State aid for public service broadcasting

1) OBJECTIVE

To lay down the criteria for applying the competition rules to public service broadcasting.

2) ACT

Commission communication on the application of state aid rules to public service broadcasting (Text with EEA relevance) [Official Journal C 320 of 15.11.2001].

3) SUMMARY

Background

Since its inception, television broadcasting has been provided mostly by public undertakings under a monopoly regime, mainly as a consequence of the limited availability of broadcasting frequencies and the high barriers to entry. In the 1970s, however, economic and technological developments made it increasingly possible for Member States to allow other operators to broadcast. Whilst opening the market to competition, Member States considered that public service broadcasting ought to be maintained as a way to ensure the coverage of a number of areas and the satisfaction of needs that private operators would not necessarily fulfil to the optimal extent.

This increased competition, together with the presence of state-funded operators, has led to growing concerns about a level playing field, which had been brought to the Commission's attention by private operators. The vast majority of the complaints allege infringements of Article 87 of the EC Treaty in relation to the public funding schemes established in favour of public service broadcasters.

The EC Treaty includes Articles 87 and 88 on state aid and Article 86(2) on the application of the rules of the Treaty and the competition rules in particular to services of general economic interest. The Maastricht Treaty had already introduced an article which defines the role of the Community in the field of culture (Article 151) and a possible compatibility clause for state aid aimed at promoting culture (Article 87(3)(d)).

At the level of secondary legislation, the present communication is to be seen in the context of the " Television without frontiers " Directive, which aims to coordinate certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, and in the context of Directive 80/723/EEC on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings.

Applicability of Article 87(1) of the Treaty

State financing of public service broadcasters is normally to be regarded as state aid. However, the existence of state aid will have to be assessed on a case-by-case basis and depends also on the specific nature of the funding. The funding schemes currently in place in most of the Member States were introduced a long time ago. As a first step, therefore, the Commission must determine whether these schemes may be regarded as "existing aid" within the meaning of Article 88(1).

Assessment of the compatibility of state aid under Article 87(2) and (3) of the Treaty

State aid to public broadcasters must be examined by the Commission in order to determine whether or not it can be found compatible with the common market. The derogations listed in Article 87(2) and (3) can be applied, where appropriate. In accordance with Article 151 of the Treaty, the Community is to take cultural aspects into account in its action under other provisions of the Treaty, in particular in order to respect and to promote the diversity of its cultures.

Assessment of the compatibility of state aid under Article 86(2) of the Treaty

The role of services of general economic interest in attaining the fundamental objectives of the European Union has been fully acknowledged by the Commission in its communication on services of general economic interest. For Article 86(2) to apply, it is necessary to establish an official definition of the public service mandate. This definition falls within the competence of the Member States, which must take account of the Community concept of "services of general economic interest", as defined by the communication. As regards the definition of the public service in the broadcasting sector, the role of the Commission is limited to checking for manifest error.

Given the specific nature of the broadcasting sector, a "wide" definition of services of general economic interest is acceptable. Such a definition may result in a given broadcaster being entrusted with the task of providing balanced and varied programming while fulfilling the democratic, social and cultural needs of a particular society and guaranteeing pluralism, including cultural and linguistic diversity.

The Commission's task is to verify whether or not Member States respect the Treaty provisions. In order to benefit from the exemption under Article 86(2), the public service remit should be entrusted to one or more undertakings by means of an official act.

While Member States are free to choose the means of financing public service broadcasting, the Commission has to verify that the derogation from the normal application of the competition rules for the performance of the service of general economic interest does not affect competition in the common market in a disproportionate manner. The test is of a "negative" nature: if examines whether the measure adopted is not disproportionate. The aid should not affect the development of trade to such an extent as would be contrary to the interests of the Community.

The above-described assessment by the Commission requires a clear and precise definition of the public service remit and a clear and appropriate separation between public service activities and non-public service activities. Separation of accounts between these two spheres is normally already required at national level to ensure transparency and accountability when using public funds. The transparency requirements in the financial relations between public authorities and public undertakings and within undertakings granted special or exclusive rights or entrusted with the operation of a service of general economic interest are indicated in Directive 80/723/EEC.

While state funding is normally necessary for the undertaking to carry out its public service tasks, the state aid must not exceed the net costs of the public service mission, taking into account other direct or indirect revenues derived from the public service mission. For this reason, the net benefit that commercial activities derive from the public service activity will be taken into account in assessing the proportionality of the aid. Accordingly, the Commission will consider whether or not any distortion of competition arising from the aid can be justified in terms of the need to perform the public service as defined by the Member State and to provide for its funding. In its assessment, it will take into account the fact that, to the extent that state aid is necessary to carry out the public service obligation, the system as a whole might also have the positive effect of maintaining an alternative source of supply in some relevant markets.

Last updated: 03.09.2003