Legal Aspects of the Broadcasting Communication

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Brussels, January 8th, 2009

EPP-ED HEARING ON THE REVISION OF THE BROADCASTING COMMUNICATION: CHALLENGE OR THREAT?

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State Aid Provisions In 2005, the Commission announced the modernisation of the State aid provisions

Article 87 (1) EC-Treaty

… any aid granted by a Member State … which distorts or threatens to distort competition …, insofar as it affects trade between Member States,

Article 87 (3) EC-Treaty

Article 87(3) provides a possible justification for State aid: reference to "common interest" in Article 87(3)(c) and Article 87(3)(d)

Article 86 (2) EC-TreatyA further potential justification for State aid that is necessary to achieve public service objectives, with a proviso similar to the "common interest" ones under Article 87(3)(c) and Article 87(3)(d)

Focus of Modernisation

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State Aid Action Plan (SAAP)The SAAP is a road map covering the revision of the State Aid rules 2005-2009

A comprehensive and consistent reform package based on

Less and better targeted aid

refined economic approach

more efficient procedures, better enforcement, higher predictability and enhanced transparency

shared responsibility between the Commission and the Member States

What did the Commission promised to do ?

Source: European Commission, DG Competition

The Commission’s view:Was the reform comprehensive?

Communication on Innovation Adopted 2005

Decision/Guidelines and Directive on SGEI Adopted 2005Communication on Short Term Credit Insurance Adopted 2005Guidelines on Regional Aid Adopted 2006Guidelines on Risk Capital Adopted 2006Framework on Research, Development & Innovation Adopted 2006Block Exemption on Regional Aid Adopted 2006Block Exemption De Minimis Adopted 2006Guidelines on Environmental Protection Adopted 2008Communication on Reference and Discount Rates Adopted 2008Communication on Guarantees Adopted 2008General Block Exemption Regulation Adopted 2008

Source: European Commission, DG Competition

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The Commission’s view: Was the reform consistent?

Rules are based on the “Balancing test” and a more effects-based approach

All guidelines have the same structure Rules incorporate new assessment

architecture

Source: European Commission, DG Competition

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Focus on the Economic Assessment

Balancing test

(1) Aid aimed at well-defined objective of

common interest?

(3) Distortions of competition and trade limited so

balance positive?(2) Aid well

designed to deliver the objective of

common interest?

REFINED ECONOMIC APPROACH

Source: European Commission, DG Competition

The locus of the Balancing Test is Article 87 (3) EC Treaty = an exemption of the prohibition under Article 87 (1) EC Treaty

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January 2009

Logical line of thought: Reform & Public Service Broadcasting

1. The system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism,

2. Funding of public service broadcasting insofar as such funding is granted to broadcasting organisations for the fulfilment of the public service remit as conferred, defined and organised by each Member State, and insofar as

3. such funding does not affect trading conditions and competition in the Community to an extent which would be contrary to the common interest, while the realisation of the remit of that public service shall be taken into account.

Balancing Test Article 87 (3) ECT

1. Well-defined objective of common interest ?

2. Is the aid well-designed to deliver the objective of common interest i.e. address the market failure ?

3. Actual balancing ??

Amsterdam Protocol Goal of common interest

Funding of PSB addresses the market failure

Affect trading conditions

Affect competition

Balancing Test in Public Service Broadcasting

The balancing test should be applied to PSB: Amsterdam Protocol confirms the first two steps

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Amsterdam Protocol

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The Commission’s Proposal: New Broadcasting Communication

In its proposal, the Commission does not recommend to modernise Article 87 (3) “Unless a funding measure is specifically aimed at

promoting cultural objectives, Article 87(3)(d) would generally not be relevant.” (para. 40)

“State aid to public service broadcasters is generally provided in the form of compensation for the fulfillment of the public service mandate and is assessed under Article 86(2).” (para. 40)

In contradiction to the overall State Aid reform, the Commission intends to refine Article 86 (2) by including a new test, the Amsterdam test

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The Commission’s proposal is outside the common reform of the State Aid provisions

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Need for fine-tuning Article 86 (2) EC Treaty ?

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Comprehensive case law on Article 86 (2) Communication of the Commission on

Services of General Economic Interest Broadcasting communication of 2001

There is no need for further sector specific guidance with respect to Article 86 (2)

Article 86 (2) EC Treaty: “Undertakings entrusted with the operation of services of general economic interest … shall be subject to the rules contained in this Treaty, in particular to the rules on competition, insofar as the application of such rules does not obstruct the performance … of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.”

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What is new ?

The real new thing in the draft broadcasting communication is the “Amsterdam Test” in Article 86 (2)

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“Before the introduction of significant new services on the market, Member States shall consider whether the service meets the same democratic, social and cultural needs of the society, while duly taking into account its potential effects on trading conditions and competition, as provided in the Amsterdam Protocol.” (para. 57)

“To arrive at a balanced decision” (para.58)

Amsterdam Test is an economic assessment Issue: Will such a new test be applied

consistently throughout the Community ?

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Guidance on the Economic Assessment?

Common understanding about the economics in public service broadcasting

What is a well-defined objective of common

interest in public service broadcasting? What are the market failures (also in the Internet

world)? What are the relevant markets of concern? Possible economic effects in related markets? etc.

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A solid economic discussion about the positive and negative effects of state aid measures in public service broadcasting is helpful

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Proposal for a Modernised Communication

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Must: Coherence with the overall State Aid reform

Focus on economic issues

No “touching up” of Article 86 (2)

Possible solution: reference to the Amsterdam Protocol and not to the State Aid provisions

 

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