11.1.2012   

EN

Official Journal of the European Union

C 8/4

1.

Services of general economic interest (SGEIs) are not only rooted in the shared values of the Union but also play a central role in promoting social and territorial cohesion. The Union and the Member States, each within their respective powers, must take care that such services operate on the basis of principles and conditions which enable them to fulfil their missions.

2.

Certain SGEIs can be provided by public or private undertakings (1) without specific financial support from Member States’ authorities. Other services can only be provided if the authority concerned offers financial compensation to the provider. In the absence of specific Union rules, Member States are generally free to determine how their SGEIs should be organised and financed.

3.

The purpose of this Communication is to clarify the key concepts underlying the application of the State aid rules to public service compensation (2). It will therefore focus on those State aid requirements that are most relevant for public service compensation.

4.

In parallel with this Communication, the Commission envisages adopting an SGEI-specific de minimis Regulation clarifying that certain compensation measures do not constitute State aid within the meaning of Article 107 of the Treaty (3), and is issuing a Decision (4), which declares certain types of SGEI compensation constituting State aid to be compatible with the Treaty pursuant to Article 106(2) of the Treaty and exempts them from the notification obligation under Article 108(3) of the Treaty, and a Framework (5), which sets out the conditions under which State aid for SGEIs not covered by the Decision can be declared compatible under Article 106(2) of the Treaty.

5.

This Communication is without prejudice to the application of other provisions of Union law, in particular those relating to public procurement and requirements flowing from the Treaty and from sectoral Union legislation. Where a public authority chooses to entrust a third party with the provision of a service, it is required to comply with Union law governing public procurement, stemming from Articles 49 to 56 of the Treaty, the Union Directives on public procurement (Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (6) and Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (7)) and sectoral rules (8). Also in cases where the Directives on public procurement are wholly or partially inapplicable (for example, for service concessions and service contracts listed in Annex IIB to Directive 2004/18/EC, including different types of social services), the award may nevertheless have to meet Treaty requirements of transparency, equality of treatment, proportionality and mutual recognition (9).

6.

In addition to the issues addressed in this Communication, the Decision 2012/21/EU and the Communication from the Commission on EU Framework for State aid in the form of public service compensation (2011), the Commission will answer individual questions that arise in the context of the application of the State aid rules to SGEIs. It will do so inter alia through its Interactive Information Service on Services of General Interest, which is accessible on the Commission’s website (10).

7.

This Communication is without prejudice to the relevant case-law of the Court of Justice of the European Union.

8.

Based on Article 107(1) of the Treaty, the State aid rules generally only apply where the recipient is an ‘undertaking’. Whether or not the provider of a service of general interest is to be regarded as an undertaking is therefore fundamental for the application of the State aid rules.

9.

The Court of Justice has consistently defined undertakings as entities engaged in an economic activity, regardless of their legal status and the way in which they are financed (11). The classification of a particular entity as an undertaking thus depends entirely on the nature of its activities. This general principle has three important consequences:

First, the status of the entity under national law is not decisive. For example, an entity that is classified as an association or a sports club under national law may nevertheless have to be regarded as an undertaking within the meaning of Article 107(1) of the Treaty. The only relevant criterion in this respect is whether it carries out an economic activity.

Second, the application of the State aid rules as such does not depend on whether the entity is set up to generate profits. Based on the case-law of the Court of Justice and the General Court, non-profit entities can offer goods and services on a market too (12). Where this is not the case, non-profit providers remain of course entirely outside of State aid control.

Third, the classification of an entity as an undertaking is always relative to a specific activity. An entity that carries out both economic and non-economic activities is to be regarded as an undertaking only with regard to the former.

10.

Two separate legal entities may be considered to form one economic unit for the purposes of the application of State aid rules. That economic unit is then considered to be the relevant undertaking. In this respect, the Court of Justice looks at the existence of a controlling share or functional, economic and organic links (13). On the other hand, an entity that in itself does not provide goods or services on a market is not an undertaking for the simple fact of holding shares, even a majority shareholding, when the shareholding gives rise only to the exercise of the rights attached to the status of shareholder or member as well as, if appropriate, the receipt of dividends, which are merely the fruits of the ownership of an asset (14).

11.

To clarify the distinction between economic and non-economic activities, the Court of Justice has consistently held that any activity consisting in offering goods and services on a market is an economic activity (15).

12.

The question whether a market exists for certain services may depend on the way those services are organised in the Member State concerned (16). The State aid rules only apply where a certain activity is provided in a market environment. The economic nature of certain services can therefore differ from one Member State to another. Moreover, due to political choice or economic developments, the classification of a given service can change over time. What is not a market activity today may turn into one in the future, and vice versa.

13.

The decision of an authority not to allow third parties to provide a certain service (for example, because it wishes to provide the service in-house) does not rule out the existence of an economic activity. In spite of such market closure, an economic activity can exist where other operators would be willing and able to provide the service in the market concerned. More generally, the fact that a particular service is provided in-house (17) has no relevance for the economic nature of the activity (18).

14.

Since the distinction between economic and non-economic services depends on political and economic specificities in a given Member State, it is not possible to draw up an exhaustive list of activities that a priori would never be economic. Such a list would not provide genuine legal certainty and would thus be of little use. The following paragraphs instead seek to clarify the distinction with respect to a number of important areas.

15.

In the absence of a definition of economic activity in the Treaties, the case-law appears to offer different criteria for the application of internal market rules and for the application of competition law (19).

16.

It follows from the Court of Justice case-law that Article 107 of the Treaty does not apply where the State acts ‘by exercising public power’ (20) or where authorities emanating from the State act ‘in their capacity as public authorities’ (21). An entity may be deemed to act by exercising public powers where the activity in question is a task that forms part of the essential functions of the State or is connected with those functions by its nature, its aim and the rules to which it is subject (22). Generally speaking, unless the Member State concerned has decided to introduce market mechanisms, activities that intrinsically form part of the prerogatives of official authority and are performed by the State do not constitute economic activities. Examples are activities related to:

17.

Whether schemes in the area of social security are to be classified as involving an economic activity depends on the way they are set up and structured. In essence, the Court of Justice and the General Court distinguish between schemes based on the principle of solidarity and economic schemes.

18.

The Court of Justice and the General Court use a range of criteria to determine whether a social security scheme is solidarity-based and therefore does not involve an economic activity. A bundle of factors can be relevant in this respect:

19.

Such solidarity-based schemes must be distinguished from economic schemes (33). In contrast with solidarity-based schemes, economic schemes are regularly characterised by:

20.

Some schemes combine features of both categories. In such cases, the classification of the scheme depends on an analysis of different elements and their respective importance (38).

21.

In the Union, the health care systems differ significantly between Member States. The degree to which different health care providers compete with each other in a market environment largely depends on these national specificities.

22.

In some Member States, public hospitals are an integral part of a national health service and are almost entirely based on the principle of solidarity (39). Such hospitals are directly funded from social security contributions and other State resources and provide their services free of charge to affiliated persons on the basis of universal coverage (40). The Court of Justice and the General Court have confirmed that, where such a structure exists, the relevant organisations do not act as undertakings (41).

23.

Where that structure exists, even activities that in themselves could be of an economic nature, but are carried out merely for the purpose of providing another non-economic service, are not of an economic nature. An organisation that purchases goods — even in large quantities — for the purpose of offering a non-economic service does not act as an undertaking simply because it is a purchaser in a given market (42).

24.

In many other Member States, hospitals and other health care providers offer their services for remuneration, be it directly from patients or from their insurance (43). In such systems, there is a certain degree of competition between hospitals concerning the provision of health care services. Where this is the case, the fact that a health service is provided by a public hospital is not sufficient for the activity to be classified as non-economic.

25.

The Court of Justice and the General Court have also clarified that health care services which independent doctors and other private practitioners provide for remuneration at their own risk are to be regarded as an economic activity (44). The same principles would apply as regards independent pharmacies.

26.

Case-law of the Union has established that public education organised within the national educational system funded and supervised by the State may be considered as a non-economic activity. In this regard, the Court of Justice has indicated that the State:

‘by establishing and maintaining such a system of public education and financed entirely or mainly by public funds and not by pupils or their parents … does not intend to become involved in activities for remuneration, but carries out its task towards its population in the social, cultural and educational areas’ (45).

27.

According to the same case-law, the non-economic nature of public education is in principle not affected by the fact that pupils or their parents sometimes have to pay tuition or enrolment fees which contribute to the operating expenses of the system. Such financial contributions often only cover a fraction of the true costs of the service and can thus not be considered as remuneration for the service provided. They therefore do not alter the non-economic nature of a general education service predominantly funded by the public purse (46). These principles can cover public educational services such as vocational training (47), private and public primary schools (48) and kindergartens (49), secondary teaching activities in universities (50) and the provision of education in universities (51).

28.

Such public provision of educational services must be distinguished from services financed predominantly by parents or pupils or commercial revenues. For example, commercial enterprises offering higher education financed entirely by students clearly fall within the latter category. In certain Member States public institutions can also offer educational services which, due to their nature, financing structure and the existence of competing private organisations, are to be regarded as economic.

29.

In the Community Framework for State aid for research and development and innovation (52), the Commission has clarified that certain activities of universities and research organisations fall outside the ambit of the State aid rules. This concerns the primary activities of research organisations, namely:

30.

The Commission has also clarified that technology transfer activities (licensing, spin-off creation or other forms of management of knowledge created by the research organisation) are non-economic where those activities are of an internal nature (53) and all income is reinvested in the primary activities of the research organisations concerned (54).

31.

Only advantages granted directly or indirectly through State resources can constitute State aid within the meaning of Article 107 of the Treaty (55). Advantages financed from private resources may have the effect of strengthening the position of certain undertakings but do not fall within the scope of Article 107 of the Treaty.

32.

This transfer of State resources may take many forms such as direct grants, tax credits and benefits in kind. In particular, the fact that the State does not charge market prices for certain services constitutes a waiver of State resources. In its judgment in Case C-482/99 France v Commission (56), the Court of Justice also confirmed that the resources of a public undertaking constitute State resources within the meaning of Article 107 of the Treaty because the public authorities are capable of controlling these resources. In cases where an undertaking entrusted with the operation of an SGEI is financed by resources provided by a public undertaking and this financing is imputable to the State, such financing is thus capable of constituting State aid.

33.

The granting, without tendering, of licences to occupy or use public domain, or of other special or exclusive rights having an economic value, may imply a waiver of State resources and create an advantage for the beneficiaries (57).

34.

Member States may, in some instances, finance an SGEI from charges or contributions paid by certain undertakings or users, the revenue from which is transferred to the undertakings entrusted with the operation of that SGEI. This type of financing arrangement has been examined by the Court of Justice, in particular in its judgment in Case 173/73 Italy v Commission (58), in which it held that:

‘As the funds in question are financed through compulsory contributions imposed by State legislation and as, as this case shows, they are managed and apportioned in accordance with the provisions of that legislation, they must be regarded as State resources within the meaning of Article (107 of the Treaty), even if they are administered by institutions distinct from the public authorities.’

35.

Similarly, in its judgment in Joined Cases C-78/90 to C-83/90 Compagnie Commerciale de l’Ouest (59), the Court of Justice confirmed that measures financed through parafiscal charges constitute measures financed through State resources.

36.

Accordingly, compensatory payments for the operation of SGEIs which are financed through parafiscal charges or compulsory contributions imposed by the State and managed and apportioned in accordance with the provisions of the legislation are compensatory payments made through State resources.

37.

In order to be caught by Article 107 of the Treaty, public service compensation must affect or threaten to affect trade between Member States. Such an effect generally presupposes the existence of a market open to competition. Therefore, where markets have been opened up to competition either by Union or national legislation or de facto by economic development, State aid rules apply. In such situations Member States retain their discretion as to how to define, organise and finance SGEIs, subject to State aid control where compensation is granted to the SGEI provider, be it private or public (including in-house). Where the market has been reserved for a single undertaking (including an in-house provider), the compensation granted to that undertaking is equally subject to State aid control. In fact, where economic activity has been opened up to competition, the decision to provide the SGEI by methods other than through a public procurement procedure that ensures the least cost to the community may lead to distortions in the form of preventing entry by competitors or making easier the expansion of the beneficiary in other markets. Distortions may also occur in the input markets. Aid granted to an undertaking operating on a non-liberalised market may affect trade if the recipient undertaking is also active on liberalised markets (60).

38.

Aid measures can also have an effect on trade where the recipient undertaking does not itself participate in cross-border activities. In such cases, domestic supply may be maintained or increased, with the consequence that the opportunities for undertakings established in other Member States to offer their services in that Member State are reduced (61).

39.

According to the case-law of the Court of Justice, there is no threshold or percentage below which trade between Member States can be regarded as not having been affected (62). The relatively small amount of aid or the relatively small size of the recipient undertaking does not a priori mean that trade between Member States may not be affected.

40.

On the other hand, the Commission has in several cases concluded that activities had a purely local character and did not affect trade between Member States. Examples are:

41.

Finally, the Commission does not have to examine all financial support granted by Member States. Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid (67) stipulates that aid amounting to less than EUR 200 000 per undertaking over any period of three years is not caught by Article 107(1) of the Treaty. Specific de minimis thresholds apply in the transport, fisheries and agricultural sectors (68) and the Commission envisages adopting a Regulation with a specific de minimis threshold for local services of general economic interest.

42.

The Court of Justice, in its Altmark judgment (69), provided further clarification regarding the conditions under which public service compensation does not constitute State aid owing to the absence of any advantage.

43.

According to the Court of Justice,

‘Where a State measure must be regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, so that those undertakings do not enjoy a real financial advantage and the measure thus does not have the effect of putting them in a more favourable competitive position than the undertakings competing with them, such a measure is not caught by Article (107(1) of the Treaty). However, for such compensation to escape qualification as State aid in a particular case, a number of conditions must be satisfied.

44.

Sections 3.2 to 3.6 will address the different requirements established in the Altmark case-law, namely the concept of a service of general economic interest for the purposes of Article 106 of the Treaty (71), the need for an entrustment act (72), the obligation to define the parameters of compensation (73), the principles concerning the avoidance of overcompensation (74) and the principles concerning the selection of the provider (75).

45.

The concept of service of general economic interest is an evolving notion that depends, among other things, on the needs of citizens, technological and market developments and social and political preferences in the Member State concerned. The Court of Justice has established that SGEIs are services that exhibit special characteristics as compared with those of other economic activities (76).

46.

In the absence of specific Union rules defining the scope for the existence of an SGEI, Member States have a wide margin of discretion in defining a given service as an SGEI and in granting compensation to the service provider. The Commission’s competence in this respect is limited to checking whether the Member State has made a manifest error when defining the service as an SGEI (77) and to assessing any State aid involved in the compensation. Where specific Union rules exist, the Member States' discretion is further bound by those rules, without prejudice to the Commission's duty to carry out an assessment of whether the SGEI has been correctly defined for the purpose of State aid control.

47.

The first Altmark criterion requires the definition of an SGEI task. This requirement coincides with that of Article 106(2) of the Treaty (78). It transpires from Article 106(2) of the Treaty that undertakings entrusted with the operation of SGEIs are undertakings entrusted with ‘a particular task’ (79). Generally speaking, the entrustment of a ‘particular public service task’ implies the supply of services which, if it were considering its own commercial interest, an undertaking would not assume or would not assume to the same extent or under the same conditions (80). Applying a general interest criterion, Member States or the Union may attach specific obligations to such services.

48.

The Commission thus considers that it would not be appropriate to attach specific public service obligations to an activity which is already provided or can be provided satisfactorily and under conditions, such as price, objective quality characteristics, continuity and access to the service, consistent with the public interest, as defined by the State, by undertakings operating under normal market conditions (81). As for the question of whether a service can be provided by the market, the Commission's assessment is limited to checking whether the Member State has made a manifest error.

49.

An important example of this principle is the broadband sector, for which the Commission has already given clear indications as to the types of activities that can be regarded as SGEIs. Most importantly, the Commission considers that in areas where private investors have already invested in broadband network infrastructure (or are in the process of expanding further their network infrastructure) and are already providing competitive broadband services with adequate coverage, setting up parallel broadband infrastructure should not be considered as an SGEI. In contrast, where investors are not in a position to provide adequate broadband coverage, SGEI compensation may be granted under certain conditions (82).

50.

The Commission also considers that the services to be classified as SGEIs must be addressed to citizens or be in the interest of society as a whole.

51.

For Article 106(2) of the Treaty to apply, the operation of an SGEI must be entrusted to one or more undertakings. The undertakings in question must therefore have been entrusted with a special task by the State (83). Also the first Altmark criterion requires that the undertaking has a public service obligation to discharge. Accordingly, in order to comply with the Altmark case-law, a public service assignment is necessary that defines the obligations of the undertakings in question and of the authority.

52.

The public service task must be assigned by way of an act that, depending on the legislation in Member States, may take the form of a legislative or regulatory instrument or a contract. It may also be laid down in several acts. Based on the approach taken by the Commission in such cases, the act or series of acts must at least specify:

53.

The involvement of the service provider in the process by which it is entrusted with a public service task does not mean that that task does not derive from an act of public authority, even if the entrustment is issued at the request of the service provider (84). In some Member States, it is not uncommon for authorities to finance services which were developed and proposed by the provider itself. However, the authority has to decide whether it approves the provider's proposal before it may grant any compensation. It is irrelevant whether the necessary elements of the entrustment act are inserted directly into the decision to accept the provider's proposal or whether a separate legal act, for example, a contract with the provider, is put in place.

54.

The parameters that serve as the basis for calculating compensation must be established in advance in an objective and transparent manner in order to ensure that they do not confer an economic advantage that could favour the recipient undertaking over competing undertakings.

55.

The need to establish the compensation parameters in advance does not mean that the compensation has to be calculated on the basis of a specific formula (for example, a certain price per day, per meal, per passenger or per number of users). What matters is only that it is clear from the outset how the compensation is to be determined.

56.

Where the authority decides to compensate all cost items of the provider, it must determine at the outset how those costs will be determined and calculated. Only the costs directly associated with the provision of the SGEI can be taken into account in that context. All the revenue accruing to the undertaking from the provision of the SGEI must be deducted.

57.

Where the undertaking is offered a reasonable profit as part of its compensation, the entrustment act must also establish the criteria for calculating that profit.

58.

Where a review of the amount of compensation during the entrustment period is provided for, the entrustment act must specify the arrangements for the review and any impact it may have on the total amount of compensation.

59.

If the SGEI is assigned under a tendering procedure, the method for calculating the compensation must be included in the information provided to all the undertakings wishing to take part in the procedure.

60.

According to the third Altmark criterion, the compensation must not exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit. Therefore any mechanism concerning the selection of the service provider must be decided in such a way that the level of compensation is determined on the basis of these elements.

61.

Reasonable profit should be taken to mean the rate of return on capital (85) that would be required by a typical company considering whether or not to provide the service of general economic interest for the whole duration of the period of entrustment, taking into account the level of risk. The level of risk depends on the sector concerned, the type of service and the characteristics of the compensation mechanism. The rate should be determined where possible by reference to the rate of return on capital that is achieved on similar types of public service contracts under competitive conditions (for example, contracts awarded under a tender). In sectors where there is no undertaking comparable to the undertaking entrusted with the operation of the service of general economic interest, reference can be made to comparable undertakings situated in other Member States, or if necessary, in other sectors, provided that the particular characteristics of each sector are taken into account. In determining what constitutes a reasonable profit, the Member States may introduce incentive criteria relating, in particular, to the quality of service provided and gains in productive efficiency. Efficiency gains cannot be achieved at the expense of the quality of the service provided.

62.

In accordance with the fourth Altmark criterion, the compensation offered must either be the result of a public procurement procedure which allows for selection of the tenderer capable of providing those services at the least cost to the community, or the result of a benchmarking exercise with a typical undertaking, well run and adequately provided with the necessary means.

63.

The simplest way for public authorities to meet the fourth Altmark criterion is to conduct an open, transparent and non-discriminatory public procurement procedure in line with Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (86) and Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (87), as specified below (88). As indicated in paragraph 5, the conduct of such a public procurement procedure is often a mandatory requirement under existing Union rules.

64.

Also in cases where it is not a legal requirement, an open, transparent and non-discriminatory public procurement procedure is an appropriate method to compare different potential offers and set the compensation so as to exclude the presence of aid.

65.

Based on the case law of the Court of Justice, a public procurement procedure only excludes the existence of State aid where it allows for the selection of the tenderer capable of providing the service at ‘the least cost to the community’.

66.

Concerning the characteristics of the tender, an open (89) procedure in line with the requirement of the public procurement rules is certainly acceptable, but also a restricted (90) procedure can satisfy the fourth Altmark criterion, unless interested operators are prevented to tender without valid reasons. On the other hand, a competitive dialogue (91) or a negotiated procedure with prior publication (92) confer a wide discretion upon the adjudicating authority and may restrict the participation of interested operators. Therefore, they can only be deemed sufficient to satisfy the fourth Altmark criterion in exceptional cases. The negotiated procedure without publication of a contract notice (93) cannot ensure that the procedure leads to the selection of the tenderer capable of providing those services at the least cost to the community.

67.

As to the award criteria, the ‘lowest price’ (94) obviously satisfies the fourth Altmark criterion. Also the ‘most economically advantageous tender’ (95) is deemed sufficient, Provided that the award criteria, including environmental (96) or social ones, are closely related to the subject-matter of the service provided and allow for the most economically advantageous offer to match the value of the market (97). Where such circumstances occur, a claw-back mechanism may be appropriate to minimise the risk of overcompensation ex ante. The awarding authority is not prevented from setting qualitative standards to be met by all economic operators or from taking qualitative aspects related to the different proposals into account in its award decision.

68.

Finally, there can be circumstances where a procurement procedure cannot allow for the least cost to the community as it does not give rise to a sufficient open and genuine competition. This could be the case, for example, due to the particularities of the service in question, existing intellectual property rights or necessary infrastructure owned by a particular service provider. Similarly, in the case of procedures where only one bid is submitted, the tender cannot be deemed sufficient to ensure that the procedure leads to the least cost for the community.

69.

Where a generally accepted market remuneration exists for a given service, that market remuneration provides the best benchmark for the compensation in the absence of a tender (98).

70.

Where no such market remuneration exists, the amount of compensation must be determined on the basis of an analysis of the costs that a typical undertaking, well run and adequately provided with material means 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 those obligations. The aim is to ensure that the high costs of an inefficient undertaking are not taken as the benchmark.

71.

As regards the concept of ‘well run undertaking’ and in the absence of any official definition, the Member States should apply objective criteria that are economically recognised as being representative of satisfactory management. The Commission considers that simply generating a profit is not a sufficient criterion for deeming an undertaking to be ‘well run’. Account should also be taken of the fact that the financial results of undertakings, particularly in the sectors most often concerned by SGEIs, may be strongly influenced by their market power or by sectoral rules.

72.

The Commission takes the view that the concept of ‘well run undertaking’ entails compliance with the national, Union or international accounting standards in force. The Member States may base their analysis, among other things, on analytical ratios representative of productivity (such as turnover to capital employed, total cost to turnover, turnover per employee, value added per employee or staff costs to value added). Member States can also use analytical ratios relating to the quality of supply as compared with user expectations. An undertaking entrusted with the operation of an SGEI that does not meet the qualitative criteria laid down by the Member State concerned does not constitute a well run undertaking even if its costs are low.

73.

Undertakings with such analytical ratios representative of efficient management may be regarded as representative typical undertakings. However, the analysis and comparison of the cost structures must take into account the size of the undertaking in question and the fact that in certain sectors undertakings with very different cost structures may exist side by side.

74.

The reference to the costs of a ‘typical’ undertaking in the sector under consideration implies that there are a sufficient number of undertakings whose costs may be taken into account. Those undertakings may be located in the same Member State or in other Member States. However, the Commission takes the view that reference cannot be made to the costs of an undertaking that enjoys a monopoly position or receives public service compensation granted on conditions that do not comply with Union law, as in both cases the cost level may be higher than normal. The costs to be taken into consideration are all the costs relating to the SGEI, that is to say, the direct costs necessary to discharge the SGEI and an appropriate contribution to the indirect costs common to both the SGEI and other activities.

75.

If the Member State can show that the cost structure of the undertaking entrusted with the operation of the SGEI corresponds to the average cost structure of efficient and comparable undertakings in the sector under consideration, the amount of compensation that will allow the undertaking to cover its costs, including a reasonable profit, is deemed to comply with the fourth Altmark criterion.

76.

The expression ‘undertaking adequately provided with material means’ should be taken to mean an undertaking which has the resources necessary for it to discharge immediately the public service obligations incumbent on the undertaking to be entrusted with the operation of the SGEI.

77.

‘Reasonable profit’ should be taken to mean the rate of return on capital (99) that would be required by a typical company considering whether or not to provide the service of general economic interest for the whole duration of the period of entrustment, taking into account the level of risk, as provided in section 3.5.