Embargo VISTA illimité(*)

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1 EUROPEAN COMMISSION Brussels, C(2015)final Embargo VISTA illimité(*) Subject: State Aid / Czech Republic - Aid No SA (2015/N) - Promotional campaign to promote quality food Sir, The European Commission (hereinafter: "the Commission") wishes to inform the Czech Republic that, having examined the information supplied by your authorities on the scheme referred to above, it has decided not to raise objections as the scheme is compatible with the Treaty on the Functioning of the European Union (hereinafter: "TFEU"). In taking this decision the Commission has relied on the following considerations: 1. PROCEDURE (1) In accordance with Article 108(3) of the TFEU, the Permanent Representation of the Czech Republic to the European Union notified the Commission of this scheme by letter of 12 January 2015, registered by the Commission on 13 January (2) By letter of 29 January 2015 the Commission asked for supplementary information. The Czech authorities provided additional information on 16 March 2015, registered by the Commission on the same day. By letter of 12 May 2015 the Commission asked for further information which the Czech authorities provided on 12 June 2015, registered by the Commission on the following working day. (3) In line with the first sentence of point (732) of the new European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas (*) Ce timbre porte sur l'ensemble des documents qui composent le dossier. PhDr. Lubomír Zaorálek Ministerstvo zahraničních věcí České republiky Loretánské náměstí Praha 1 Česká republika Commission européenne, B-1049 Bruxelles Europese Commissie, B-1049 Brussel Belgium Telephone: 32 (0)

2 2014 to (hereinafter: "the AGRI Guidelines") that are applied as of 1 July 2014, the currently notified aid scheme has to be treated as new aid and has to be assessed under the AGRI Guidelines. 2. DESCRIPTION 2.1. Title (4) Promotional campaign to promote quality food Budget (5) Total budget: CZK Mio (ca EUR 44,4 Mio); Annual budget: CZK 200 Mio (ca EUR 7,4 Mio); 2.3. Duration (6) From 1 July 2015 (or from the date of Commission approval decision, should this be adopted later) until 31 December Legal basis (7) Act No 256/2000 Coll., on the State Agriculture Intervention Fund as amended; (8) Act No 110/1997 Coll., on foodstuff and tobacco products as amended; (9) Act No 137/2006 Coll., on public procurement rules as amended; (10) Act No 320/2001 Coll., on financial control in public administration as amended; (11) Act No 89/2012 Coll., Civil Code as amended; (12) Draft Promotional program: "Promotional campaign to promote quality food (hereinafter: "Promotional program") Aid beneficiaries (13) The beneficiaries are farmers and undertakings active in the processing and marketing of agricultural products (incl. large enterprises); over 1000 beneficiaries Form (14) Subsidized services and direct grants Objectives of the aid scheme (15) The objective of the present notified aid scheme is to provide support for education in the area of consumer issues in food quality. Such orientation of the 1 OJ C 204, , p. 1. 2

3 project will further encourage manufacturers in producing quality food and in broadening the range of offered quality foodstuff. The other manufacturers will be motivated in the inclusion of such quality foodstuffs into their product portfolio. Moreover, sellers will be motivated, based on the educated consumers pressure to increase the representation of high-quality food production in a commercial network. Thus the supported program shall become a tool for supporting healthyeating populations and for preventing the emergence of lifestyle diseases Description of the aid scheme a) Introduction (16) Czech consumers are increasingly interested in quality food. This is not only because of the poor quality of information on foodstuff or even unhealthy foods offered, incl. various food scandals which have occurred, but mainly due to a series of educational campaigns to promote quality food which have been performed in the past. This development results in consumers thinking more about what they purchase and consume. This development is in particular encouraged by a number of projects focusing on promotion of the high-quality production that clearly declares which foods are good and what is meant by the term "quality". The Czech market is prepared to accept and market products with high quality. For these reasons, it is desirable to further encourage interests in high-quality food among consumers as well as producers. (17) The occurring problem is the fact that due to the economic crisis, Czech consumers, when buying foodstuff products, tend to be primarily focused only on price without comparing purchase price and the quality of the food. (18) The notified aid scheme shall provide for the solution to this problem. Consumer benefits resulting from the characteristics of certified quality schemes shall become a part of promotion campaigns so that consumers clearly understand why it pays off to prefer and to buy quality food. Promotion campaigns should therefore be focused on educating the consumers about the benefits of high quality food products and they should target moments which are crucial for the selection and purchase of food products. (19) The basic consumer benefit when buying high quality food products is the increased quality of food. Qualitative parameters that meet agricultural products under various certified quality schemes should therefore serve as a basis for the explanation of the term "food quality". 2 b) Main features of the promotion campaigns (20) Promotion campaigns will contain a slogan "Buy a quality with taste" (in Czech "Nakupujte kvalitu s chutí"). (21) The campaigns will ensure that the consumer actively seeks food products with guaranteed quality and prefers them to low-quality food products. While forming his shopping behavior in this direction, he will effectively exert pressure on food 2 The respective quantitative parameters are listed in the Promotional program. 3

4 products dealers so that the latter will have in their offer the greatest range of high quality products. (22) The slogan shows, therefore, the following characteristics: It is a call to action (with verb in the form of imperative). Events targeted are purchases of food; it clearly and quickly describes the main benefit - which is the guaranteed quality of food products; it provides a product attribute which is for food products and food the taste (flavor). This would then work in another sense too: it will become easier for the consumer to navigate among the variety of products he purchases and the purchase changes from a demanding operation (which includes searching for information, reading the full composition on the package of a given product) to a gentle stroll for something good to eat. (23) Symbolically, the slogan represents a broader formulation: When you buy quality food products, you eat good food and lead a good life. We help you quickly and clearly recognized products with high quality. (24) The goal of the promotion campaigns is to make the consumers familiar with the answer to the question: "What is the quality and how can I recognize it?" The consumers should become educated with regard to the high-quality products: "When doing shopping, I clearly know why it pays off to buy a food product with a guaranteed quality". (25) The result of the promotion campaigns should be the awareness of the consumers who will prefer to buy food products with guaranteed quality and will exert pressure on sellers to offer a wide range of high-quality food products to their customers. (26) The structure of promotion campaigns will focus on the following objectives: consumers perception of "quality" has been shifted on the top of mind when deciding to buy food products; they will be preformed to influence the consumers directly in the course of purchasing decision processes by creating an emotional link to the quality food products; they will educate consumers with regard to the quality of food products; they will increase the interest in certified systems of quality: i. with regard to consumers preference to buy products with certified quality; ii. with regard to producers effort for quality production which would enable the producer to join a certified quality scheme. 4

5 c) Forms of promotion campaigns (27) The general qualitative parameters of respective certified quality schemes and food products as well as qualitative parameters typical for the given type of agricultural products will be the criteria to find the most suitable communication means. (28) The objectives of the promotion campaigns (recital (26)) will be achieved by a process where the consumer will be addressed by the synergistic effects through various communication channels: the use of the nationwide media to educate and media support activities (TV and radio spots, campaigns in periodical press); targeted promotion campaigns at point of sale for the purpose of creating the closest possible approach to consumers (distribution of leaflets, posters, free samples, oral information, tasting); other means such as printed and Internet publications; roadshows, exhibitions and fairs 3 ; use of specialized media to contact professionals and other stakeholders segments (trade press, special internet sections for professionals, direct mail, seminars and workshops); strong coordinated PR support (planning, timing of the campaigns, evaluation). (29) Based on the specification and analysis of communication channels, the implementing body (public tender winner) will provide for recommendations for appropriate communication channels. d) Selection procedure (30) The State Agricultural and Intervention Fund (hereinafter: "SZIF") will be the awarding authority. SZIF Fund will plan, organise, coordinate and supervise the completion of the promotion campaigns within its statutory tasks according to 1(2) of the Act No 256/2000 Coll. which includes "support for marketing of agriculture products and food products". 4 (31) Given its small staff, it is estimated that SZIF will exclusively carry out basic administrative tasks. Any other activities (e.g. materials for advertising campaigns) necessary for the accomplishment of its functions will be commissioned from external service providers. Any external service provider contracted by the SZIF will be chosen in compliance with Union and national 3 Promotional campaigns will be performed in the main agricultural exhibitions and fair trades taking place in the Czech republic ("Země živitelka", "Salima", "ZEMĚDELEC Lysá nad Labem", "TECHAGRO Brno", "Výstava Flora Olomouc", "Zahrada Čech Litoměřice") and in the EU (Internationale Grüne Woche Berlin, SIAL Paris or ANUGA KÖLN). 4 The Czech authorities provided for a detailed plan on timing of the respective promotion campaigns. 5

6 public procurement laws 5 in force and the principles of the Treaty in general and with the principles of transparency and equal treatment in particular using a degree of advertising sufficient to enable the services market to be opened up to competition. The remuneration by the SZIF will follow market principles. (32) The Czech authorities assure that the selection procedure for choosing an external service provider will have a form of open selection procedure to guarantee the maximum efficiency and transparency. 6 The selection procedures will be divided into smaller separate parts which will constitute independent projects. Each applicant will be able to submit its offer for one or more projects. To this end the SZIF will organise advertising campaigns financed by the aid in the Czech Republic and in the other EU Member States Description of the respective supported measures (33) The Czech authorities have confirmed that campaigns will be co-ordinated by the SZIF and organized by the producer groups and organisations. Aid for promotion campaigns is available to all active farmers and undertakings active in processing and marketing of agricultural products eligible in the area concerned based on objectively defined conditions. This aid scheme excludes a compulsory membership of the producer group/organisation or intermediate entity managing the aid in order to benefit from the aid. Only small and medium sized enterprises will be beneficiaries of aid for organization of competitions, trade fairs and exhibitions with no discrimination. (34) The Czech authorities have confirmed that the promotion campaigns will be earmarked for EU-recognised denominations in general in line with the Regulation (EU) No 1151/ (protected designations of origin, geographical indications and/or traditional terms) as well as for high quality products using another certified quality label (with no mention of the origin of the product) such as KLASA. (35) The Czech authorities confirmed that the certified quality scheme KLASA will guarantee specific product characteristics. The production processes in the Czech Republic are controlled by the State Veterinary Institute and the State Agricultural and Food Institute. KLASA logo can only be used for certified foodstuff products with a full transparency and traceability. Unique characteristics of the products must be ensured and are controlled. The quality system lays down stricter requirements for the hygienic and processing conditions the producers have to introduce a certified system of management of quality ISO or a certificate of critical point system (HACCP, BRC or IFS) and have to comply with the requirements for freshness and short distribution channels. (36) The producers have to comply with the quality requirements related to the following areas: 5 Act No 137/2006 Coll., on public procurement as amended. 6 The Program contains detailed rules and criteria for the selection of the best offer in the selection procedure. 7 Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs OJ L 343, , p

7 (a) (b) (c) (d) (e) (f) proving the high quality characteristics of the product; compliance with the specifications of the receipt and technology procedures as provided for in the national legislation; processing of high quality components; adding only minimum additives which are necessary from the technological process viewpoint; ensuring the endurance of the quality parameters of the production process (subject to controls by supervisory bodies); depending on the sector, ensuring high proportion of labour work. (37) The Czech authorities committed that to be eligible for support under the notified aid scheme, the producer will have to comply with the legal provisions governing the quality requirements for the respective sector. More concretely, a product can be labelled "bio-product" provided it is produced in compliance with the provisions of Act (EC) No 242/2000 Coll. on ecological agriculture as amended, Council Regulation No 834/ and Commission Regulation (EC) No 889/ For the respective sectors, the objective high quality requirements are stipulated in the respective legal acts which implement the Act No 110/1997 Coll. as amended: (a) fresh and processed fruits and vegetables Quality requirements are set in the Decree No 157/2003 Sb. (b) meat products Quality requirements are set in the Decree No 326/2001 Sb. (c) bakery products Quality requirements are set in the Decree No 333/1997 Sb. (d) milk and milk products Quality requirements are set in the Decree No 77/2003 Sb. (38) The Czech authorities have submitted a detailed analysis of the respective quality requirements for each agricultural sector concerned stipulated in the above mentioned legal provisions. They assured that these requirements are designed in an objective manner. It follows that every undertaking active in the agricultural sector could be eligible for support if it meets the defined quality requirements. 8 Council Regulation (EC) No 834/2007 of 28 June 2007 on organic production and labelling of organic products and repealing Regulation (EEC) No 2092/91, OJ L 189, , p Commission Regulation (EC) No 889/2008 of 5 September 2008 laying down detailed rules for the implementation of Council Regulation (EC) No 834/2007 on organic production and labelling of organic products with regard to organic production, labelling and control, OJ L 250, , p. 1. 7

8 (39) The Czech authorities committed that these criteria will be applied to products in a transparent, objective and non-discriminatory manner. The compliance with the legal quality requirements will be evaluated and controlled by the Assessment Committee composed of the experts of the Ministry of Agriculture, Supervisory bodies, representatives of universities and research facilities. (40) The Czech authorities confirmed that the promotion activities are of generic character benefitting all producers of the promoted products and will also include dissemination of scientific knowledge and information on quality system and/or on generic products, information on benefits of high quality products and public health. However, they confirmed that these campaigns, if consumer-targeted, will not be earmarked for products of one or more particular companies and will not mention the origin. (41) The Czech authorities also confirm that the promotion campaigns will only be used for quality products covered by a quality scheme described in point (282) of the AGRI Guidelines as described above. (42) The Czech authorities assure that the measure does not contravene secondary Union legislation, and in particular the provisions of Article 2 of Directive 2000/13/EC 10. (43) The Czech authorities have agreed to provide samples of those promotion materials (informative leaflets, TV programme) which will be used in the described promotion campaigns once those promotion materials are available after the respective selection procedure has been closed and before the start of any new promotion campaign. (44) Furthermore, the Czech authorities confirm that the total annual budget of the promotion campaigns will not exceed EUR 5 Mio. Aid for promotion campaigns will be granted in kind. Therefore, it will not include any direct payments to the aid beneficiaries Eligible costs (45) The promotion campaigns include the communication via the media (i.e. press, radio, TV), activities at the points of sale (such as distribution of leaflets, posters, free samples, tasting) and other means such as printed and Internet publications (recital (28)). Aid will be granted for the following eligible costs: costs of organisation of competitions, fairs and exhibitions; participation fees; costs of printed advertising materials and internet web-page informing about the promotional event; 10 Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs, OJ L 109, , p

9 costs of renting the premises, stands, incl. their construction, deconstruction; symbolic prizes up to the value of EUR 1000,- for the winner of the competition; costs of printed advertising materials for press, posters, leaflets (royalties and production, design preparation costs); costs of radio and TV spots and internet advertising programmes (royalties and production costs); (46) The maximum aid intensity for eligible costs is 100%, given the generic nature of the promotion campaigns and the fact that all producers of the promoted quality food products will benefit therefrom. Formal requirements of the aid (47) The applicant shall submit an application form to the awarding authority (the SZIF). The application shall contain necessary documents clearly identifying eligible costs for which aid should be granted. It will be submitted before activities (the respective promotion campaign selected under the public procurement rules) have started; it shall include at least the applicant's name and the size of the undertaking, a description of the project or activity, including its location and start and end dates, the amount of aid needed to carry it out and the eligible costs. In the view of the Czech authorities the AGRI Guidelines do not require an incentive effect for promotional campaigns which are generic in character in accordance with point (464) thereof. (48) With regard to the potential distortion of competition, the Czech authorities declare that the aid intensity has been set up within the range of the maximal allowed aid intensity which would ensure that no distortion of competition will occur. It follows from their analysis that the present aid scheme does not support any production processes, their extension or investments. Support is given for promotional measures relating to quality agricultural products (recital (15)). This structure excludes, therefore, according to the Czech authorities, any potential distortion of competition and trade. (49) The Czech authorities explain that the notified scheme is consistent with rural development objectives under point (10) of the AGRI Guidelines and compatible with the rules on the common organisation of markets in agricultural products and is not provided at the same time for in the Rural Development Programme for the Czech Republic ( ). Nonetheless, they have explained that the notified scheme fits in and is consistent with that Programme. (50) The Czech authorities have provided for an analysis of the potential impact of the present State aid on the environment. It follows from their analysis that the present aid scheme does not support any extension of the production nor will any environmentally unfriendly activities be supported. Furthermore, the promotional campaigns for consumers will also contain information about environmentally friendly (recyclable) packing as this constitutes a part of the high quality of food 9

10 products. In the view of the Czech authorities, this will also raise awareness of the consumers who will become more focus on the quality aspect as well. (51) The Czech authorities conclude, therefore, that the present aid scheme will not contain any negative impact on the environment and that it is in line with the EU common agricultural policy Cumulation (52) According to the conditions of the aid scheme any possibility of cumulating the present grant with aid received from other public resources, including regional aid schemes (national or EU) to cover the same eligible costs is excluded. The Czech authorities committed themselves to respect this restriction as well as to assure that the maximum allowed intensities will be respected Other commitments (53) The Czech authorities declare that the application procedure, the conditions for obtaining aid and the adherence to the terms of aid are based on the principle of free and equal access for all applicants. No selective approach is allowed. The implementation of the scheme is subject to maximum transparency. The Czech authorities commit to respect the transparency requirements specified in points (128) (132) of the AGRI Guidelines. (54) Furthermore the Czech authorities committed to suspend the payment of the aid if the beneficiary still has at its disposal an earlier unlawful aid that was declared incompatible by a Commission Decision (either concerning an individual aid or an aid scheme), until that beneficiary has reimbursed or paid into a blocked account the total amount of the unlawful and incompatible aid including the corresponding recovery interest. (55) The Czech authorities further confirmed that undertakings in difficulty within the meaning of the Guidelines on State aid for rescuing and restructuring nonfinancial undertakings in difficulty 11 are specifically excluded from receiving any aid under the present scheme Communication from the Commission Guidelines on State aid for rescuing and restructuring nonfinancial undertakings in difficulty OJ C 249, , p The definition of undertakings in difficulty applied under the AGRI Guidelines is identical with that applied in the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty. 10

11 3. ASSESSMENT UNDER STATE AID RULES 3.1. Presence of State aid within the meaning of Article 107(1) TFEU (56) Pursuant to Article 107(1) TFEU, aid granted by a Member State or through State resources in any form whatsoever that distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is incompatible with the internal market, insofar as it affects trade between Member States. (57) The aid scheme confers an advantage on selected recipients as it favours certain undertakings economically active in the Czech Republic by providing a support for promotion activities on quality food products. The compatibility conditions of this support scheme will be assessed below, under the application of the new AGRI Guidelines. (58) The aid scheme in question is financed through the State budget. Therefore, the advantage is granted from State resources. (59) According to the case law of the Court of Justice, aid to an undertaking is capable of affecting trade between Member States where that undertaking operates in a market open to trade at EU level. 13 The mere fact that the competitive position of an undertaking is strengthened compared with other competing undertakings, by giving it an economic benefit which it would not otherwise have received in its normal course of business, points to a possible distortion of competition. 14 Therefore an aid granted by a Member State to an undertaking may help to maintain or increase domestic activity, with the result that undertakings established in other Member States have less chance of penetrating the market of the Member State concerned. 15 (60) The supported sector is open to competition at EU level and therefore sensitive to any measure in favour of the production in one or more Member States. As there is substantial intra-eu trade in agricultural products in general 16, the notified aid scheme is liable to affect trade between Member States. (61) In the light of the above, the conditions of Article 107(1) TFEU are fulfilled. It can therefore be concluded that the notified scheme constitutes State aid within the meaning of that Article. 13 See in particular Judgment of the Court of 13 July 1988, Case 102/87, French Republic v. Commission of the European Communities, ECR 1988, p Judgment of the Court of 17 September 1980, Case 730/79, Philip Morris Holland BV v. Commission of the European Communities, ECR 1980, p See in particular Judgement of the Court of 15 December 2005, Case C-66/02, Italy v. Commission, ECR 2005, p. I-10968, para. 117; and of 15 June 2006, Joined Cases C-393/04 and C-41/05, Air Liquide Industries Belgium, ECR 2006, p. I-5332, para In 2014 the Czech Republic s import of agriculture products amounted in value of EUR 7.1 billion and the export amounted in value of EUR 6.1 billion (source: Eurostat). 11

12 3.2. Lawfulness of the aid (62) The Czech authorities have notified the aid scheme before its implementation, they have declared (recital (6)) that the aid scheme will be implemented from 1 July 2015 or from the date of the Commission approval decision, should the latter be adopted later Compatibility of aid pursuant to Article 107(3)(c) TFEU (63) The aid may be regarded as compatible with the internal market only if one of the exemptions provided for in the TFEU applies. (64) The present notified aid scheme covers support for promotional activities regarding agricultural products, (recital (15)). Therefore, the State aid rules in the agricultural sector and forestry are applicable. (65) The Commission has examined the proposed aid scheme in the light of Article 107(3)(c) TFEU and of the AGRI Guidelines, therein under Part I, Chapter 3. Common assessment principles and under Part II, Chapter 1, Section Aid for promotion measures in favour of agricultural products Application of the AGRI Guidelines (66) Point (452) of the AGRI Guidelines stipulates that the Commission will consider these types of aid compatible with the internal market under Article 107(3)(c) TFEU if it complies inter alia with the common assessment principles of these Guidelines Common assessment principles (67) According to point (38) of the AGRI Guidelines, the common assessment principles apply to aid granted in accordance with Article 107(3)(c) TFEU. (68) The notified aid scheme contributes to a common objective in line with point (43) of the AGRI Guidelines. As described in recital (15) above, the objective of the present notified scheme is to encourage the production and marketing of quality agriculture products, incl. the dissemination of scientific information on benefits of quality agriculture products. The documentation provided in the notification also shows that support is targeted on clearly defined objectives (recitals (16) and (19)) reflecting identified needs to promote quality in the agriculture production in the Czech Republic. (69) As the Czech authorities demonstrated by providing the relevant documentation that the notified aid scheme does not form part of the regional framework for rural development and that in overall, it fits into and is consistent with the rural development framework (recital (49)), the conditions of point (47) and (58) of the AGRI Guidelines are met. (70) As demonstrated by the Czech authorities, the aid scheme does not support any extension of the production or investment projects. It aims exclusively at supporting the promotion activities for the agricultural sector. Therefore, no negative impact on the environment within the meaning of point (52) of the AGRI Guidelines has been identified (recital (50)). 12

13 (71) It can be overall concluded that a necessity of a State intervention within the meaning of points (53) and (54) of the AGRI Guidelines exists. The analysis demonstrates that the notified aid scheme can be considered necessary to achieve the objectives of common interest, in particular promotion of quality products and awareness of the producers related to the modernization and more efficient processes and increase in competitiveness. Thus, if complying with the other conditions of the AGRI Guidelines as analysed below, it can be concluded that the conditions of point (55) of the AGRI Guidelines have been met. (72) The Czech authorities comply with the prescribed form subsidized services for beneficiaries in line with points (59) et seq. of the AGRI Guidelines (recital (14)). (73) The Czech authorities indicate that the present notified aid scheme aims at promoting quality food products. Therefore, such aid scheme is deemed to have an incentive effect, as set out in point (75(m)) of the AGRI Guidelines. (74) The Czech authorities have analysed and identified the need for further promoting quality agriculture products. They have demonstrated positive effects of the aid scheme as this will provide for incentives for the enterprises active in the given sector to produce and offer more variety of quality agriculture products (recitals (16) and (19)). (75) Furthermore, the Czech authorities committed and provided all necessary information to ensure that the aid under the notified scheme will not be cumulated with aid received from other local, regional, national or European Union sources to cover the same eligible costs (recital (52)). The risk of cumulation is therefore avoided. (76) According to the point (82) of the AGRI Guidelines, in order for the aid to be proportionate, the Commission considers that the aid amount should not exceed the eligible costs. As demonstrated by the Czech authorities (recitals (45) and (46)), the maximum aid intensity was set up within the limits of the AGRI Guidelines (see also below for the respective supported measures). Therefore, the risk of overcompensation is eliminated. The Commission therefore concludes that the requirement of proportionality has been met. (77) The Czech authorities have analysed the risk of distortion of competition when implementing the notified aid scheme. As they demonstrated in recital (48), the aid scheme aims at supporting the promotion activities for quality agriculture products. It does not have any direct link to any production processes or their extension, nor for the investment projects. The Commission therefore concludes that no significant distortion of competition and trade could be identified in line with point (113) of the AGRI Guidelines. (78) Regarding the transparency requirements stipulated in points (128) to (132) of the AGRI Guidelines, the Czech authorities have committed to comply with these requirements (recital (53)) and therefore the transparency requirement is met Aid for the promotion of agricultural products (79) According to points (454) to (456) of the AGRI Guidelines, the promotional activity must be designed either to inform the public about the characteristics of 13

14 particular agricultural products, for example by organising competitions, participating in trade fairs and public relations activities, by the vulgarisation of scientific knowledge, or by publications with factual information. Furthermore, the promotional campaign must be focused on products covered by quality schemes as referred to in point (282) of the AGRI Guidelines or it must be generic in nature and intended for the benefit of all producers of the type of product concerned and must comply with Article 2 of Directive 2000/13/EC and, where appropriate, with specific labelling rules. It follows from recitals (33) to (43) above that these conditions are fulfilled. (80) The Czech authorities committed to submit representative samples of promotion materials intended for quality promotion as soon as they are available. They will provide samples of promotion material before any new promotional campaign is launched (recital (43)). Therefore, the requirements under point (457) of the AGRI Guidelines are met. (81) The Czech authorities have confirmed that the promotion campaigns will not exceed an annual budget of 5 million (recital (44)). Therefore, the requirement under point (458) of the AGRI Guidelines is not applicable to the present scheme. (82) According to point (459) of the AGRI Guidelines, the provision of promotional measures may be undertaken by producer groups or other organisations regardless of their size. Participation in such activity must not be subject to membership of those groups or organisations and any contribution in terms of administration fees for the group or organisation must be limited to the cost of providing the promotional measure. The Czech authorities have confirmed that the present scheme fulfils these obligations (recital (33)). (83) According to points (461) to (463) of the AGRI Guidelines, aid for promotion campaigns must be granted only in kind by means of subsidised services and must be paid to the provider of the promotional measures. This requirement is met (recital (44)). (84) The eligible costs communicated by the Czech authorities (recital (45)) match those listed under point (464) (a) to (d) of the AGRI Guidelines. Furthermore, the Czech authorities have confirmed that only SMEs will benefit from aid for organization of competitions, trade fairs and exhibitions (recital (33)) and therefore, the requirement set out in point (453) of the AGRI Guidelines is complied with. (85) According to points (465) and (466) of the AGRI Guidelines, promotion campaigns as referred to in point (464)(d) (generic) must not be earmarked for products of one or more particular company or companies (recital (37)). Furthermore, the promotion activities referred to in point (464)(c) and campaigns referred to in point (464)(d), and in particular activities which are generic in nature and intended for the benefit of all producers of the type of product concerned, must not mention any particular undertaking, brand name or origin (recital (33)). (86) However, the restriction on the reference to origin does not apply to activities and campaigns referred to in point (464)(c) and (d), focussed on products covered by 14

15 quality schemes as referred to in point (282) of the AGRI Guidelines (recital (41)). The Commission therefore concludes that these conditions have been met. (87) The maximum permitted aid intensity, as stated under points (467) to (469) of the AGRI Guidelines, is 100% for all eligible costs (for costs referred to in point (464)(a) to (c). The same maximum aid intensity is envisaged for generic promotion campaigns, referred to in point (464)(d)). The Czech authorities have confirmed that the present aid scheme complies with this condition (recital (46)). (88) The Commission concludes that the requirements of Section of Part II of the AGRI Guidelines are met Other conditions Duration of the aid scheme (89) As to the duration of the scheme, pursuant to point 719 of the AGRI Guidelines the Commission shall only authorize schemes of limited duration. Schemes covering State aid for measures that can also benefit from EAFRD co-financing under Regulation (EU) 1305/ should be limited to the duration of the programming period As stipulated in recital (6), this condition has been met. Outstanding recovery orders (90) The Commission takes note that in compliance with point (27) of the AGRI Guidelines and with the settled case law 18, the Czech authorities commit to suspend the payment of the notified aid if the beneficiary still has at its disposal an earlier unlawful aid that was declared incompatible by a Commission Decision (either concerning an individual aid or an aid scheme), until that beneficiary has reimbursed or paid into a blocked account the total amount of unlawful and incompatible aid including the corresponding recovery interest (recital (54)). Undertakings in difficulty (91) The Commission takes note of the commitment by the Czech authorities that aid will not be granted to undertakings in difficulty within the meaning of the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (recital (55)). 19 (92) In view of the above considerations that the AGRI Guidelines are complied with, the Commission considers that the notified aid scheme is compatible with the internal market in accordance with Article 107(3)(c) TFEU. 17 Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005, OJ L347, , p See Judgment of the General Court of 13 September 1995, joined cases T-244/93 and T-486/93, Textilwerke Deggendorf GmbH v. Commission, p. II-2288, paras 51 and 56 et seq.; confirmed by the judgment of the Court of Justice of 15 May 1997, case C-355/95 P, p. I-2575, paras 22 and 26 et seq. 19 Communication from the Commission Guidelines on State aid for rescuing and restructuring nonfinancial undertakings in difficulty OJ C 249, , p

16 4. CONCLUSION (93) The Commission has accordingly decided not to raise objections to the scheme on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) TFEU. (94) If any parts of this letter are covered by the obligation of professional secrecy according to the Commission communication on professional secrecy and should not be published, please inform the Commission within fifteen working days of notification of this letter. If the Commission does not receive a reasoned request by that deadline the Czech Republic will be deemed to agree to the publication of the full text of this letter. If the Czech Republic wishes certain information to be covered by the obligation of professional secrecy please indicate the parts and provide a justification in respect of each part for which non-disclosure is requested. (95) Your request should be sent electronically via the secured system Public Key Infrastructure (PKI) in accordance with Article 3(4) of Commission Regulation (EC) No 794/ , to the following address: agri-state-aidsnotifications@ec.europa.eu. For the Commission Phil HOGAN Member of the Commission 20 Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 140, , p. 1). 16