service broadcasters

(141) It appears that 14 out of the 19 public service broadcasters
were over-compensated in the period 1994-2005. The
over-compensation generated €32 million profits, which
were generally transferred to their programme reserves.

(142) However, in some cases part of the over-compensation was
used to balance under-compensation in the period before
1994. At the beginning of 1994 some broadcasters had a
negative programme reserve (56). Broadcasters were only
allowed to register negative programme reserves when the
public service costs exceeded the various sources of public
service funding.
In other words, negative programme
reserves could only result from under-compensation of
public service costs.

(143) On the other hand, any possible loss from commercial
activities had to be financed through the association
reserves and could not be reflected in the programme

(55) This is in line with the Commission's position in the decision
regarding the Italian public broadcaster RAI: Commission Decision
of 15 October 2003 on the measures implemented by Italy for RAI
SpA, OJ L 119, 23.4.2004, p. 1.

(56) E.g. VARA had a negative Programme Reserve of €8,5 million at the

beginning of 1994.

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reserves. According to the Dutch authorities, the associa-
tion reserves were built up with private funds.

certain percentage of the annual over-compensation to be
carried forward to the next year. The Commission
recognised this principle in the Danish public broadcasting
case (59).

In 1993,

costs was

(144) There are also cases in which the under-compensation of
temporarily financed with
public
service
association reserves.
the association reserves
were ‘frozen’ by the Dutch authorities; as of that moment,
revenues from public service and commercial activities
could no longer be added to these association reserves.
However, an exception was made for the reimbursement of
payments made out of association reserves before 1994 to
cover for unfunded public service costs. According to the
Dutch authorities, this is the only circumstance in which
funds were still added to these reserves after 1994 (57).

(145) The Commission considers that

the negative amounts
recorded in the programme reserves and the positive
variations of association reserves after 1994 only occurred
as a result of previous ‘under-compensation’ of public
service costs. The consequent balancing of these sums is
the
therefore considered to constitute eligible costs of
public service task. The corresponding amounts therefore
do not have to be taken into account for the establishment
of the over-compensation.

(146) As

the Media Act,

stated in paragraph 141,

the over-compensation
generally flowed into the programme reserves. In 2005
the PO decided for the first time, on the basis of Arti-
cle 19a(1)h and Article 109a of
that
reserves held by the individual broadcasters in excess of 5-
10 % of their annual budget should be transferred to the
PO (58). This transfer is also considered part of the ad hoc
measures and is taken into account in determining the
this
proportionality of
the compensation. As a result,
transfer has reduced the overall compensation of
the
individual public service broadcasters, while increasing the
over-compensation of the PO.

(147) By subtracting — for each year from 1994 to 2005 — the
net cost of the public service from the overall funding
received from the State,
in the way described in
section 8.3.2, the Commission comes to the conclusion
that none of the individual broadcasters has received public
funding in excess of 10 % of its annual budget. Since the
costs of public broadcasting may vary every year, the State
may indeed wish for budgetary reasons to keep the
fluctuations in state financing to a minimum and permit a

(57) This applies to AVRO, KRO, NCRV and VARA. Letter from the Dutch

authorities, 30 April, registered on 13 May 2004.

(58) Letter ‘Publieke Omroep’ dated 28 July 2005 sent by the Dutch
authorities on 1 September 2005 (registered 5 September 2005).

(148) In the Danish state aid case the Commission stated that
these reserves must be established for a specific purpose
and that they must be regularised on a fixed date, i.e. being
deducted from the next year's compensation if over-
compensation has been found. Thus, if the over-compensa-
tion does not exceed 10 % of the amount of the annual
compensation, such over-compensation is compatible with
the EC Treaty and may be carried forward to the next
amount of
annual period and deducted from the
compensation payable in respect of that period.

(149) The Dutch authorities have decided that each individual
public service broadcaster can only maintain a dedicated
reserve of a maximum of 5-10 % of its annual budget (60).
In view of this constraint, the PO ordered the transfer of
€42,457 million of reserves from the individual broad-
casters to the PO in 2005. The authorities have also
committed themselves to carrying out regular monitoring
of the reserves and ordering the reimbursement of the
excess amounts above 10 % of the annual compensation as
of 2006 (61). The Commission therefore considers that the
conditions are fulfilled for accepting as compatible an
amount of over-compensation provided that this does not
exceed 10 % of the annual budget of the public service
broadcasters (62).

(150) Since the over-compensation does not exceed the 10 %
margin of the annual budget, it can therefore be considered
justified for the fulfilment of the public service mission and
the aid is thus considered compatible with Article 86(2) of
the EC Treaty.

8.4.2 Over-compensation of the PO

(151) The PO has also received compensation for its role in
managing and coordinating the broadcasting system. The
PO performs this role as a separate organisation, which,
internally, keeps separate accounts. The Dutch authorities
have stated that although the NOS RTV and the PO are
parts of a single legal entity and also present consolidated
accounts, under no circumstances could they have access to
each other's funds.

(59) Commission Decision of 19 May 2004 on measures implemented by
Denmark for TV2/Danmark, OJ L 85, 23.8.2006, paragraph 113.
(60) It is 5 % or 10 % depending on the size of the budget of the

broadcaster.

(61) In the draft proposal for a new Media Act (Media Act 2007), the
Dutch Government has introduced a rule that lays down that the
reserve will be monitored yearly and that any excess reserve (reserve
above 10 % of the annual compensation) has to be transferred back
to the AOR administered by the Media Authority. The Dutch
Government has committed itself — by letter of 4 May 2006 — to
introducing this rule in the Budget law 2006, which guarantees the
application until the adoption of the ‘Media Act 2007’.

(62) In practice 5 % or 10 %, as determined by the Dutch authorities.

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the Commission concludes

(152) On the basis of the separate accounts for the PO and according to the accounting method described
received a total over-compensation of
above,
€55,908 million, not
including the reserves which were transferred in 2005 from individual
broadcasters. The transfer of the reserves amounted to €42,457 million. When this transfer is taken into
account, the total over-compensation of the PO amounts to €98,365 (€55,908 + €42,457) million.

the PO has

that

Overview of annual funding of PO (1994-2005) amounts x €1 million (63)

Table 4:

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Total

Public activity costs

53,1

60,5

61,8

64,6

69,3

77,3

89,0

94,7 100,4

91,2

91,9

95,2 948,9

Public activity
revenues

Net public activity
costs

Net result of com-
mercial activities

Need for public
funding

0

0

0

0,7

3,3

3,5

2,5

2,6

3,4

0,2

0

0

16,2

53,1

60,5

61,8

63,9

66,0

73,8

86,4

92,0

97,0

90,9

91,9

95,2 932,7

5,7

5,9

6,5

7,3

10,7

16,0

13,7

12,0

10,8

13,1

22,3

9,7 133,7

47,5

54,6

55,3

56,5

55,4

57,8

72,7

80,0

86,2

77,8

69,6

85,5 799,0

Annual payments

49,4

55,6

58,3

58,9

62,3

70,7

68,7

74,6

78,6

85,4

78,0

79,3 819,6

Annual payments
from Stifo

Total annual com-
pensation

Result before
ad hoc payments

Payments from FOR

Payments from
matching funds

Payments from CoBo
Fund

Transfer of excess
reserves

Total ad hoc
payments

Extraordinary items

Total over/under-
compensation

0

0

0

0

0

0

0

0

0

0

0

0

0

49,4

55,6

58,3

58,9

62,3

70,7

68,7

74,6

78,6

85,4

78,0

79,3 819,6

1,9

1,0

3,0

2,3

6,9

12,8

- 4,0

- 5,4

- 7,6

7,6

8,4

- 6,2

20,7

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

7,1

6,1

5,2

7,0

5,6

2,8

33,9

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

42,5

42,5

0

7,1

6,1

5,2

7,0

5,6

45,3

76,3

0,9

0

0,2

0,2

0

0

0

1,4

1,9

1,0

3,0

2,3

6,9

13,7

3,1

0,9

- 2,1

14,5

14,0

39,1

98,4

(63) Differences between text and table due to rounding differences.

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(153) In the Commission's view,

the over-compensation of
€98,365 million is not necessary for the functioning of
the public service and it cannot, therefore, benefit from the
Article 86(2) derogation from the prohibition on state aid.
The over-compensation is consequently not considered
compatible aid and should in principle be recovered from
the PO.

(158) Indeed, the commercial agreements between the broad-
casters and the cable operators can take various forms,
particularly in view of the fact that the transaction involves
an exchange of transmission services for availability of
content, which is valuable to both parties. The Commission
finds accordingly that there are no clear indications that the
PO acted contrary to market behaviour and that by
renouncing commercial revenues it increased the need for
state funding.

(154) Nevertheless,

it

appears

the over-compensation
that
exceeds the total ad hoc payments accrued to the PO. The
PO has received €33,870 million as ad hoc payments from
the State's media budget, plus the ad hoc
transfer of
€42,457 million from the other broadcasters. This gives a
total of €76,327 million of payments received from ad hoc
measures.
the ad hoc payments have also
generated interest, which should be taken into account in
determining the amount of funds which were not received
in the context of the ‘existing aid measures’. The recovery
would, therefore, have to be capped at €76,327 million
plus interest, because the ‘remaining’ over-compensation
was granted through existing aid and cannot be recovered.

In addition,

8.5

Anti-competitive behaviour on commercial

markets

(155) As explained in the Broadcasting Communication,

the
Commission is of
the opinion that anti-competitive
conduct by public service broadcasters cannot be con-
sidered necessary for the fulfilment of the public service
mission. In the decision to initiate the formal investigation
procedure the Commission mentioned the following
possible market distortions:

8.5.1 Cable transmission

(156) The model contract concluded between broadcasters and
cable operators in 1985 stipulates, at the request of the
Dutch government, that cable operators do not pay any
intellectual property rights for
transmission of Dutch
public television programmes. It is legitimate to question
whether, by forgoing intellectual property rights payments
from cable operators, the PO acted as a normal market
operator, since it waived commercial income.

(157) The Dutch authorities argue, however, that the fact that the
PO does not claim a fee for intellectual property rights is
not necessarily contrary to market behaviour. After all,
commercial broadcasters do not require a fee from the
cable operators for the transmission of their programmes
either (64).

(64) According to the organisation of cable operators, VECAI, the NOS
does actually receive a payment from the VECAI, although it is not
referred to as such. However, the NOS does not regard this payment
as a fee for intellectual property rights.

8.5.2 Advertising market

8.5.2.1 Alleged undercutting of prices for GRP 20-49

(159) At the opening of the formal investigation procedure, the
Commission did not have sufficient evidence that the STER
had actually undercut prices. Nevertheless, the information
which was submitted after the opening of the investigation
by the complainants and the Dutch authorities has to be
assessed.

(160) Paragraph 58 of the Broadcasting Communication indi-
cates that public service broadcasters might be tempted to
depress the prices of advertising so as to reduce the revenue
of competitors. However, one should keep in mind that the
public broadcasters in the Netherlands do not directly carry
out advertising activities, but the advertising activities are
carried out by a separate organisation, the STER. According
to its mission statement, the STER must exploit the time
available for advertising in such a way as to deliver an
optimal contribution to the central financing of the public
service broadcasters. It functions as an intermediary, with
the job of maximising profits from the sale of
the
advertising space of the public broadcasters. As already
mentioned in paragraph 17,
the
advertising revenues directly to the media budget.

the STER transfers

(161) Any undercutting behaviour by the STER might be inferred
from some or all of the following circumstances: STER's
prices being lower than its competitors', an increase in
market share and loss of revenues for the STER.

(162) First, as the Commission also indicated in the decision to
open the formal
investigation procedure, a comparison
between the prices of the public and private advertising
sales companies could be regarded as a meaningful measure
of the criteria set out in paragraph 58 of the Broadcasting
Communication.

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(163) In order to compare prices, the target group of 20-49 year-olds is the most relevant one. As can be
inferred from Table 5, there are different sub-groups, many of which target viewers in the 20-49 age
range:

Table 5:

Percentage of target GRP's (gross rating points) acquired by the STER in 2004

Target

13+

20-34

35-49

50-64

20-49

Shoppers
20-49

Shoppers
20-49 +
child

Men
20-34

Women
20-34

Acquired

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Source:

Letter of 27.1.2005 from Dutch authorities.

(164) Table 5 indicates that the STER predominantly sells advertising for viewers. Since 1999, the STER's
market share in advertising and the audience reached by the public service broadcasters for the target
group aged 20-49 has decreased. The gross prices charged to the advertisers for the 20-49 target group
were as follows:

Gross prices per GRP for the target group of 20-49 year-olds (18.00h - 24.00h), 1995 - 2005 in €

Table 6:

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

STER

1 470

1 496

1 499

1 315

1 485

1 541

1 562

1 624

1 816

1 932

1 890

Commercial
broadcasters

1 337

1 314

1 366

1 399

1 438

1 637

1 667

1 675

1 753

2 055

2 087

Source:

Letter of 3.2.2006 from Dutch authorities.

(165) On the basis of the data provided above, the STER's list prices for GRP for the 20-49 target group have
been only slightly lower than the commercial broadcaster's list prices. According to the Dutch authorities
the broadcasters and the STER grant quite substantial discounts. The commercial broadcasters seem to
have granted much higher discounts, especially since 1998. These discounts are listed below:

Table 7:

Actual discounts granted in 1994-2005 in %

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

STER

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Commercial
broadcasters

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Source:

Letter of 24.2.2006 from Dutch authorities.

22.2.2008

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Official Journal of the European Union

L 49/21

(166) Even though the STER has a less attractive audience than the commercial broadcasters — it has a low
selectivity and is thus less able to offer a very specific target group — and has a lower audience and
advertising market share (see Table 9 below),
its net prices are higher than those charged by the
commercial broadcasters.

Net prices per GRP for the target group of 20-49 year-olds (18.00h - 24.00h), 1995 - 2005 in €

Table 8:

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

STER

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Commercial
broadcasters

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

(167) From Table 9 it can, moreover, be inferred that there is a clear correlation between the decrease in
audience share and advertising share for the public broadcasting service. There is no evidence that the
STER is increasing its market share by possible price dumping, or even maintaining its market share
despite the decrease in the audience share of its client broadcasters. On the contrary, the STER is losing
advertising market share at a similar pace as the public service broadcasters are losing audience.

Table 9:

Audience and advertising market shares

1998

1999

2000

2001

2002

2003

Commercial broad-
casters' audience

Commercial broad-
casters' advertising

Public service
broadcasters' audi-
ence

Public service
broadcasters' adver-
tising

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Source:

Letter of 3.2.2006 from Dutch authorities.

(168) Finally, there is no evidence of the STER losing advertising revenues in order to increase its market share.

Figure 1:

Development of gross and net revenues

L 49/22

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Official Journal of the European Union

22.2.2008

(169) From Table 7 and Figure 1 it can be concluded that the
STER has offered considerable discounts. Nevertheless,
from Figure 1 it can also be concluded that, despite these
discounts, the net revenues from the sale of advertising
space remained relatively constant. The use of discounts
has not led to a major change in revenues.

(170) Consequently, none of the circumstances which typically
accompany price undercutting behaviour — that is: lower
prices,
increase in market share and temporary loss of
revenues — seems to have taken place in the Dutch
advertising market. Again it should be emphasised that the
STER is a company independent of the public service
broadcasters and its revenues go directly into the media
budget. Accordingly, the Commission must conclude that
there are no indications that the STER has undercut prices
to an extent which has led to an undue loss of revenues
which increased the need for additional state funding of the
public service broadcasting system.

8.5.2.2 Benchmark for advertising prices

(171) SBS Broadcasting BV argued that ‘just the price comparison
between the prices of GRP 20-49 paid to the STER or to
the IP and/or SBS cannot be an exclusive criterion for
establishing whether or not the STER undercuts the price’.

(172) SBS also states that, first of all, advertisers are willing to pay
an additional premium for the GRP 20-49 offered by the
STER because it also reaches people outside the target
group. In addition, the prices of the STER for GRP 13+ (the
category of teenagers) for real delivery are actually much
lower than the prices of the commercial competitors for
GRP 13+. These issues were submitted by the Commission
to the Dutch authorities (65).

(173) Regarding the first issue, it should be made clear from the
outset that marketing companies intend to reach a target
group when advertising their products. Audiences outside
the target group are irrelevant. One of the criteria for
acquiring advertising time is selectivity of
the target
audience. If the advertising slot is not selective, i.e. there
is a lot of so-called ‘waste’ (advertising reaching people
outside the target group), then the advertising slot becomes
less interesting. Due to the fact that the advertising space
sold by STER has a low selectivity — it attracts a broad
range of viewers — it is, according to the Dutch authorities,
actually difficult for the STER to maintain its advertising
tariffs. Secondly, the GRP 13+ is of less importance than
GRP 20-49. The information in Table 5 shows the relatively
low importance of GRP 13+ and clearly indicates that the
GRP 13+ is not decisive when establishing a comparison of
prices. As the Dutch authorities stated, the GRP 20-49 is
much more relevant. The fact that the price of GRP 13+ is
lower at the STER does not in itself prove that there is a
general undercutting of prices by public service broad-
casters.

(65) Letter of 4 January 2005 to the Dutch authorities.

8.5.2.3 Conclusion on advertising

(174) Consequently, despite the fact that the STER has offered
considerable discounts, the total revenue stemming from
advertising space has not decreased but has remained
stable. Having assessed the other arguments and the
answers of
the Commission
concludes that there is currently no evidence that the
STER did not attempt to maximise its advertising revenues
and that its behaviour would have led to an increased need
for state funding.

the Dutch authorities,

8.5.3 Football rights

(175) When it initiated the procedure, the Commission stated
that
there were no clear indications to conclude that
broadcasters paid a price for football transmission rights
which was structurally above the market value. One of the
reasons was that public service broadcasters offered higher
amounts during the negotiations than the commercial
broadcasters were willing to offer. CLT-UFA complained
that the Dutch public broadcasters paid high prices for
football rights. The Commission indicated that it would
assess this situation further.

(176) The subsequent investigation did not provide evidence that
the public broadcasters have outbid the commercial
broadcasters, nor that public service broadcasters have
acquired rights to a football event to an extent liable to
close the market off to the competitors. Indeed, examples
were found of important football rights held by commer-
cial broadcasters during the period under investigation (see
paragraph 55).

(177) However, as no specific anti-competitive practices could be
identified in the present procedure, the issue of whether the
the
system as such offers sufficient safeguards against
possibility of anticompetitive behaviour will be examined
in procedure E-5/2005 on existing aid.

9.

CONCLUSION

(178) For the reasons set out above, the Commission concludes
that there has been over-compensation of the NOS for the
functions it performs as PO amounting to €98,365 million
and that this sum was granted through state aid measures
that cannot be considered compatible with the common
market on the basis of Article 86(2) of the EC Treaty and
should therefore be recovered from the NOS.

(179) Nevertheless, because the over-compensation exceeds the
total ad hoc payments to the NOS for the functions it
performs
total of
as PO, which amounted to a
€76,327 million, the recovery would have to be capped
at €76,327 million plus interest, because the ‘remaining’
over-compensation was granted through existing aid and
cannot be recovered,

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L 49/23

HAS ADOPTED THIS DECISION:

Article 1

1. The ad hoc state aid which the Netherlands has granted to
the NOS for the functions it performs as PO is incompatible with
the common market.

2. The incompatible ad hoc state aid shall be recovered from the
NOS. The amount to be recovered is €76,327 million, plus
interest.

3) The interest to be recovered under paragraph 2 shall be
calculated in accordance with the procedures laid down in
Articles 9 and 11 of Commission Regulation (EC) No 794/
2004 (66).

4) Within two months of the notification of this Decision, the
Netherlands shall enjoin the beneficiary referred to in Article 1 to
reimburse the unlawful and incompatible aid and the interest
due.

Article 3

3. The ad hoc state aid granted by the Netherlands to the
individual public service broadcasters is compatible with the
common market provided that, insofar as such aid results in
over-compensation of the public service mission, the surplus is
held in a special purpose reserve, the amount of which does not
exceed 10 % of the broadcaster's annual budget and provided
that compliance with this limitation is regularly monitored by
the Netherlands.

The Netherlands shall
inform the Commission, within two
months of notification of this Decision, of the measures it has
already taken and plans to take in order to comply with it. It will
provide this information using the questionnaire attached in
Annex 1 of this Decision. The Netherlands shall, within the same
period of time, submit all documents giving evidence that the
recovery proceedings have been initiated against the beneficiary
of the unlawfully granted and incompatible aid.

Article 2

Article 4

1) The Netherlands shall take all necessary measures to recover
from the PO the aid referred to in Article 1 and unlawfully made
available to the beneficiary.

2) Recovery shall take effect without delay and in accordance
with the procedures of national law, provided that they allow the
immediate and effective execution of the decision. The aid to be
recovered shall include interest from the date on which it was
made available to the beneficiaries until the date of its recovery.

This Decision is addressed to the Kingdom of the Netherlands.

Done at Brussels, 22 June 2006.

For the Commission

Neelie KROES

Member of the Commission

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

L 49/24

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Official Journal of the European Union

22.2.2008

INFORMATION REGARDING THE IMPLEMENTATION OF THE COMMISSION DECISION C 2/2004

ANNEX

1.

Total number of beneficiaries and total amount of aid to be recovered

1.1 Please explain in detail how the amount of aid to be recovered from individual beneficiaries will be calculated?

— The principal

— The interest

1.2 What is the total amount of unlawful aid granted under this scheme that is to be recovered (gross aid equivalent;

prices of …):

1.3 What is the total number of beneficiaries from which unlawful aid granted under this scheme is to be recovered:

2. Measures planned and already taken to recover the aid

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

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

3.

Information by individual beneficiary

Please provide details for each beneficiary from whom unlawful aid granted under the scheme is to be recovered in the
table below.

Identity of the beneficiary

Amount of
unlawful aid
granted (*)
Currency: ….

Amounts
reimbursed (°)
Currency:…

(*) Amount of aid put at the disposal of the beneficiary (in gross aid equivalent; in prices of ….).
(°) Gross amounts reimbursed (including interest).