IP/06/822

Brussels, 22^nd June 2006

State aid: Commission orders Dutch public service broadcaster NOS to pay back €76.3 million excess ad hoc funding

The European Commission has ordered the Dutch authorities to recover €76.3 million plus interest from NOS, the umbrella organisation of public broadcasters in the Netherlands, following an investigation under EC Treaty state aid rules into ad hoc payments from the Dutch State to the public broadcasters between 1994 and 2005. The investigation has shown that the payments went beyond the financial needs of broadcasters for public service purposes and resulted in NOS building up financial reserves.

Competition Commissioner Neelie Kroes stated: “Today’s decision confirms that public funding for broadcasting must not exceed the costs of providing the public service tasks defined by an individual Member State, without challenging Member States’ rights to define those public service tasks or to compensate broadcasters for performing them. Excess compensation unnecessarily distorts competition and allows the public service broadcasters to operate in commercial markets on more favourable grounds than competitors that do not receive state aid.”

In 2002 and 2003, several commercial broadcasters and other media undertakings raised concerns about the Dutch public service broadcasters (PSBs), their commercial behaviour and their financing mechanisms.

In February 2004, the Commission decided to open a formal investigation into the ad hoc financing of the public service broadcasters, financing which is received in addition to the regular financing of the public service broadcasters through licence fees. The ad hoc financing consists of ad hoc contributions from several separate funds held by the Dutch State. The Commission found that the individual broadcasters were overcompensated between 1994 and 2005.

In 2005 the excess financial reserves built up by the overcompensation were transferred to the NOS, the management and coordination organisation of the broadcasters. After this transfer, the overall compensation granted to the PSBs was again in line with the state aid rules. However, the NOS has received a total overcompensation of €76.3 million in the period under investigation. The Dutch authorities have in the meantime committed themselves to monitor in the future the reserves of the individual PSBs and to recover the excess, if the reserves surpass a certain threshold.

The overcompensation caused by the granting of ad hoc aid is not necessary for the fulfilment of the public service task and is therefore incompatible with EC Treaty state aid rules. Consequently, the Commission concluded that it has to be reimbursed to the State.

Background

The Commission has assessed the state aid measures in accordance with Article 86(2) of the EC Treaty and the principles of the “Communication on the application of state aid rules to public service broadcasting”. The analysis carried out in today’s decision regarding the ad hoc aid on the basis of Article 86(2) of the EC Treaty, is also in line with earlier Commission decisions regarding ad hoc aid granted to TV2 (Denmark) and other cases like RAI (Italy), France 2 and 3 (France) and RTP (Portugal) (see IP/04/666, IP/05/458 and IP/06/349).

State financing of public service tasks is as a general rule authorised under Article 86(2) of the EC Treaty as long as the financing corresponds to the net cost of providing the public service (see MEMO/05/73).

The Dutch public service broadcasting system consists of 19 different public service broadcasters (PSBs). The NOS is both a broadcaster (NOS RTV) and the coordination and management organisation of the individual public service broadcasters. Both tasks are fulfilled within the same legal entity, but the activities are clearly separated. The individual PSBs benefit from several state aid measures. In addition to the regular licence fee resources, the individual PSBs have received ad hoc aid. Both kinds of measures are subject to investigation. Only the ad hoc aid, granted as of 1994, is subject to today’s decision.

The regular licence fee resources have been granted since the entry into force of the EEC Treaty and are therefore qualified as existing aid. Different rules apply for the assessment of existing aid. The Commission, in cooperation with the Member State concerned, attempts to bring the existing aid in line with EC Treaty state aid rules but cannot order its recovery. In this context, the Commission sent a letter to the Dutch authorities in March 2005, indicating that the existing aid granted to the PSBs does not seem to be in line with state aid rules anymore (see IP/05/250). Subsequently, the Dutch authorities have submitted the draft for a new broadcasting law, the Media Act 2007, which is currently being assessed by the Commission’s services. The Commission intends to complete the investigation into the regular financing before the end of 2006.