(1)

By Implementing Regulation (EU) No 430/2013 (2) (‘the contested Regulation’), the Council imposed a definitive anti-dumping duty at rates ranging from 14,9 % to 57,8 % on imports of threaded tube or pipe cast fittings, of malleable cast iron, currently falling within CN code ex 7307 19 10 (TARIC code 7307191010) and originating in the People's Republic of China and Thailand. Bodies of compression fittings using ISO DIN 13 metric thread and malleable iron threaded circular junction boxes without having a lid are not covered by the duty.

(2)

On 12 June 2013, one cooperating Chinese exporting producer, Jinan Meide Castings Co., Ltd (‘Jinan Meide or the applicant’), lodged an application at the General Court of the European Union (‘the General Court’) seeking the annulment of the contested Regulation in so far as it applies to the applicant (3).

(3)

On 30 June 2016, the General Court in its judgment found that the rights of defence of Jinan Meide were breached by the rejection of its request for disclosure of normal value calculations using confidential data of an analogue country producer. Jinan Meide had obtained an exclusive authorisation from the analogue country producer waving the confidentiality of its data. In particular, the General Court found that the Commission was wrong to rely on the need to comply with the principle of equal treatment in order to reject this request for disclosure. The General Court held that it could not be ruled out that if the request had been accepted, the outcome of the investigation could have been different. Therefore, the Court annulled the contested Regulation in so far as it imposed an anti-dumping duty on imports of threaded tube or pipe cast fittings, of malleable cast iron, manufactured by Jinan Meide.

(4)

According to Article 266 of the Treaty on the Functioning of the European Union, the Union institutions are obliged to comply with the Court's judgment of 30 June 2016.

(5)

In its judgment in case T-2/95 (4) (the ‘IPS case’), the Court of First Instance recognised that, in cases where a proceeding consists of several administrative steps, the annulment of one of those steps does not annul the complete proceeding. The anti-dumping proceeding is an example of such a multi-step proceeding. Consequently, the annulment of the contested Regulation in relation to one party does not imply the annulment of the entire procedure prior to the adoption of that Regulation. The EU institutions have the possibility to remedy the aspects of the contested Regulation which led to its annulment, while leaving unchanged the uncontested parts which are not affected by the Court judgment — as was held by the Court of Justice in case C-458/98 P (5).

(6)

It should be noted that apart from the finding that the Commission was wrong to rely on the need to comply with the principle of equal treatment in order to reject Jinan Meide's request for disclosure, all other findings made in the contested Regulation which were not contested within the time-limits for a challenge or which were contested but rejected by the General Court's judgment or not examined by the General Court and therefore did not lead to the annulment of the contested Regulation, remain valid.

(7)

Following the Court's judgment of 30 June 2016, the Commission published a notice (6) concerning the partial reopening of the anti-dumping investigation concerning imports of threaded tube or pipe cast fittings, of malleable cast iron, originating in the People's Republic of China. The reopening was limited in scope to the implementation of the judgment of the General Court with regard to Jinan Meide.

(8)

The Commission officially advised Jinan Meide, the representatives of the exporting country and the Union industry of the partial reopening of the investigation. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time-limit set out in the notice.

(9)

Following the initial comments received, all other interested parties known to be concerned from the original investigation were contacted and given the opportunity to make their views known in writing and to request a hearing.

(10)

All interested parties who so requested were granted the opportunity to be heard by the Commission services and/or the Hearing officer.

(11)

The Commission received submissions on various aspects of the investigation from Jinan Meide, other Chinese exporting producers, one Thai exporting producer, five Union producers and eight unrelated importers.

(12)

Jinan Meide argued that the illegality committed by the Union Institutions which led to the annulment of contested Regulation cannot be cured and the proceeding should be terminated without re-imposing any anti-dumping duty on Jinan Meide.

(13)

As stated above in recital 4, the Court of First Instance in the IPS case recognised that, in cases where a proceeding consists of several administrative steps, such as in an anti-dumping proceeding, the annulment of one of those steps does not annul the complete proceeding. Since the Union institutions are obliged to comply with the Court's judgment, this implies the possibility to remedy the aspects of the contested Regulation which led to its annulment, while leaving unchanged the uncontested parts. The claim was therefore rejected.

(14)

One unrelated importer claimed that it is procedurally not possible to reopen an investigation which has previously been concluded, as substantive failures would consequently occur, like accepting new information after the closure of a case, discrimination against all other parties to the investigation whose dumping margins would be different if Jinan Meide's dumping margin was amended and a breach of EU and WTO law in the sense that anti-dumping measures cannot be applied retroactively.

(15)

This importer also claimed that a reopening does not appear to be permitted under the terms of the basic Regulation.

(16)

The same party also stated that the Commission is not authorised to take action to implement a Court judgment in respect of a Council Regulation as the Commission was not the defendant in Case T-424/13. It claimed that the Commission needs to receive formal instructions from the Council to launch a reopening.

(17)

It is clear from the judgment of joined cases C-283/14 and C-284/14 (7) that the EU Institutions may reopen an anti-dumping investigation to amend irregularities found by the European Courts even though this is not expressly provided for in the basic Regulation. The EU Institutions are in fact required to take the necessary measures to remedy illegalities. In this case, as the investigating authority, the Commission reopened the investigation in order to implement the Court's judgement. The reopening of this investigation follows the legal procedures required by the basic Regulation, which provide for adoption by the Commission after consulting the Member States under the examination procedure referred to in Article 15(3) of the basic Regulation. The claims were therefore rejected.

(18)

One importer stated that it was not clear to what extent a reopening can be carried on under the provisions of the current basic Regulation, as it is apparent the Commission intended to pursue the investigation as if it were put back in time when Council Regulation (EC) No 1225/2009 (8) was still in force.

(19)

The law applicable to this reinvestigation is Regulation (EC) No 1225/2009, which was the substantive law at the time of the adoption of the regulation annulled by the Court. In any event, Regulation (EU) 2016/1036 is a codification of Regulation (EC) No 1225/2009 and its amendments. The argument was therefore rejected.

(20)

An exporting producer from Thailand argued that the Commission must re-impose the duty of 40,8 % on Jinan Meide without modification, as the General Court did not find fault with any substantive findings, only a procedural irregularity. It also claimed that any substantive reconsideration can only address the normal value calculation for Jinan Meide and all other findings in the contested Regulation should remain valid, as there was no indication in the General Court's judgment that remedying the procedural irregularity should result in any substantive changes to the normal value calculation for Jinan Meide.

(21)

In the judgment leading to the present reopening, the General Court held that it could not be ruled out that if the request for disclosure of confidential data of the analogue country producer had been accepted, the outcome of the investigation could have been different. The reopening has therefore to examine possible impact on substance of the investigation. The argument was therefore rejected.

(22)

One unrelated importer argued that as the Union industry did not submit any comments concerning the reopening, which allegedly meant that there is no Union interest to conduct this reopened investigation.

(23)

The lack of submission by a certain type of operator cannot per se lead to any conclusion on substance in an investigation. In any case, five Union producers requested the Commission to re-impose the anti-dumping duty on Jinan Meide urgently and even to register imports for potential retroactive imposition of duties, in order to limit the damage the current situation causes to the Union producers. The argument was therefore rejected.

(24)

Jinan Meide claimed that it should get comprehensive access to all information submitted by the analogue country producer and abundant time to lodge comments. All such information was made available to Jinan Meide, and Jinan Meide had time to lodge comments beyond the time-frame foreseen in the basic Regulation, including several hearings with the case team and with the Hearing Officer. Following disclosure of the confidential information and the dumping calculations, Jinan Meide also made submissions outside of deadlines set for that purpose, which were nevertheless considered.

(25)

Jinan Meide claimed that an ordinary course of trade test should not be carried out, since the analogue country producer was not able to provide a reliable cost of production by type of the like product. One importer supported this argument, since a cost allocation based on turnover assumes that the same profit margin is generated for all product types, which is allegedly unreliable.

(26)

However, the Commission consistently carries out the ordinary course of trade test in its investigations. In particular, Article 2(5) of the basic Regulation specifically deals with such situations as referred to by Jinan Meide, stating that in the absence of a more appropriate method, preference shall be given to the allocation of costs on the basis of turnover. In this respect, it is noted that the costs were allocated on the basis of turnover and that no other more suitable method was proposed by any interested party. The decision to allocate costs on the basis of turnover and to carry out an ordinary course of trade test was therefore maintained.

(27)

Jinan Meide requested that product types that are sold by the analogue country producer in quantities below 200 kg should be disregarded from the normal value calculation, as prices of such product types are allegedly unreliable. It is noted that Jinan Meide claimed during the original investigation that the 5 % representativity test should not be carried out when normal value is established in an analogue country, and this claim was accepted by the Commission at the time. The claim to disregard sales of product types sold in quantities below 200 kg is rejected since sales prices for types of the like product sold in quantities below 200 kg cannot be considered unreliable, as they were verified and found as reliable as any other sales prices.

(28)

One importer supported Jinan Meide's argument, since the price volatility for slow-moving product types would allegedly be high. This would mean that product types may have a very similar quality and cost structure, but might be sold at very different prices. However, the Commission established that, in respect of the analogue country producer, the price volatility is high for all product types, even the best-selling items. Therefore, the alleged high price volatility cannot be used as an argument to exclude slow-moving product types from the dumping calculation. The claim was therefore rejected.

(29)

Jinan Meide also claimed that as the Commission had allocated costs of the analogue country producer on the basis of turnover, the normal value should not be constructed if the comparable types of the like product in the analogue country were sold in quantities below 200 kg, but that the normal value should be established in such cases on the basis of prices of other similar types sold in larger quantities. This claim was likewise rejected, as the allocation of total costs on the basis of turnover is in line with Article 2(5) of the basic Regulation and the arguments of Jinan Meide were not sufficient to justify a different methodology in this particular case.

(30)

Jinan Meide brought forward claims concerning adjustments in the analogue country producer's data for credit, packing expenses, level of trade, bank charges, domestic transport, credit notes, indirect taxes, technical support, use of different raw materials and different labour productivity.

(31)

The Commission accepted the claim concerning domestic transport and the credit costs as related to one single customer of the analogue country producer and the corresponding adjustments were made in the dumping calculation of Jinan Meide.

(32)

As concerns the claims regarding the difference in labour productivity and the use of different raw materials, Jinan Meide alleged that the lower productivity per worker and the use of different raw materials lead to a moderate cost increase of the analogue country producer compared to Jinan Meide. In this respect, it should be noted that while some differences in efficiency or productivity might exist between companies, the guiding principle of anti-dumping calculations is to ensure comparability between export prices and normal value, which does not require that the circumstances of an analogue country producer and an exporter in a non-market economy country are completely aligned. Indeed, only differences for factors affecting prices and price comparability between an analogue country producer and an exporter in a non-market economy country warrant an adjustment.

(33)

The other claims were found not to be supported by the evidence collected on spot and present on the file and were thus rejected.

(34)

During the preparation of the final disclosure for Jinan Meide, the Commission spotted a clerical error concerning the adjustment for indirect taxes in the dumping calculation for Jinan Meide. Contrary to what the Commission stated in the text of the provisional (9) and definitive (10) Regulations, due to a clerical error, the adjustment for indirect taxes was not done at the time of the final disclosure to Jinan Meide, although it was done at the provisional stage. For reasons of good administration, this error was corrected.

(35)

On 12 April 2017, the Commission informed all interested parties of the above findings on the basis of which it was intended to propose to re-impose the anti-dumping duty on imports of threaded tube or pipe cast fittings, of malleable cast iron, excluding bodies of compression fittings using ISO DIN 13 metric thread and malleable iron threaded circular junction boxes without having a lid, from Jinan Meide on the basis of the facts collected and submitted relating to the original investigation.

(36)

Jinan Meide and three unrelated importers claimed that the Commission could not proceed with the correction of the clerical error (concerning the adjustment for indirect taxes in its dumping margin calculation) in the framework of the present reopening, because the clerical error was not related to the implementation of the judgment of the General Court. Jinan Meide also requested and was granted a hearing with the Hearing Officer. Two unrelated importers claimed that the Commission is prevented from putting the exporting producer in a position worse than originally found.

(37)

Jinan Meide reiterated its claim that the Commission should treat product types for which the analogue country's sales volume was below 200 kg as quasi-matching or non-matching product types and that it cannot rely on unreliable costs to exclude sales from the normal value determination.

(38)

Jinan Meide challenged the Commission's decision to reject its adjustments requests with regard to level of trade, packing expenses, credit costs, domestic insurance costs and differences in raw materials and productivity.

(39)

Jinan Meide claimed that no duty should be imposed on it as a result of alleged procedural violations and other irregularities in these proceedings. In this context, the company claimed that an error in the disclosure of 23 December 2016 put into question whether the Commission disclosed the confidential version of the calculation made at definitive stage of the original investigation, and that the disclosure did not explain the alleged differences with the calculation made in the original investigation. It further claimed that the Commission refused to disclose certain elements despite Jinan Meide's repeated requests. It also submitted that the claims made in Case T-424/13, but not address by the General Court, remained valid and would continue to vitiate the measures in case they would be re-imposed.

(40)

The Commission recalls that during the preparation of the final disclosure for Jinan Meide, it spotted a clerical error concerning the adjustment for indirect taxes in the dumping calculation for Jinan Meide. For reasons of good administration, the Commission proposed to correct this error at that stage and properly disclosed this proposal to all interested parties.

(41)

Having considered all arguments put forward, the Commission decided to accept Jinan Meide's claim and not to correct the clerical error. The Commission, following the opinion of the Hearing Officer, considered that there is no general prohibition of a reformatio in peius in reopening of trade defence cases — that is to say that an interested party subject to a reopening in trade defence cases may be put in a position less favourable than what it was in before that reopening took place. However, the Commission concluded that, in this specific case, the scope of reopening should be limited to the disclosure of the data from the analogue country, receiving comments from interested parties, and, if necessary, revising the duty accordingly. Since the calculation error with regard to the reimbursement of VAT for export sales, and in particular the rate of VAT reimbursement, is not related to the data obtained from the analogue country producer, such correction is considered to be outside the scope of the reopened investigation.

(42)

On 29 May 2017, the Commission sent the Additional Disclosure Document informing interested parties of its decision not to correct the clerical error referred to in recital 34. The Commission received comments from one importer only, which restated that due to the limited disclosure to importers it is not in a position to comment on adjustments. Accordingly, in the absence of arguments to the contrary, the findings on adjustments are confirmed.

(43)

With regard to the product types sold in quantities below 200 kg, Jinan Meide referred to the Advocate General's opinion in the Goldstar case (11) that ‘for domestic prices to be comparable there must be a sufficient volume of sales in absolute terms on the domestic market stems from the fact that domestic prices may differ from one sales outlet to another. Furthermore, prices may fluctuate in the course of a single reference period’, and ‘[i]n order to be representative that weighted average must be based on a minimum number of sales’.

(44)

In this respect it is noted that the Advocate General continued his opinion in the following subparagraph that this ‘does not mean, however, that the Community institutions should, in addition to the aforesaid relative threshold below which sales should be disregarded, fixed at 5 % and calculated for each model, still be required to apply an absolute threshold as well. It makes little sense to establish an absolute minimum threshold in general since the value of an absolute figure depends too closely on the nature of the product.’ Thus, the opinion of the Advocate General in fact confirms that it is indeed not necessary to apply an absolute minimum threshold such as the absolute threshold of 200 kg claimed by Jinan Meide.

(45)

As regards the issue of price fluctuations, as indicated in recital 28 above, this affected all product types and not only product types in quantities sold below 200 kg.

(46)

One unrelated importer supported Jinan Meide's claim concerning representativity of low turnover products and reiterated its comments in that regard. It provided a general statement that Commission's position contradicts general market experience. The Commission's statement is based on data obtained from the analogue country producer. Given that the claim has not been further substantiated and in light of recitals 28 and 42 et seq. above, the claim is therefore rejected.

(47)

With regard to the claim concerning unreliable costs, Jinan Meide claimed that the Commission eventually resorted to the initial set of cost data submitted even though allegedly it had initially considered that this set did not meet the standards. This argument is not supported by the facts of the investigation. Indeed, the Commission has never considered that the initial set of cost data did not meet the standards. In such circumstances, it is therefore not appropriate to completely disregard the costs reported by the analogue country producer, as claimed by Jinan Meide.

(48)

One unrelated importer reiterated its comment that cost allocation based on turnover assumes that the same profit margin is generated for all product types, which allegedly contradicts observed logic in the market. The claim was not further substantiated. As stated in recital 26 above, in accordance with the basic Regulation, in the absence of a more appropriate method, preference shall be given to the allocation of costs on the basis of turnover. The costs were allocated on the basis of turnover and that no other more suitable method was proposed by any interested party. The claim is therefore rejected.

(49)

Concerning the level of trade adjustment, Jinan Meide reiterated its claim that when determining whether a level of trade adjustment is warranted, it is sufficient to establish a difference in average prices to different categories of customers. Article 2(10)(d)(i) of the basic Regulation however requires that there is a ‘consistent and distinct difference of prices of the seller for the different levels of trade.’ A simple comparison of average prices is therefore not considered sufficient to establish such a consistent and distinct difference of prices. To the contrary, an analysis of the information on file shows that all customer types are in all segments of the price range.

(50)

One unrelated importer claimed that the Commission should carry out a level of trade adjustment, but, because of lack of access to data, could not comment further. It also claimed that because of lack of access to the calculation of the dumping margin, it could not comment further. In this regard, it is recalled that the Commission is under an obligation to protect confidential information that it has received from interested parties. However, all non-confidential submissions are available to interested parties, who are invited to comment. The Commission notes, however, that, as stated in recital 49 above, the information on file showed that in this case there were no consistent and distinct differences in the prices charged to different customer types. Therefore, a level of trade adjustment would not be appropriate.

(51)

Concerning the allowance for credit costs, an allowance was deducted on the basis of the information on the sales documentation, both on the export price and normal value side. Jinan Meide argued that the allowance for credit costs on the normal value side should be made on the basis of the actual number of days between the invoice and the payment, since the Commission allegedly deducted an allowance for credit cost on export sales even though no payment term was made on the sales documentation. This claim was found not to be supported by the evidence on file of the investigation. Nor was Jinan Meide able to provide any evidence to support its claim. In addition, it was established that both on the normal value side and on the export price side, the actual payment was often made after the payment term on the sales documentation. Calculating the allowance on credit cost on the basis of the actual payment date on the normal value side and on the basis of the information contained in the sales documentation of the export price side would therefore not result in a fair comparison. The Commission therefore maintained its approach to establish the allowance for credit costs on the basis of the information on the sales documentation for both the normal value and the export price.

(52)

As regards the allowance for packing costs, Jinan Meide reiterated their claims that the allocation of packing costs was incorrect, and the resulting allowance for packing costs was very low and not reasonable. It did however not further substantiate its argument, in particular why the resulting allowance was unreasonably low. The Commission therefore maintained its methodology concerning the allowance for packing costs.

(53)

Lastly, the Commission rejects Jinan Meide's allegations of procedural violations and other irregularities in these proceedings. The Commission observed all principles and respected all procedural steps. The Commission reopened the investigation, disclosed the data from the analogue country as required to implement the judgement of the Court, and revised Jinan Meide's duty rate accordingly. In all steps of the investigation, interested parties were given the opportunity to comment as well as to be heard at a hearing. In fact, during the whole proceedings, the Commission was transparent and engaging, accommodating meetings at Jinan Meide's request for clarifications and hearings. The Commission clarified the technical problem related to a faulty excel file with calculations which resulted in the inconsistencies referred to by Jinan Meide. This error, in any case, had no impact on the dumping margin and was promptly corrected. The Commission disclosed all confidential information to Jinan Meide, including the confidential file with the figures used for the dumping margin in 2013. With regard to the claims that were made before the General Court but not addressed by the judgment, the Commission contests all the alleged illegalities pointed out by Jinan Meide. The Commission has fulfilled its duty to implement the court judgment by addressing the illegalities found by the General Court. On this basis, the Commission fails to see the procedural violations referred to by Jinan Meide and restates that it complied with all principles and procedural requirements, allowing Jinan Meide (and other interested parties) to exercise its procedural rights throughout the investigation.

(54)

Jinan Meide also reiterated their arguments concerning the difference in labour productivity and the use of different raw materials, without providing further arguments or evidence in this respect. This position was supported by one unrelated importer. These arguments are addressed in recital 32 above.

(55)

One unrelated importer reiterated its claim that the reopening as such was not compatible with the provisions of the basic Regulation. As stated in recital 17, it is clear from the judgment of joined cases C-283/14 and C-284/14 (12) that the EU Institutions may reopen an anti-dumping investigation to amend irregularities found by the European Courts even though this is not expressly provided for in the basic Regulation. The Union's institutions are, in fact, required to take the necessary measures to remedy illegalities. The claim was therefore rejected.

(56)

Another unrelated importer pointed to negative effects of the anti-dumping duties (due to impact on profitability and turnover as well as new market conditions, i.e. new prices, new sourcing). As set out in recital 41 above, the scope of the present reopening was limited to implementation of the judgment of the General Court with regard to Jinan Meide, notably to disclose to Jianan Meide the confidential data of the analogue country producer. The claim was therefore rejected.

(57)

One unrelated importer claimed that the change (an alleged increase) of the duty rate necessitated a reassessment of the impact of the duty on importers and users. However, as stated in recital 41, the Commission did not proceed to correct the clerical error related to the VAT reimbursement because it was considered to be outside the scope of the reopened investigation. The claim was therefore rejected.

(58)

The same party also claimed that the Commission should carry out an interim review since the original investigation period lies more than five years in the past. The scope of the reopening has been clearly defined in the notice of the reopening (13). A reopening and an interim review are instruments with different purposes. That is to say, the purpose of this reopening was to implement the judgment of the General Court with regard to Jinan Meide. An interim reviews, on the other hand, are an instrument with clearly defined legal conditions, notably to review the measures in force due to changed circumstances of a lasting nature. The claim was therefore rejected.

(59)

Finally, one party claimed that the Commission should have analysed claims raised in the court proceedings even if they were not addressed by the court to prevent further litigation. The Commission notes that the scope of the present reopening was limited to implementation of the judgment of the General Court with regard to Jinan Meide, notably to disclose to Jinan Meide the confidential data of the analogue country producer. The claim was therefore rejected.

(60)

The comparison of the weighted average export price with the re-calculated weighted average normal value by product type on an ex-factory basis showed the existence of dumping. The dumping margin established, expressed as a percentage of the CIF import price at the Union frontier, duty unpaid, was 39,2 %.

(61)

The Commission took account of comments made by the parties and concluded that the implementation of the General Court's judgment should take the form of the re-disclosure to Jinan Meide of the final disclosure of 15 March 2013 with the additional information on normal value calculations using confidential data of the analogue country producer. Following the re-disclosure, the Commission received and considered comments from Jinan Meide and other interested parties. On the basis of this assessment, and the considerations recalled in recitals 40 to 58 above, the Commission considered appropriate to re-impose the anti-dumping duty on imports of threaded tube or pipe cast fittings, of malleable cast iron, excluding bodies of compression fittings using ISO DIN 13 metric thread and malleable iron threaded circular junction boxes without having a lid, manufactured by Jinan Meide.

(62)

The Union industry represented by the five still active Union producers argued that the situation following the annulment of the anti-dumping duty for Jinan Meide warrants a registration of imports. The request has been reiterated following the final disclosure.

(63)

Pursuant to Article 9(5) of the basic Regulation, the sole purpose of such registration is however the possible retroactive collection of duties. The conditions for a retroactive collection of duties are however not met in the present case. A registration of imports is therefore not warranted.

(64)

On the basis of the above, the Commission considered it was appropriate to re-impose the definitive anti-dumping duty on imports of threaded tube or pipe cast fittings, of malleable cast iron, excluding bodies of compression fittings using ISO DIN 13 metric thread and malleable iron threaded circular junction boxes without having a lid, currently falling within CN code ex 7307 19 10 (TARIC code 7307191010) and originating in the People's Republic of China and manufactured by Jinan Meide at the rate of 39,2 %.

(65)

This procedure does not affect the date on which the measures imposed by the contested Regulation will expire pursuant to Article 11(2) of the basic Regulation.

(66)

The Committee established by Article 15(1) of Regulation (EU) 2016/1036 did not deliver an opinion,

(1)

By electronic notification dated 17 May 2010, Romania notified to the Commission, in accordance with Article 108(3) of the Treaty, an aid scheme providing for public support in favour of small (2) regional airports. The notification was registered under case number N 185/2010.

(2)

The Commission requested additional information on the notified measure on 23 June 2010, 7 October 2010, 3 December 2010 and 17 March 2011. The Romanian authorities provided the information requested on 22 July 2010, 27 October 2010, 20 January 2011 and 5 April 2011.

(3)

On 15 September 2010 the Romanian authorities informed the Commission on certain changes to the notified scheme, in particular as regards the number of beneficiaries.

(4)

By letter dated 24 May 2011, the Commission informed Romania that it had decided to initiate the formal investigation procedure laid down in Article 108(2) of the TFEU in respect of the notified aid and of other measures in favour of airports which were not part of the notification but were brought to the attention of the Commission by Romania in the preliminary assessment phase (hereinafter ‘the opening decision’) (3). In particular, in the preliminary assessment phase the Commission was informed by the Romanian authorities that regional airports had been granted public financing in the period 2007-2009 to cover operating losses.

(5)

The Commission adopted a Corrigendum to the opening decision on 23 June 2011.

(6)

The opening decision was published in the Official Journal of the European Union (4). The Commission called on interested parties to submit their comments.

(7)

With letters dated 27 June 2011, 5 July 2011 and 19 August 2011, Romania submitted its comments on the opening decision.

(8)

The Commission received comments from three interested parties, namely the air carrier Carpatair, Cluj-Napoca airport and the Romanian Association of Airports (hereinafter ‘RAA’).

(9)

By letter dated 16 September 2011, the Commission forwarded the comments of the interested parties to Romania.

(10)

By letter dated 25 July 2011, Romania withdrew its notification of the planned financing scheme of infrastructure investments at the Romanian small regional airports. Romania undertook to finance such airports in compliance with Commission Decision 2005/842/EC (5) (hereinafter ‘the 2005 SGEI Decision’ on the application of Article 86(2) of the EC Treaty (now Article 106(2) TFEU) (hereinafter ‘the 2005 SGEI Decision’). Consequently, on 31 October 2011 the Commission closed its investigation in respect of that measure. The formal investigation procedure remained open as concerns the public funding granted to Romanian regional airports in the period 2007-2009.

(11)

The Commission guidelines on State aid to airports and airlines (hereinafter ‘the 2014 Aviation Guidelines’) were published in the Official Journal of the European Union on 4 April 2014 (6). They replaced the 2005 guidelines on financing of airports and start-up aid to airlines departing from regional airports (hereinafter ‘the 2005 Aviation Guidelines’).

(12)

On 15 April 2014 a notice was published in the Official Journal of the European Union inviting Member States and interested parties to submit comments on the application of the 2014 Aviation Guidelines in this case within one month of the publication date. The Commission received no reply to that invitation.

(13)

As already mentioned above, in the framework of the notification of infrastructure investments at small regional airports, Romania informed the Commission that most regional airports in Romania were loss-making, and that their operating losses were covered by public financing on a yearly basis.

(14)

Table 1 shows the list of the public financing made available to D category airports (7) in the period 2007-2009, as submitted by Romania.

Table 1

Public financing granted to 13 regional airports (thousand RON)

(15)

During the preliminary investigation phase Romania submitted that this financing would mostly amount to aid exempted from the notification requirement on the basis of the 2005 SGEI Decision. The only exception would be the public financing granted to Timișoara airport. That financing is being investigated by the Commission under case number SA.31662 (8).

(16)

In particular, Romania claimed that the public financing granted annually to the regional airports represented compensation for the provision of a service of general economic interest (hereinafter ‘SGEI’). In this sense, the measure would have cumulatively observed the conditions laid down by the 2005 SGEI Decision, namely:

(17)

Government Decision 398/1997/EC refers to the transfer of ownership of the regional airports from the Ministry of Transport to the local counties councils and thereby changing their statute from ‘regii autonome’ with special characteristics of national interest to ‘regii autonome’ with special characteristics of local interest. The Decision includes, inter alia, provisions regarding their assets, budgets and personnel. The Decision lays down in its Annexes provisions regarding the organisational structure and the financing of the airports. The Annexes also list the activities of the airport managers (e.g. management of the airport infrastructure, organisation and provision of handling services, ensuring security of, inter alia, aircrafts, passengers, airport activities, development, maintenance and modernisation of runways, taxiways aprons, equipment, etc.) but they do not present these activities as PSOs imposed on the airport managers. The list of activities applies to all concerned airports across the board, i.e. there is no separate list for each airport. Romania claimed that these activities, namely the overall management of the airports in question, should be regarded as SGEI and the compatibility of the measure should be assessed under Article 106 of the Treaty.

(18)

Regarding the financing of the airports, Government Decision 398/1997/EC sets out that the operating and capital costs of the airports in question would be covered by own resources supplemented by public financing. The Romanian authorities contend that this mechanism prevents overcompensation insofar as the airports can only receive the amount necessary to cover all costs, thereby avoiding overcompensation.

(19)

In addition, the Romanian authorities pointed out that activities not directly linked to the core activities of the airports are not being subsidised, in accordance with points (34) and 53(iv) of the 2005 Aviation Guidelines.

(20)

One of the airports listed in Table 1, Constanța airport, is not subject to Government Decision 398/1997/EC. The Romanian authorities clarified that the public financing to this airport represents compensation for the discharge of PSOs pursuant to Government Decision 523/1998/EC. This Decision lays down that Societatea Națională ‘Aeroportul Internațional Constanța’ is a shareholding company owned by the State and that the old legal entity (Regia Autonoma Aeroportul International Constanța — Mihail Kogalniceanu) is abolished. The Decision and its annexes include provisions regarding the assets, the organisational structure, the financing and list the activities to be undertaken by the airport manager (e.g. operating the airport infrastructure, organisation and provision of handling services, ensuring security of passengers, aircraft, etc., maintenance of runways, taxiways, aprons, etc.). These activities are not presented as PSOs imposed on the airport manager. Regarding the financing, the Government Decision 523/1998/EC sets out that depending on the type of assets and costs to be financed, costs would be financed by own resources and credits or by own resources supplemented by public financing or only by public financing (9). The Romanian authorities also specified that this airport is a Romania-US military base, therefore its operational continuity is considered a strategic national security objective.

(21)

For the airport owned by the State (Constanța) the financing in question is granted from the State budget. For the remaining airports, whose ownership was transferred to local authorities by Government Decision 398/1997/EC, the public financing is granted by local authorities through local resources.

(22)

The beneficiaries are the operators of Romanian airports at Arad, Bacău, Baia Mare, Cluj-Napoca, Craiova, Iași, Oradea, Satu-Mare, Sibiu, Suceava, Târgu-Mureș, Tulcea and Constanța.

(23)

Table 2 shows the traffic at the airports concerned in the period under assessment 2007-2009 as well as in the recent years (2013-2015).

Table 2

Traffic at the thirteen airports

(24)

Out of the 13 airports, only five airports (Arad, Baia Mare, Satu Mare, Constanța and Oradea) had another EU airport within 100 km or 60 minutes travelling time. Arad airport is at 50 km and 40 minutes travelling time from Timișoara Airport. Baia Mare and Satu Mare airports are situated 76 km and 1h10 minutes travelling time from each other. Constanța Airport is situated 45 km and 30 minutes travelling time from Tuzla Airport. Oradea airport is situated at 80 km and approximately 1h30 minutes travelling time from Debrecen airport, which is located in Hungary.

Table 3

Distance and travelling time to closest airports

(25)

As regards the airports for which another airport is located within less than 100 kilometres or 60 minutes travelling time, the Romanian authorities were asked to detail the specificities of the airports concerned, if any, which could justify the assumption that those airports are located in different catchment areas, as defined by the 2014 Aviation Guidelines (11).

(26)

In reply to this request by the Commission Romania clarified the following (12):

(27)

Arad airport is open to domestic and international passenger and freight traffic and operated a 1 800 × 45 m runway. The capacity of the airport amounts to 200 passengers/hour. The airport is endowed with good quality technical equipment. According to Romania, at the time of the submission of information, the local authorities approved financing for the extension and the modernisation of Arad airport given, inter alia, the local authorities strategic objective to convert the airport into an intermodal passenger and freight hub for the development of the region.

(28)

During the period 2007-2009, the airport was focused on low cost traffic. Blueair operated several European destinations (Verona, Valencia, Stuttgart, Barcelona, Treviso) and Ryanair served one destination (Milano) for the period April-June 2008.

(29)

The Romanian authorities have submitted to the Commission an analysis — prepared by the airport in 2008 — of the activity of that time and the passenger traffic for the period 2009-2020.

(30)

The analysis showed:

(31)

According to the analysis, the airport largely relied on low cost traffic as major growth driver: in 2008 88 % of overall passenger traffic was represented by scheduled flights operated by Blue Air and 11 % by Ryanair traffic. The analysis assumed a diversification of airline connections by attracting a new low-cost airline, EasyJet.

(32)

The forecasts presented in the analysis foresaw Arad airport to increase its traffic from 128 834 passengers in 2008 to 1 064 116 passengers in 2020 in an optimistic scenario.

(33)

Regarding Timișoara airport, its passenger traffic increased from 859 329 passengers in 2007, 886 083 passengers in 2008 and 991 758 passengers in 2009. From 2007 to 2009, the airport was a regional hub for Carpatair, a regional full service carrier which operated some 32 domestic and European destinations. Other airlines such as Tarom, Lufthansa, Austrian Airlines, Malev, Alitalia, Moldavian Airlines, Alpi Eagles, Skyeurope Airlines, Wizzair served the airport.

(34)

The characteristics of the runway at Baia Mare airport allow the operation on a regular basis of aircraft with a maximum capacity of 75 passengers for short-haul flights.

(35)

The characteristics of the runway at Satu Mare airport allow the operation of aircrafts with a seating capacity of up to 180 passengers for medium-haul flights. The capacity of the airport amounts to 100 passengers/hour.

(36)

Tuzla airport operates a grass strip used by small aircraft (i.e. not exceeding a maximum take-off weight (MTOW) of 5 700 kg (13)) and has no radio navigation system. In the period 2007-2009, the number of aircraft movements of aircrafts of maximum MTOW of 5 700 kg from Constanța airport was significantly lower (5 to 16 times lower in the period under assessment) than at Tuzla airport. Tuzla airport mainly serves specialised flights while Constanța airport serves medium and large aircraft for commercial traffic.

(37)

Debrecen Airport (Hungary) is at 80 km from Oradea airport, but the travelling time is of at least 1h30 since the trip includes passing of a border passport control from Romania which is not in the Schengen area to Hungary which belongs to the Schengen area. Debrecen airport had 42 900 passengers in 2007, 42 650 passengers in 2008 and 25 060 passengers in 2009. The two airports had different business models in 2007-2009 since Debrecen airport was focused on charter flights (with low cost traffic developing only in the last years), while Oradea airport was focused on domestic flights by regional and national full service carriers.

(38)

The total budget of the measure under assessment is 490 401,3 thousand RON, as detailed in Table 1.

(39)

On 31 July 2015, the Commission opened two formal investigation procedures concerning, inter alia, public funding measures in favour of Cluj-Napoca Airport granted over the period from 2010 to 2014 (14) and Târgu Mureș airport granted from 2011 to 2014 (15), other than those covered by the investigation subject to this Decision.

(40)

As explained in recital 4 above, in the opening decision, the Commission decided to initiate the formal investigation procedure in respect to the notified aid and public financing in the period 2007-2009 to cover operating losses. Subsequently, following the withdrawal by Romania of its notification of the planned financing scheme of infrastructure investments, the formal investigation procedure remained opened as concerns the public financing granted to Romanian regional airports in the period 2007-2009 (see recital 10 above).

(41)

In the opening decision, the Commission took the preliminary view that the conditions for the compensation for SGEIs not to constitute an advantage within the meaning of Article 107 of the Treaty were not cumulatively met in this case.

(42)

Indeed, according to the fourth condition of the Altmark judgement (16), the compensation must be limited to the minimum necessary for an efficient undertaking in order for it to escape State aid qualification. This criterion is deemed to be fulfilled if the recipients of the compensation have been chosen following a tender procedure Failing that, the level of compensation must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with 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 revenues and a reasonable profit for discharging the obligations.

(43)

The Commission took the preliminary view that this condition was not fulfilled since the operators of the beneficiary airports had not been chosen following a public tender procedure. Nor had Romania claimed that the compensation had been set on the basis of an analysis of the costs of a typical airport operator, well run and adequately provided with means to provide the public service.

(44)

Therefore the Commission considered that the measure provided the recipients with an economic advantage and came to the preliminary conclusion that the annual operating subsidies constituted State aid in the meaning of Article 107 of the Treaty.

(45)

The Commission also noted that Romania had not contested the aid qualification of the measure.

(46)

As concerns compatibility of the measure, the Commission had doubts that the criteria laid down by the 2005 SGEI Decision were complied with and therefore that the operating subsidies paid yearly to the airports were exempted from the notification requirement, as initially claimed by Romania.

(47)

In this sense, the Commission first noted that in order for the 2005 SGEI Decision to be applicable in specific cases, the services in question must qualify as genuine SGEIs and be clearly defined as such by the Member State.

(48)

The Commission took the view that in this case insufficient information had been provided by Romania to justify that the operation of the thirteen regional airports should be considered SGEI in the sense that the areas served by those airports would be insufficiently connected to the rest of the country if left to the market forces alone.

(49)

The Commission further considered that the airport services had not been clearly defined as SGEIs by the Member State. The Commission took the preliminary view that the apparent duplication of regional airports in Romania within the same catchment area could be a reason why those airports were loss making. To this end, the Commission noted that several of these airports had less than 50 000 passengers per year and were located within a linear distance of less than 100 km from each other.

(50)

Therefore the Commission took the view that the definition of the public service was not sufficiently clear and may contain manifest error insofar as the operation of the airports could have been defined as SGEI without an effective need to ensure a proper connection of the catchment area of each airport to the rest of the country.

(51)

The Commission also had doubts that the requirements of Article 4 of the 2005 SGEI Decision relating to the content of the entrustment act were met in full.

(52)

Finally, the Commission noted that although the Romanian authorities have confirmed that only core activities of the airports were being subsidized, it was not sufficiently clear whether in fact only the costs of eligible activities had been subsidized. No specific provision to restrict eligible costs to the core activities of the airports was included in the acts of entrustment.

(53)

Romania's comments on the opening decision mainly referred to the doubts raised by the Commission on the State aid scheme for the financing of infrastructure for airports with annual traffic of less than 1 million passengers, whose notification has been withdrawn.

(54)

As regards the public funding to Romanian regional airports, in reply to the view of Commission according to which the apparent overabundance of airports in certain regions may hinder the development of the airports in question, Romania submitted that the situation of regional airports (with low traffic which does not allow them to reach a level of profitability) was primarily due to the state of development of the regions where those airports were located, rather than to the distance to neighbouring airports.

(55)

Regarding the public financing on the basis of the Government Decision 398/1997/EC, Romania clarified that amounts are not paid at the beginning of the year on the basis of forecasts of costs and any surplus is not returned to the State at the end of the financial year as stated in the opening decision, but that such financing is granted at the moment when the activities are undertaken based on justifications and within the limits of the approved budget.

(56)

Carpatair's comments partially refer to public financing to Timișoara airport and Wizz Air. As explained in recital 15, public financing of Timișoara airport and Wizz Air is subject to another formal investigation procedure (17). In what follows the Commission will therefore only summarise Carpatair's comments with relevance to the present case.

(57)

Carpatair submits that operating aid is generally considered illegal and against EU interest, and should only be granted in exceptional circumstances. Granting operating aid to airports would in Carpatair's view be disruptive for the industry, for the following reasons:

(58)

Carpatair points out that operating aid has a negative effect on the air transport and airport services markets as it leads to unfair competition between airports and ultimately unfair competition between airlines operating from those airports. As such, operating aid causes unfair competition between airports in Romania and also affects negatively airports in neighbouring countries such as Hungary.

(59)

RAA is a non-profit private law legal entity representing Romanian civil airports.

(60)

RAA comments on the opening decision focus on the aspects related to the State aid scheme for the financing of infrastructure. RAA essentially submits that the infrastructure of most regional airports in Romania requires updating and is well below that of airports of other EU Member States. According to RAA, public funding to upgrade airport infrastructure would be justified by the absence of feasible and reliable transport alternative in Romania (no motorways nor high speed trains).

(61)

According to Cluj-Napoca airport, the public funding granted to it by the local council served to subsidise only non-economic activities and hence fell outside the scope of Article 107(1) of the Treaty.

(62)

In particular, the amounts in question presumably aimed to cover costs of certain non-economic activities taking place inside airport premises (such as Border Patrol, Special Forces Brigade, Customs, Police, Special Aviation Unit), as well as costs of support infrastructure and equipment including maintenance, upgrade, management of the infrastructure, costs with the auxiliary services provided by the airport, fire prevention, emergency assistance, safety measures. According to Cluj-Napoca airport, those costs fall under State responsibility in the exercise of its official powers and therefore do not fall within the scope of the rules on State aid.

(63)

The airport further submitted that in the period 2007-2009 the airport recorded no operating losses.

(64)

By letter dated 17 October 2011 Romania submitted to the Commission its comments on the observations submitted by interested parties in the investigation.

(65)

Although these comments exclusively referred to the notified State aid scheme for infrastructure investments, some of those comments are of relevance for the assessment of the operating subsidies under assessment in this Decision. Those comments are summarised in what follows.

(66)

Romania submits that most of the Romanian regional airports have an annual traffic of less than 50 000 passengers and none of these airports will exceed 300 000 passengers by 2015. On this basis, Romania considers that public support to those airports is unlikely to affect competition and distort trade between Member States.

(67)

Nor would the distance between those airports affect their development in any way, according to Romania. This is because even in those cases where the linear distance between the airports is less than 100 km, the travelling time is generally over 2 hours such that the airports in question exert no competitive pressure on each other.

(68)

As explained in recital 10 above, following the withdrawal by Romania of its notification of the planned financing scheme of infrastructure investments, the formal investigation procedure remained open as concerns the public funding granted to Romanian regional airports in the period 2007-2009. The assessment set out below therefore concerns that measure.

(69)

In the light of the decisions to open a formal investigation for Cluj-Napoca Airport and Târgu Mureș airport adopted on 31 July 2015 (see point 39 above), the Commission considers appropriate to close the present investigation for all airports subject to it, except for Cluj-Napoca airport and Târgu Mureș airport. The Commission intends to close investigation SA.30931 with respect to those two airports together with the investigations opened on 31 July 2015. Consequently, the assessment set out below only applies to the measures granted to the 11 other airports.

(70)

Pursuant to Article 107(1) of the Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the provision of certain goods, in so far as it affects trade between Member States, shall be incompatible with the internal market save as otherwise provided by the Treaty.

(71)

The criteria laid down in Article 107(1) of the Treaty are cumulative. Therefore, in order to determine whether the measures under scrutiny constitute State aid within the meaning of Article 107(1) of the Treaty, all the above mentioned conditions need to be fulfilled. Namely, the financial support:

(72)

According to settled case law, the Commission must first establish whether the airport managers are undertakings within the meaning of Article 107(1) of the Treaty. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed (18). Any activity consisting in offering goods or services on a given market is an economic activity.

(73)

In Leipzig/Halle Airport, the General Court held that from the date of the judgment in Aéroports de Paris (12 December 2000), the application of State aid rules to the financing of airport infrastructure could no longer be excluded.

(74)

The Commission therefore finds that at least as of from 12 December 2000, the airport manager has been engaged in an economic activity and that it constitutes an undertaking in the sense of Article 107(1) of the Treaty (see also point 29 of the 2014 Aviation Guidelines).

(75)

While airport managers must be considered to constitute undertakings in the sense of Article 107(1) of the Treaty at least as of 12 December 2000, it must be recalled that not all activities of an airport manager are necessarily of an economic nature (see also point 34 of the 2014 Aviation Guidelines) (19).

(76)

The Court of Justice has held that activities that normally fall under the State's responsibility in the exercise of its official powers as a public authority are not of an economic nature and do not fall within the scope of the rules on State aid.

(77)

Therefore, the financing of activities falling within the public policy remit or of infrastructure directly related to those activities in general does not constitute State aid (20). At an airport, activities such as air traffic control, police, customs, firefighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform these activities are generally considered to be of a non-economic nature (see also point 35 of the 2014 Aviation Guidelines) (21).

(78)

However, public financing of non-economic activities must not lead to undue discrimination between airlines and airport managers. Indeed, it is established case-law that an advantage is present when public authorities relieve undertakings of the costs inherent to their economic activities (22). Therefore, if in a given legal system it is normal that airlines or airport managers bear the costs of certain services, whereas some airlines or airport managers providing the same services on behalf of the same public authorities do not have to bear those costs, the latter may enjoy an advantage, even if those services are considered in themselves non-economic (see also point 37 of the 2014 Aviation Guidelines).

(79)

At no time did Romania claim that the financing granted to any of the regional airports subject to this Decision covered costs which would qualify as public policy remit costs. Nor have any of the airport operators, apart from Cluj-Napoca Airport, claimed in the course of the investigation that it would be the case. As a matter of fact, the compensation mechanism is designed to cover the difference between the revenues and losses of the airports, without making a distinction between public policy remit costs and other types of costs. This question can be left open as regards Cluj-Napoca Airport and Târgu Mureș Airport, since this Decision does not close the pending investigation with respect to those airports. As to the other airports, the Commission concludes that the measures do not constitute compensation for public policy remit costs.

(80)

The concept of State aid applies to any advantage granted directly or indirectly, financed out of State resources, granted by the State itself or by any intermediary body acting by virtue of powers conferred on it. Thus, it also applies to all advantages granted by regional or local authorities of Member States, whatever their status and description (23).

(81)

In this case the financing is granted directly by the State or the local authorities through their own resources. Therefore, the Commission confirms that all measures under assessment are granted through State resources and are imputable to the State.

(82)

The public funding granted to the airport managers aimed at offsetting the losses incurred when carrying out their ordinary activity. Nothing in the factual evidence available to the Commission or in the comments received from Romania or third parties suggest that the granting authorities could expect any financial return as a result of those funding measures when they decided to grant them. Therefore, the measures at issue do not comply with the market economy operator principle.

(83)

In the course of the investigation Romania claimed that the disputed public financing would represent compensation for the provision of SGEIs.

(84)

In case of undertakings entrusted with the provision of an SGEI, in order to conclude whether or not the measures under assessment constitute an economic advantage within the meaning of Article 107(1) of the Treaty, the Commission must examine observance of the conditions set out by the Court in its judgement in the Altmark case (24). Those conditions may be summarised as follows:

(85)

Those four conditions must be fulfilled cumulatively. Therefore, if one of them is not satisfied, it cannot be claimed that the measures at issue do not involve an economic advantage on the basis of the Altmark judgement.

(86)

The requirement of the first Altmark condition coincides with the requirement of clear entrustment and definition of the SGEI provided by Article 106(2) of the Treaty (25).

(87)

Article 106(2) of the Treaty applies only to ‘undertakings entrusted with the operation’ of an SGEI. The Court of Justice has consistently underlined the need for an entrustment act (26). Therefore, the need for a clear definition of the SGEI is inherent to and inseparable from the idea of entrustment and derives directly from Article 106(2) of the Treaty.

(88)

In the 2001 Communication on services of general interest, the Commission already underlined the link between clear definition, entrustment and necessity and proportionality of the SGEI compensation under Article 106(2) of the Treaty (27). Paragraph 22 of that Communication explained that ‘in every case, for the exception provided for by Article 106(2) of the Treaty to apply, the public service mission needs to be clearly defined and must be explicitly entrusted through an act of public authority […]. This obligation is necessary to ensure legal certainty as well as transparency vis-à-vis the citizens and is indispensable for the Commission to carry out its proportionality assessment’. Entrustment and definition are thus a logical prerequisite of any meaningful assessment of the proportionate level of any compensation. The Union Courts have consistently underlined the need for a clear definition of the PSOs for the application of both the Altmark exception and Article 106(2) of the Treaty (28).

(89)

Also the 2011 Communication from the Commission on the application of the European Union State aid rules to compensation granted for provision of SGEIs (29) clarifies that the SGEI and the PSOs must be clearly defined in advance. According to paragraph 51 therein, 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. The first Altmark criterion requires that the undertaking has PSOs to discharge. Accordingly, in order to comply with the Altmark case-law, a public service entrustment is necessary that defines the obligations of the SGEI provider in question and those of the public authority entrusting the SGEI in question. According to paragraph 52 thereafter the public service task must be assigned by way of one or more acts that must at least specify the PSOs; the undertaking and, where applicable, the territory concerned; the nature of any exclusive or special rights assigned to the undertaking by the authority in question.

(90)

In this case, Romania claimed that the public financing granted to the airports in question in the period 2007-2009 represented compensation for the provision of SGEIs. Romania claimed that Government Decision 398/1997/EC laid down in a clear and transparent manner the PSOs, the parameters for calculating the compensation and the arrangements for avoiding any overcompensation.

(91)

However, whilst Government Decision 398/1997/EC set out that operating and capital costs of the airports listed therein would be covered by own resources supplemented by public financing and listed the activities to be performed by the airport managers across all airports concerned (i.e. not for each airport individually), it did not impose clear PSOs on any of the airport managers.

(92)

As concerns Constanța airport, whilst the Government Decision 523/1998/EC set out which costs are either to be supplemented by public financing or be fully covered by public financing and listed the activities to be performed by the airport manager, it did not impose clear PSOs on any of the airport managers.

(93)

Romania's claim that airport services would be essential for the economic development of the respective regions or aim to fulfil a strategic security objective does not suffice to consider that the beneficiaries were correctly entrusted with the SGEI to the extent that the PSOs.

(94)

Regarding the issue as to whether the airports in question qualify as genuine services of general economic interest, the Commission leaves this question open since an assessment in this respect is not necessary given that, as explained above, the PSOs are not clearly defined in an entrustment act. The Commission therefore does not need to take a position on this aspect.

(95)

Therefore, the measures at issue do not comply with Altmark 1.

(96)

The fourth Altmark criterion provides that the compensation must be the minimum necessary in order for it not to qualify as aid. This criterion is fulfilled if the recipient of the compensation has been chosen following a tender procedure that would allow for the selection of the tenderer capable of providing the required SGEI at the least cost to the community or, failing that, if the compensation has been calculated by reference to the costs of an efficient undertaking.

(97)

In this case, the beneficiaries have not been chosen following a tender procedure. There is also no evidence showing that that the level of compensation has been determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with the means required to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant revenues and a reasonable profit for discharging these obligations (not correctly defined — see recitals 86-95). The Commission therefore considers that the public financing in question cannot be found to have been determined on the basis of the costs of an efficient undertaking.

(98)

Consequently, the measures under investigation do not comply with Altmark 4.

(99)

As the Altmark 1 and 4 conditions are not complied with, the Commission finds that the four conditions set out by the Court of Justice in the Altmark case were not cumulatively met in the present case. Since the market economy operator principle is not complied with either as mentioned in recital 82 above, the measures under assessment conferred an economic advantage on the airport managers.

(100)

Furthermore, that economic advantage is selective as it is directed at certain undertakings belonging to a given economic sector, namely airports.

(101)

Competition between airports can be assessed in the light of airlines' criteria of choice, and in particular by comparing factors such as the type of airport services provided and the clients concerned, population or economic activity, congestion, whether there is access by land, and the level of charges and overall commercial conditions for use of airport infrastructure and services (see point 43 of the 2014 Aviation Guidelines).

(102)

Moreover, airport operators are in competition for the management of airport infrastructure, including at local and regional airports. The public funding of an airport may therefore distort competition in the markets for airport infrastructure operation. Moreover, public funding to airports can distort competition and have an effect on trade in air transport markets across the Union. Finally, intermodal competition may also be affected by public funding to airports (see point 44 of the 2014 Aviation Guidelines).

(103)

Therefore, the measures under assessment distorted competition or at least threatened to distort competition and affected trade between Member States.

(104)

On the basis of the above, the Commission concludes that the measures under assessment constitute State aid to those airports within the meaning of Article 107(1) of the Treaty.

(105)

The assessment made under Section 3.2.2 ‘Type of aid: existing or new aid’ (paragraphs 93 to 95) of the opening decision as to whether the aid should be considered as existing or new aid under the provisions of Annex V to the Act concerning the conditions of accession of the Republic of Bulgaria and Romania remains valid. Therefore, the measures do not qualify as existing aid.

(106)

The measures under investigation were put into effect before formal approval by the Commission. Therefore, they constitute unlawful aid unless they fulfil the relevant conditions of a Union act providing for a block exemption from the notification obligation laid down in Article 108 of the TFEU for certain categories of aid. In this case, the only possible act that could have potentially provided such an exemption is the 2005 SGEI Decision.

(107)

In the course of the investigation Romania has argued that the aid to the thirteen airports in question would comply with the conditions laid down in the 2005 SGEI Decision, which was in force when the measures at issue were granted.

(108)

The 2005 SGEI Decision applied to airports:

(109)

The 2005 SGEI Decision only applied to aid under the form of public service compensation for genuine SGEI services. In order to benefit from this exemption, public service compensation for the operation of SGEI must also comply with the detailed conditions set out in Articles 4, 5 and 6 thereof (31).

(110)

Article 4 of the 2005 SGEI Decision requires that the SGEI be entrusted to the undertaking concerned by way of one or more official acts, setting out, inter alia, the nature and duration of the PSOs, the parameters for calculating, controlling and reviewing the compensation, and the necessary arrangements for avoiding and repaying any overcompensation. Article 5 of the 2005 SGEI Decision laid down that the amount of compensation has to be limited to what is necessary to cover the costs incurred in discharging the PSOs, taking into account the relevant receipts and a reasonable profit. Finally, Article 6 of the 2005 SGEI Decision requires Member States to carry out regular controls to ensure that undertakings are not receiving compensation in excess of the amount determined in accordance with Article 5.

(111)

As indicated in Section 7.1.4.1, Romania has failed to demonstrate that the airport managers were entrusted with clearly defined PSOs through the alleged entrustment acts on which it relied, namely Government Decision 398/1997/EC and Government Decision 523/1998/EC. The requirements of Articles 4 are therefore not met.

(112)

Consequently, the aid to the eleven airport managers cannot be considered compatible with the internal market and exempted from the notification requirement on the basis of the 2005 SGEI Decision.

(113)

According to Article 10 of the Commission Decision 2012/21/EU (32) (hereinafter ‘the 2011 SGEI Decision’), any aid put into effect before its entry into force that was not compatible with the internal market nor exempted from the notification requirement in accordance with the 2005 SGEI Decision can be declared compatible with the internal market and exempt from the requirement of prior notification if the aid fulfils the conditions laid down therein. For similar reasons to those set out in Section 7.1.4.1, the aid does not fulfil the conditions laid down in Articles 4, 5 and 6 of the 2011 SGEI Decision, which are largely similar to Articles 4, 5 and 6 in the 2005 SGEI Decision. Therefore, the aid cannot be considered compatible with the internal market and exempted from the notification requirement on the basis of the 2011 SGEI Decision.

(114)

The measures at hand thus constitute unlawful State aid.

(115)

For the reasons explained above, the aid cannot be declared compatible with the internal market in accordance with the 2005 SGEI Decision and the 2011 SGEI Decision. Consequently, the Commission will assess the compatibility of the measures at issue on the basis of the criteria laid down respectively in the 2011 SGEI Framework and the 2014 Aviation Guidelines, which seem to be the only possible legal bases under which those measures might potentially be found compatible with the internal market.

(116)

Article 106(2) of the Treaty sets out that ‘undertakings entrusted with the operation of an SGEI or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to EU interest.’

(117)

That Article provides for a derogation from the prohibition of State aid contained in Article 107 of the Treaty to the extent that the aid is necessary and proportional to ensure the performance of the SGEI under acceptable economic conditions. Under Article 106(3) of the Treaty it is for the Commission to ensure application of this Article, including, inter alia, by specifying under which conditions it considers the criteria of necessity and proportionality to be fulfilled.

(118)

Prior to 31 January 2012, the Community framework for State aid in the form of public service compensation (hereinafter ‘the 2005 SGEI Framework’) (33) and the 2005 SGEI Decision represented the Commission's policy of applying the derogation of Article 106(2) of the Treaty.

(119)

On 31 January 2012 the new SGEI package, including the European Union framework for State aid in the form of public service compensation (2011) (hereinafter ‘the 2011 SGEI Framework’) (34) and ‘the 2011 SGEI Decision’ entered into force.

(120)

According to paragraph 69 of the 2011 SGEI Framework, ‘the Commission will apply the principles set out in this Communication to unlawful aid on which it takes a decision after 31 January 2012 even if the aid was granted before this date’.

(121)

Paragraph 16 of the 2011 SGEI Framework sets out the requirements for an SGEI to be considered validly entrusted. Notably paragraph 16(a) thereafter lays down that the entrustment act must spell out the content and duration of PSOs. Therefore, for the same reasons already mentioned in Sections 7.1.4.1 and 7.3 above, in this case the aid cannot be considered compatible under the 2011 SGEI Framework.

(122)

The Commission therefore considers that the aid measure in question cannot be declared compatible with the internal market pursuant to Article 106(2) of the Treaty.

(123)

The 2014 Aviation Guidelines apply to operating aid granted to airports before 4 April 2014 (35). The compatibility conditions laid down in the 2014 Aviation Guidelines for operating aid to airports differ depending on whether the aid was granted before or after 4 April 2014, the date of entry into force of the guidelines (36).

(124)

Operating aid granted before the entry into force of the 2014 Aviation Guidelines, that is before 4 April 2014, may be declared compatible provided that the following conditions are met:

(125)

The operating support measures granted to Romanian regional airports were aimed to allow the airports to have enough capital to continue operating viably. According to Romania, regional airports have an instrumental role to play in promoting accessibility to catchment areas and the financing at issue improve airport safety, security and efficiency, whilst contributing towards the achievement of wider regional development objectives. In addition, the most convenient mode of transport to/from those regions is air travel, apart from road/rail services, which however in Romania, given the poor condition of the infrastructure, involve considerably higher travelling times.

(126)

Nevertheless, the Commission notes that in view of the close proximity between some of the airports in the investigation, a possible duplication of airport infrastructure could militate against finding financing for those airports meets a clearly defined objective of common interest. Therefore the Commission must assess that the financing of those airports does not lead to the duplication of airport infrastructure within the same catchment area.

(127)

The 2014 Aviation Guidelines define the ‘catchment area of an airport’ as the geographic market boundary that is normally set at around 100 kilometres or around 60 minutes travelling time by car, bus, train or high-speed train. The definition of the catchment area of a given airport needs to take into account the specificities of each particular airport. The size and shape of the catchment area depends on various characteristics of the airport, including its business model, location and the destinations it serves.

(128)

As set out in recital 24 above, the only airports subject to the present assessment for which another airport is present within the catchment area of 100 km or 60 minutes travelling time by road, train or high-speed train, as set out in point 25 (12) of the 2014 Aviation guidelines are Arad, Baia Mare, Satu Mare, Constanța and Oradea. For all the other airports, the Commission considers that the aid contributed to maintaining in operation infrastructure necessary to the mobility of citizens and accessibility of the regions where those airports are located, given in particular the poor quality of the road and rail infrastructure. Therefore, for those airports, the aid contributed to the furtherance of an objective of common interest for the Union. As to the remaining airports, the Commission notes the following.

(129)

Arad airport is located only 50 km from Timișoara, which amounts to a travelling time by road of 40 minutes.

(130)

Timișoara and Arad airports had different business models during the period 2007-2009. Timișoara was a well-established airport pursuing a business model that is significantly different from that of Arad airport. Timișoara airport offered mainly scheduled flights of regional and international full service carriers connecting Timișoara with a number of Romanian and European cities (43) whilst, as mentioned in recitals 28 and 31 above, the business model of Arad was based on low-cost traffic. The two airports continued to operate under different models from 2009 onwards with low-cost traffic drastically reduced and subsequently disappearing at Arad airport (the airport served only 8 632 passengers in 2015 and according to publicly available information, it had no commercial passenger traffic in 2016) and Timișoara airport gearing towards low cost traffic. The fact that the business models of the airports at Timișoara and Arad were different during the period under assessment and subsequently is an indication that the two airports are imperfect substitutes for one another.

(131)

According to point 85 of the Aviation Guidelines, the duplication of unprofitable airports or the creation of additional unused capacity does not contribute to an objective of common interest. In this respect, the Commission notes that Timișoara was profitable during the period under assessment. In addition, Timișoara airport made investments in various terminals over 2007-2010 to expand its capacity and cater for increased air traffic (e.g. extension and modernisation of the international flights terminal in 2007, extension of the domestic departure terminal over 2008-2010). Timișoara airport therefore, already far bigger, had to invest to grow, so it is unlikely that absent the aid to Arad, Timișoara could have absorbed Arad's traffic without further investments. This is a further indication of the imperfect degree of substitutability between the two airports.

(132)

In the light of the arguments put forward in recitals 130 and 131 above, the Commission finds that while Arad airport is situated in the same catchment area as Timișoara airport, there is no duplication between the two airports.

(133)

On the basis of the above, the Commission can conclude that the aid to Arad airport contributed to the mobility of citizens and accessibility of the region where it is located and therefore served a well-defined objective of common interest.

(134)

As regards Baia Mare and Satu Mare airports, they are located 76 km from each other and both airports served mostly scheduled flights to Bucharest operated by the Romanian flag carrier, TAROM. Based on publicly available information, at Baia Mare airport, during the period 2007-2009, TAROM operated several weekly flights to Bucharest, while Austrian Airlines operated one destination (Vienna) during the period April 2008-February 2009 and Blueair served three European destinations for just a few months (October to December 2009). TAROM also operated several weekly flights from Satu Mare airport to Bucharest. However, given the poor condition of the road infrastructure in that area, the travelling time between the two airports is 1h10 minutes by road, which exceeds the 60 minutes travelling time criterion used to delineate the catchment area of an airport according to the 2014 Aviation Guidelines.

(135)

In addition, as mentioned in recitals 34 and 35 above there was a difference in the size of the aircrafts which could be regularly operated at the two airports given the difference in infrastructure.

(136)

Therefore, in the light of the arguments set in recitals 134 and 135 above, while the two airports are situated within 100 kilometres distance criterion used to delineate the catchment area of an airport according to the 2014 Aviation Guidelines, the Commission finds that there is no duplication between them.

(137)

Based on the above, the Commission concludes that the aid received by each of the two airports contributed to a well-defined objective of common interest by increasing mobility and accessibility in the areas where those airports are located.

(138)

Constanța airport is situated at 45 km and 0h30 travelling time from Tuzla airport. In 2007-2009, Constanța offered scheduled flights to several European destinations and therefore had a different business model compared to Tuzla which did not offer any airport services for commercial aviation and focused on specialised flights (e.g. for agricultural purposes, for advertising purposes as well as leisure, training and emergency flights). Consequently, although Tuzla airport is situated in the same catchment area as Constanța airport, it cannot be considered an ‘airport’ within the meaning of point 25(6) of the 2014 Aviation Guidelines and therefore cannot be regarded as the duplication of the airport infrastructure at Constanța airport.

(139)

On this basis, the Commission concludes that the aid to Constanța airport contributed to a well-defined objective of common interest by increasing mobility and accessibility in the area where the airport is located.

(140)

Oradea is 80 km away from Debrecen (Hungary), but traveling time is at least 1h30 (due to the need to pass a non-Schengen border).

(141)

In addition, over 2007-2009 the airports had a different business model with Oradea operating domestic flights by regional and national full service carriers and Debrecen airport focusing at that time on charter flights (with low cost traffic developing only in recent years). This is an indication that the two airports in the period under assessment have been imperfect substitutes for one another. Therefore, while the two airports are situated within 100 kilometres distance criterion used to delineate the catchment area of an airport according to the 2014 Aviation Guidelines, the Commission concludes that there is no duplication between them.

(142)

Based on the above, the Commission finds that the aid to Oradea airport contributed to a well-defined objective of common interest by increasing mobility and accessibility in the area where the airport is located.

(143)

As regards necessity of the aid, point 116 of the 2014 Aviation Guidelines requires that the operating aid brings about a material improvement that the market itself cannot deliver. According to point 120 of the 2014 Aviation Guidelines, Member States must demonstrate that the aid is appropriate to achieve the intended objective or resolve the problems intended to be addressed by the aid. This is the case if, absent the aid in question, the Romanian airports in question would likely have been forced to exit the market, depriving Romania's regions of a transport infrastructure which plays a significant role in its accessibility and development, or reduce their activity to a significant extent. According to the 2014 Aviation Guidelines, smaller airports may have difficulties in ensuring the financing of their operation without public funding. According to point 118 of the 2014 Aviation Guidelines, airports with annual passenger traffic below 200 000 passengers per annum may not be able to cover their operating costs to a large extent. In this sense, the Commission notes that traffic at the eleven airports subject to this assessment was below 200 000 passengers in the period 2007-2009.

(144)

According to point 124 of the 2014 Aviation Guidelines, operating aid has an incentive effect if it is likely that, in the absence of the operating aid, and taking into account the possible presence of investment aid and the level of traffic, the level of economic activity of the airport concerned would be significantly reduced. In the present case, absent the aid the activity of the beneficiaries would have been significantly reduced if not terminated altogether due to uncovered losses. According to point 125 of the 2014 Aviation Guidelines, in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place. The measures under investigation were limited to the minimum necessary to offset losses and allow the airports to continue to operate viably.

(145)

Therefore, the Commission concludes that all operating aid was necessary and limited to the minimum necessary for the aided activity to take place.

(146)

As set out in recital 24 above, the only airports subject to the present assessment for which another airport is present within 100 km or 60 minutes travelling time by road, train or high-speed train are Arad, Baia Mare, Satu Mare, Constanța and Oradea. As explained in recital 128 above, for all the other airports, the Commission considers that the aid contributed to maintaining in operation infrastructure necessary to the mobility of citizens and accessibility of the regions where those airports are located, given in particular the poor quality of the road and rail infrastructure. Therefore, for those airports, the aid contributed to the furtherance of an objective of common interest for the Union and did not give rise to undue distortions of competition. As to the remaining airports, the Commission notes the following.

(147)

The Commission notes that in the period under assessment, Arad airport had very limited traffic, both in absolute terms and compared with Timișoara airport (situated at 50 km and 40 minutes travelling time). The number of passengers per year at Arad airport varied between 67 183 and 128 835 in the period under assessment, whereas traffic at Timișoara airport varied between 859 329 to 991 758 passengers per year. Traffic at Arad airport represented only 7,8 % of the traffic at Timișoara airport in 2007, 14,5 % in 2008 and 8,8 % in 2009. The competitive impact of the aid received by Arad airport on Timișoara airport has been very limited in view of the difference in traffic level between the two airports (44). More generally, the overall competitive effects of the aid have been necessarily modest in view of the small traffic at the airport. In addition, the traffic evolution at the two airports does not seem correlated. Traffic at Arad airport increased from 67 183 passengers in 2007 to 128 835 in 2008 and decreased to some 88 147 passengers in 2009 while Timișoara airport increased steadily its traffic (from 859 329 passengers in 2007 to 886 083 passengers in 2008 and 991 758 passengers in 2009) (45). This absence of correlation suggests that the two airports served different needs and market segments and were not simply duplicating each other.

(148)

Furthermore, given that Timișoara airport was profitable between 2007 and 2009 and made investment to increase its capacity, it is unlikely that the effect of the aid to Arad airport have had a material impact on the operations of Timișoara airport.

(149)

In view of the above, the Commission considers that the distortions of competition brought about by the aid were limited and did not outweigh the contribution of the aid to mobility and accessibility.

(150)

Given the extremely low level of traffic of the two airports in the period under assessment (from 15 334 passengers in 2007 to 24 983 passengers in 2009 for Baia Mare and from 5 883 passengers to 11 101 passengers in 2009 for Satu Mara) and the difference in size of the type of aircrafts operated as indicated in recitals 34 and 35 above, the Commission concludes that the distortions of competitions caused by the aid were very limited and did not outweigh the positive contribution of the aid to mobility and accessibility.

(151)

As explained in recital 138 above, Constanța which operated commercial traffic had a different business model than the nearby Tuzla airport, which did not offer any airport services for commercial aviation. Tuzla airport is not even an ‘airport’ within the meaning of point 25(6) of the 2014 Aviation Guidelines. Moreover, Constanța had a very low traffic in the period under assessment, which limits the distortions of competition brought about by the aid that it received. Therefore the Commission finds that the contribution of the aid received by Constanța airport in 2007-2009 to mobility and accessibility outweighed any distortion of competition brought about by that aid.

(152)

As explained in recitals 37 and 140 above, Oradea is 80 km away from Debrecen (Hungary), but traveling time is at least 1h30 (due to the need to pass a non-Schengen border). In addition, over 2007-2009 Oradea had very low traffic (less than 40 000 passengers) and had a different business model compared to Debrecen airport (see recital 141).

(153)

On this basis, the Commission considers that contribution of aid received by Oradea airport to mobility and accessibility outweighed any distortion of competition brought about by that aid.

(154)

On the basis of the above assessment, the Commission concludes that the aid granted in 2007-2009 to Romanian airports at Arad, Bacău, Baia Mare, Craiova, Iași, Oradea, Satu-Mare, Sibiu, Suceava, Tulcea and Constanța in the period 2007-2009 is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty.

(155)

This assessment is entirely without prejudice to any potential future assessment by the Commission of any potential aid granted to those airports after 4 April 2014, since any such aid would have to be assessed against criteria that differ from those applicable to the measures at hand (46).

(156)

The funding granted by Romanian public authorities between 2007-2009 to airports located in Arad, Bacău, Baia Mare, Craiova, Iași, Oradea, Satu-Mare, Sibiu, Suceava, Tulcea and Constanța constitutes unlawful State aid which is compatible with the internal market pursuant to Article 107(3)(c) TFEU.

(157)

For the reasons explained in recital 69, the investigation for the public funding granted to Cluj-Napoca airport and Târgu Mureș airport between 2007-2009 remains open,

(1)

By letter dated 5 July 2013 (1), tellUs IT AS (later merged with New Mind (2), and henceforth referred to as ‘New Mind | tellUs’ or ‘the Complainant’), made a State aid complaint to the Authority regarding Innovasjon Norge's (‘Innovation Norway’ or ‘IN’) economic activities in the market for web infrastructure and related services, within the tourism sector. The Authority received and registered the complaint on 8 July 2013.

(2)

After a preliminary examination of the complaint, on 16 July 2014, the Authority decided to initiate the formal investigation procedure provided for in Article 1(2) of Part I of Protocol 3 by adopting Decision No 300/14/COL (‘the opening decision’) (3). By means of this decision, the Authority called upon the Norwegian authorities and interested parties to submit their comments.

(3)

By letter dated 1 September 2014 (4), the Norwegian authorities provided comments to the opening decision. On 30 September 2014, the Authority met the Norwegian authorities and IN. On that occasion, the Norwegian authorities provided new information and clarifications on their submission dated 1 September 2014. The Authority also asked IN additional questions which were replied to by email dated 17 October 2014 (5).

(4)

By email of 9 October 2014 (6), the Authority received comments from one interested party, the Complainant. By letter of 10 October 2014 (7), the Authority forwarded these to the Norwegian authorities. The Authority had conference calls with IN on 27 October 2014 and 5 November 2014.

(5)

By letter dated 24 November 2014 (8), the Norwegian authorities submitted their comments on the Complainant's observations and further information on the case.

(6)

After this, the Authority has received additional information on the case from the Complainant and IN (9). The information received from the Complainant was forwarded to the Norwegian authorities.

(7)

The present decision concerns IN's activities within the tourism sector.

(8)

IN is a public company, entrusted with the mandate to support innovation and development of Norwegian enterprises and industry. IN supports the national tourism industry. IN has established and manages the website visitnorway.com, the most visited Norwegian tourism website (10).

(9)

Through visitnorway.com, IN provides services to regional tourist boards (‘RTBs’) (11) and destination management organisations (‘DMOs’) (12). The RTBs and the DMOs are local/regional entities promoting tourism in their respective geographic areas.

(10)

Those services include (i) web infrastructure and related services and (ii) marketing and promotion services in the tourism sector (13).

(11)

The Complainant and the opening decision refer to possible State aid measures regarding the web infrastructure and related services. Specifically, Article 1 of the opening decision refers to three possible State aid measures.

(12)

The first alleged State aid measure concerns State aid in favour of IN by means of foregoing of profits when providing web infrastructure and related services to the RTBs and DMOs.

(13)

The second measure is the alleged lack of accounting separation and a transparent cost allocation methodology separating IN's economic and non-economic activities. In particular, a relevant question is whether IN's provision of web infrastructure and related services are cross-subsidised with public funds received to carry out a non-economic service, i.e. the general promotion of Norway as a tourism destination.

(14)

The third alleged State aid measure concerns State aid in favour of the RTBs and DMOs, in the form that prices charged for web infrastructure and related services are not sufficient to create a reasonable return for IN on its investments.

(15)

IN was established in 2003 by the Norwegian Government through the Act on Innovation Norway (14) (‘the Act on IN’). The State owns 51 % of the company, and the counties own the remaining 49 % (15).

(16)

The company was established with the purpose to be the Norwegian Government's instrument to promote value-generating business development throughout the country (16). IN manages and implements several Norwegian aid schemes. IN supports the national tourism sector. According to the Norwegian authorities: ‘IN is amongst others entrusted with the task of offering web marketing services to reach the international and national population on the official website visitnorway.com’ (17).

(17)

Local and regional tourism promotion is ensured by the RTBs and the DMOs. According to the information provided by the Norwegian authorities (18), in Norway there are around 300 regional and local tourism organisations, i.e. RTBs and DMOs. Their main objective is to arrange tourism activities and offer tourism information. The RTBs' focus is on marketing the region internationally, while the DMOs work both internationally and nationally to market specific destinations (19). In general, their shareholders are both public and private companies (20). The RTBs are generally organised as limited liability companies, whose shares are owned by the county authorities and representatives of the tourism industry. The DMOs are local and their shareholder structure varies. However, they are generally owned by local authorities and local tourism businesses.

(18)

The RTBs and DMOs do not seek to maximise profit for their owners. Their objective is rather to stimulate the economic activity of the tourism sector in their respective geographical areas (21).

(19)

Web infrastructure and related services in the tourism sector are provided through a ‘Destination Management System’ (‘DMS’) (22).

(20)

Through a DMS, an IT company offers a service where its clients (destination management companies (23)) can submit and regularly update information about tourist sites, hotels, restaurants, events and similar information simultaneously on their own webpage, and on external channels such as visitnorway.com, Google Maps, tourist information kiosks, mobile portals, and printed newspapers. The information is used by the general public for booking or other purposes.

(21)

A DMS can provide different functionalities: (i) a destinator functionality (i.e. the creation of a database of points of interest or information flash concerning events, hotels, restaurants, art expositions, etc.); (ii) a distribution functionality (i.e. the information stored in the database is distributed to different channels and platforms); and (iii) a search functionality (i.e. used on websites to search and present tourism products).

(22)

A graphic illustration of these services is included in recital 43 below.

(23)

Tourism marketing and promotion services can refer to the general promotion of a geographic area or to the promotion of specific businesses.

(24)

General promotion implies offering to the visitors general tourism information regarding landscapes, culinary traditions, weather, etc. Specific business promotion refers to the marketing of specific contents (i.e. information regarding hotel, restaurants, cultural events, etc.).

(25)

Furthermore, when promoting specific contents on visitnorway.com, two different possibilities can be identified, either the information is directly published on the website (i.e. the information is hosted within the website), or a link to an external website that publishes the specific information.

(26)

It is within the scope of IN's mandate to promote the tourism industry at a national level. The Norwegian Government has been an active stakeholder in the tourism sector since 1903 (24). As indicated in recital 17 above, at the regional and local levels, tourism promotion is performed by the RTBs and the DMOs. The State annual Budget letters, in the chapter devoted to IN, provide instructions for IN's activities in the tourism sector (25).

(27)

In 2007, the Norwegian authorities adopted a national strategy for the tourism industry, establishing the Governments' main objectives for the sector (26). One of these objectives was to strengthen the recognition of Norway as a tourism destination. In this respect, in 2007, IN developed and established the website visitnorway.com. According to the strategy for the tourism industry ‘[t]he website shall compel visitors to travel to Norway and provide good and comprehensive information about Norway and what the tourism industry has to offer’ (27).

(28)

Since the establishment of the visitnorway.com website, IN has in addition to providing general content about Norway (non-economic activity), also offered to RTBs and DMOs the ability to promote their specific tourism content (i.e. information on events, hotels, transport, etc.) on the visitnorway.com website. IN has signed standard agreements with RTBs and DMOs by means of which the tourism specific content of the RTBs and DMOs is published on visitnorway.com (directly or through hyperlinks) against an annual subscription fee calculated on the basis of the annual turnover of the respective RTBs and DMOs. The RTBs and DMOs have historically also had their own websites where they provide general information about their respective geographical areas, as well as promote specific tourism products, i.e. economic services on behalf of their stakeholders and owners.

(29)

In 2012, the Norwegian Government adopted a new tourism strategy aimed at improving the national tourism structure (28). The objectives of the new strategy were to render the public support to the sector more efficient, reduce the number of actors involved and ensure more coordination amongst them. Moreover, the Norwegian authorities have stated their aim to avoid a diversification of websites dealing with tourism in Norway, with different structure and layouts, booking engines, languages and so on, which are all partly funded by various Government bodies, counties or municipalities.

(30)

Following this, in 2013, the Ministry of Trade, Industry and Fisheries adopted a ‘new tourism structure’ with the objective to make it easy to select Norway as a tourism destination for tourists (29).

(31)

IN's budget letter of 2013 (the ‘2013 Budget letter’ (30)) states that: ‘Innovation Norway is to ensure a good distribution of Norwegian travel experience through visitnorway.com, and help to make the players in the tourist industry […]’. visitnorway.com was thus identified as a key element of the Norwegian tourism promotion strategy (31). IN was asked to expand the website and increase its support to the tourism industry. The objective was to offer web marketing services to reach both national and international audiences on the official website visitnorway.com (32).

(32)

Taking into account this objective, IN initiated a project called ‘visitnorway's new structure’ (the ‘new structure’) (33). The new structure offered the RTBs and DMOs not only marketing and promotion services (as done through the standard agreements, see recital 28), but also additional services.

(33)

IN has made a number of necessary changes to features and functionalities on the visitnorway.com platform, in order to remain up to date on technology and to be able to efficiently operate the platform over time. In 2013, IN started to offer some of the DMS functionalities (hereby collectively defined as ‘web infrastructure and related services’) to Norwegian RTBs and DMOs, that wished to migrate the content from their own websites to visitnorway.com. This integration of content on the visitnorway.com platform is in line with the objectives laid down by the Norwegian authorities in their new tourism strategy, inter alia, to avoid a diversification of websites dealing with tourism in Norway (see recital 29 above).

(34)

Consequently, in 2014 all RTBs and DMOs were offered premium partnership agreements with the possibility to use visitnorway.com as their homepage instead of developing or maintaining their own homepage. Migrating to visitnorway.com implied terminating their own websites. These services were only offered to RTBs and DMOs and not to the general market; i.e. not to all potential users including the shareholders or external customers of the RTBs and DMOs (34).

(35)

Once migrated, some of the services that the RTBs and DMOs had previously purchased from companies such as the Complainant, became redundant. In particular, the search functionality would be redundant for the RTBs and DMOs, and the licensee contracts with companies such as New Mind | tellUs would normally be terminated. On the contrary, other functionalities — such as the destinator functionality — were still required to create and maintain the points of interest or information flash to be published on visitnorway.com.

(36)

Despite premium partnership agreements having been offered to all RTBs and DMOs, not all of them were/are interested in the new services, since migrating to visitnorway.com implied, inter alia, accepting the editorial conditions and restrictions imposed by IN (35). Therefore, some of the RTBs and DMOs maintain standard agreements by means of which IN provides to them promotion and marketing services (see recital 28 above).

(37)

The tourism ‘new structure’ project within visitnorway.com (see recital 32 above) also encompassed two pilot projects — Alfa and Beta — in 2013, prior to the signing of the premium partnership agreements in 2014 as described in the recital 34 above. This will be further described in the following.

(38)

In March 2013, IN launched a project called ‘Pilot Alfa’ together with two pilot customers — VisitSørlandet and VisitTrondheim. Pilot Alfa refers to the migration of the websites of Visit Sørlandet AS (36) (RTB) and Visit Trondheim AS (37) (DMO) to the visitnorway.com platform.

(39)

The two undertakings were selected as pilot project participants and signed a premium partnership agreement with IN in order to use visitnorway.com. As a consequence of those agreements, both companies redirected their URL (38) to visitnorway.com and discontinued the use of their own homepages. The information available on those pages (i.e. general tourism information and specific tourism contents) migrated to visitnorway.com.

(40)

When the two companies operated their own websites, they were clients of the Complainant. Accordingly, they used tellUs destinator and tellUs search functionalities and paid a licence fee to the Complainant for this use. However, upon redirecting their URL to visitnorway.com and terminating their own websites, these companies ended their contracts for the search functionality, since, for technical reasons, only IN's search functionality can be used on visitnorway.com (the only search engine on the website is the one developed by IN and installed on the platform).

(41)

Both companies still had to contract with the Complainant or a similar firm for the destinator functionality. IN is not providing this functionality. The Complainant used to be the sole supplier of DMS services on the Norwegian market. However, in 2012-2013, an international competitor, Citybreak, entered the market offering the destinator functionality, i.e. allowing tourism providers to create a database of points of interest (39).

(42)

The RTBs and the DMOs which migrated to visitnorway.com could therefore choose among different companies offering the destinator functionality (New Mind | tellUs or CityBreak or any other operator which might enter the market), while customers using tellUs search services could only use tellUs destinator functionalities. When New Mind | tellUs was the only provider of web and infrastructure services, all RBTs and DMOs had to contract with New Mind | tellUs for both the search and destinator functionalities.

(43)

The uses of the different functionalities, before and after Pilot Alfa, are presented in the following graphic:

Source: the Authority, based on the information provided by the Norwegian authorities (Document No 688213).

(44)

The services that IN was offering to RTBs and DMOs before the implementation of the new structure project (i.e. online marketing and promotion services on the visitnorway.com website), were offered for a fee calculated on the basis of their annual turnover rather than on the market price of the services obtained (see recital 28 above). This pricing system was also applied under Pilot Alfa, with no additional charges made for the additional services provided by IN (web infrastructure and related services).

(45)

The Norwegian authorities have explained (40) that the reason for not charging extra for the additional services was that the new services were under development, and that the two companies involved in the pilot project invested significant time and effort in helping to develop IN's new functionalities, thereby compensating IN by providing valuable feedback and input on the new services.

(46)

From July 2013 to November 2013, IN undertook ‘Pilot Beta’. During this pilot project, IN studied new business models, including the possibility of promoting new premium partnership agreements to all RTBs and DMOs.

(47)

From 1 January 2014, IN offered premium partnership agreements to all interested DMOs and RTBs on a non-discriminatory basis. IN introduced a new pricing model for these services, where, according to the Norwegian authorities, the price charged was intended to reflect the costs of the services provided by IN, plus a reasonable profit. The new price model also applied to the two pilot projects, i.e. VisitSørlandet and VisitTrondheim as of 1 January 2014.

(48)

Consequently, as illustrated in figure 2 below, IN offered two different possibilities to the RTBs and the DMOs (41): (i) services under the premium partnership agreements (42), and (ii) promotion under non-premium agreements (43). Irrespective of its relationship with the RTBs and the DMOs, visitnorway.com promotes Norway as a tourism destination, providing general information on the country (44).

(49)

Premium partnership agreements were signed with RTBs and DMOs that wanted to migrate to visitnorway.com. In relation to those RTBs and DMOs that did not want to migrate their websites to visitnorway.com (non-premium partners), IN offered the same promotion and marketing services as before by means of the standard agreements.

Figure 2

Current structure of visitnorway.com

CBIS Product database

Tellus Product database

VisitNorway product database

Full Ownership and full rights

Full Ownership and full rights

Standard Presentation OSLO

Standard Presentation Fjord Norge

RTB Fjord Norge

DMO Oslo

Right to edit

Right to edit

New Structure DMO Trondheim

New Structure RTB Sørlandet

NORWAY

POWERED BY NATURE

Generic Marketing

DMO Specific

Generic marketing about Norway, Sørlandet, Trondheim, Oslo and Fjord Norge

(Source: IN)

(50)

New Mind | tellUs argues in its complaint that IN's promotion activities and its tasks in relation to visitnorway.com, as a national tourism portal, can be considered a service of general economic interest (‘SGEI’) in line with the EEA State aid rules.

(51)

However, in 2013, IN entered a new market (45), offering new economic services to the RTBs and the DMOs allowing them to migrate their websites to visitnorway.com (i.e. the web infrastructure and related services). New Mind | tellUs considers that those services are not part of the mandate received by IN and are not provided in line with the Altmark (46) case-law.

(52)

The Complainant underlines that while providing economic services, IN should not receive State aid (47).

(53)

In particular, the complaint refers to four different forms of alleged State aid:

(54)

Finally, New Mind | tellUs also alleges that IN encourages its clients to terminate their previous contracts with New Mind | tellUs, offering free translation services to the RTBs and DMOs migrating to visitnorway.com (48).

(55)

On 16 July 2014, the Authority decided to initiate the formal investigation procedure provided for in Article 1(2) of Part I of Protocol 3.

(56)

However, the Authority limited the scope of the formal investigation to three of the measures identified by the Complainant: (i) the non-implementation of a separation of accounts for commercial activities within IN and the lack of a costs allocation mechanism, (ii) the profits foregone through the non-profit orientation of economic activity, and (iii) the alleged aid granted by IN to the RTBs and DMOs in form of prices not sufficient to obtain a reasonable return on investment, while providing them web infrastructure and related services.

(57)

The general exemption from the income tax granted to IN was excluded from the opening decision (49). An existing aid procedure has been initiated regarding this issue.

(58)

Regarding the measures within the scope of the opening decision, the Authority considered, on a preliminary basis, that the provision of web infrastructure and related services constituted an economic activity, separable from the mere promotion of Norway as a tourism destinations. These new services were offered to all the RTBs and DMOs only as of 1 January 2014. Hence, the Authority concluded that if the measures were to constitute State aid, they would amount to new aid (50).

(59)

Moreover, the Authority was also of the opinion that if it were established that IN was not charging a competitive market price for the services provided to the RTBs and DMOs, the existence of new State aid in favour of those entities could not be excluded.

(60)

Finally, the Authority doubted that the alleged State aid measures could be considered compatible with the EEA Agreement under Article 61(3)(c) as aid to promote tourism activities (51).

(61)

Taking into account these preliminary conclusions, the Authority considered that it did not have sufficient information to exclude the existence of State aid or its incompatibility with the EEA Agreement. The formal investigation procedure was therefore initiated.

(62)

Only New Mind | tellUs, the Complainant, submitted observations on the opening decision.

(63)

On the substance, the Complainant underlines that IN has entered into an already well-functioning market for web infrastructure and related services, which are economic services. The entrance into this market does not respond to an instruction from the State and would be in conflict with IN's main task of promoting private entrepreneurship.

(64)

New Mind | tellUs subscribes to the Authority's preliminary findings on the presence of state resources, imputability, selectivity and potential distortion of competition.

(65)

On the existence of an advantage, the Complainant considers that IN has cross-subsidised their web infrastructure and related services. This is so because within IN there is no proper separation of accounts, and because IN is foregoing profits when providing these economic services to RTBs and DMOs. The Complainant insists also that IN offers translation services free of charge (see recital 54 above).

(66)

Regarding the alleged aid in favour of RTBs and DMOs, the Complainant argues that the Norwegian authorities have not informed them about the opening decision.

(67)

Furthermore, it is argued that during the pilot projects, the selected pilot customers were not paying for services obtained. The price model introduced later by IN does not cover all relevant costs nor give a reasonable profit. In particular, IN has not included in its calculations all development costs related to the infrastructure created for the new structure (NOK 18 million), and IN is not calculating ROI (‘return on investment’). Therefore, the RTBs and DMOs obtain an advantage.

(68)

As regards compatibility, the Complainant argues that there is no market failure in the market in question. Furthermore, the fact that IN offers free or subsidised translation services to the RTBs and DMOs migrating content to the visitnorway.com platform, constitutes a tie-in condition in breach of antitrust rules, and therefore the alleged State aid cannot be declared compatible.

(69)

On 13 January 2015, the Complainant sent to the Authority a copy of the 2015 State Budget letter (52). In its opinion, this letter confirms that IN's activities in the web infrastructure and related services are not within IN's mandate, which is limited to the general promotion of Norway as a tourism destination.