Legal Aspects of the Broadcasting Communication EE&MC - European Economic & Marketing Consultants GmbH Bonn * Brussels * Vienna Adenauerallee 87, D Bonn Tel.: 0049 (0) Brussels, January 8 th, 2009 EPP-ED HEARING ON THE REVISION OF THE BROADCASTING COMMUNICATION: CHALLENGE OR THREAT?

January 2009 Page 2 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-Treaty  A 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

January 2009 Page 3 State Aid Action Plan (SAAP) The SAAP is a road map covering the revision of the State Aid rules  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 InnovationAdopted 2005 Decision/Guidelines and Directive on SGEIAdopted 2005 Communication on Short Term Credit InsuranceAdopted 2005 Guidelines on Regional AidAdopted 2006 Guidelines on Risk CapitalAdopted 2006 Framework on Research, Development & InnovationAdopted 2006 Block Exemption on Regional AidAdopted 2006 Block Exemption De MinimisAdopted 2006 Guidelines on Environmental ProtectionAdopted 2008 Communication on Reference and Discount RatesAdopted 2008 Communication on GuaranteesAdopted 2008 General Block Exemption RegulationAdopted 2008 Source: European Commission, DG Competition January 2009 Seite 4

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 January 2009 Seite 5

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 January 2009 Seite 6

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 Page 7 Amsterdam Protocol

January 2009 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 Page 8 The Commission’s proposal is outside the common reform of the State Aid provisions

January 2009 Need for fine-tuning Article 86 (2) EC Treaty ? Page 9  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.”

January 2009 What is new ? The real new thing in the draft broadcasting communication is the “Amsterdam Test” in Article 86 (2) Page 10  “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 ?

January 2009 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. Page 11 A solid economic discussion about the positive and negative effects of state aid measures in public service broadcasting is helpful

January 2009 Proposal for a Modernised Communication Page 12  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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