State aid to PSB in Denmark Erik Nordahl Svendsen Mediesekretariatet EPRA, Budapest October 2005

TV 2: History 1988: Lauched as second national channel Financed 70 % adv % license fee Succesfull against DR TV (100 % license fee) 2000: Complaint from TV Danmark (SBS) about illegal state aid to TV : TV 2 turned into plc (for privatisation) May 2004: Decision from EU-Commission

State Aid? (Art. 87, 1) Is license fee state aid?Yes! Altmark test: omandate and definition?Yes oex ante calculation?No ocompensation of net cost??? otender or efficiency-test?No Effect on trade?Yes EU Conclusion: Yes, new state aid.

’Service of General Economic Interest’, compatability with Art. 86, 2? [1] 1) Definition of PS (broad, ok) except commercial internet services – manifest error! 2) Entrustment – by Act (and – later - Contract) Monitoring Authority? National Audit Office (financial and management audit) Radio and Television Board (approval of yearly report from TV 2 about PS)

’Service of General Economic Interest’ compatability with Art. 86, 2? [2] 3) Proportionality test: + Programme costs (all programmes) + specified investments (digital tv) -commercial and other income (adv. etc) = Net cost for PS - license fee funds (1995 – 2002) = Overcompensation (84,4 mio. EURO plus interests)

Advertising prices? (State Aid-Communication, point 58) ”Might be tempted to depress prices…” Prices are low in Denmark (vs. Nordic level) But relative Cost Per Point is not alarming EU-Conclusion: No clear evidence that Danish advertising market was depressed due to TV 2’s pricing behaviour

Recapitalisation of TV 2 [1] Equity capital, based on estimated market value of TV 2 (amount is a business secret) Recovery leads to technical bankruptcy Selling with recovery claim less advantagous A market economy investor would rather recapitalise the TV 2 company EU accepts the methods

Recapitalisation of TV 2 [2] Incorporation (plc) reduces the risk for distortion of competetion: oLimits the amount of (state-) equity oSeperates state roles as authority and entrepreneur Conclusion: EU acccepts the need for recapitalisation against Article 86, 2

Claims after decision about overcompensation (August 2004) Denmark and TV 2: Licensefee is not state aid Surplus is reasonable Crosssubsidising has not taken place in fact MTG/SBS: PS is not defined precisely Crosssubsidising has in fact taken place New aid, not notified (Art. 88, 3) Not sufficent control with PS-performance State aid was not necessary

Claims after EU’s acceptance of recapitalisation (January 2005) MTG/SBS (among other items): EU omits to state elements of state aid, and to establish netcosts for PS – and PS is not clear Decision on overcompensation loses its meaning Art 86, 2 allows compensation for net cost, not for investments to prepare for sale Should have opened formal investigation (Art. 88, 2), so others could be heard

Denmark postpones the sale of TV 2 (April 2005) Because of the pending courtcases It is not possible to guarantee a buyer against eventual recovery So – two or more years to go……

DR (no case) 100 % license fee, existing aid, not reported Indications of overcompensation (only future danger, Art. 88, 1) Will Altmark apply? oMandate and definition oEx ante principles of compensation oNet cost compensation oEfficiency, when neither tender or market

DR: Proposal from professor Frands Mortensen More precise definition of PS obligations DR publish Budgets for programmes and (net-) ressources, which should be… oApproved by Board of Radio and TV for efficiency oAccepted by Ministry of Culture in relation to amount of license fee Radio and Television Board controls performance ex post

Future? Is the broad definition of PS eternaly safe (online and digital services) ? Art. 151 on culture is interpreted narrowly (as arts and high culture) Could culture in a broader sense be a ”common interest” of EU? Do member states support such an idea?

References State aid to TV 2: C(2004) 1814, 19. May 2004 Recapitalization: C(2004) 3632, 6. October 2004 Altmark: CaseC-280/00, 24. July 2003 Pending cases about TV 2: T-309/04 by TV 2 T-317/04 by Denmark T-329/04 by Viasat T-336/04 by TV Danmark (SBS) T-12/05 by TV Danmark (SBS) T-16/05 by Viasat Frands Mortensen: (Ask for Timeline for state aid