Embargo VISTA illimité(*)

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1 EUROPEAN COMMISSION Brussels, C(2015), Embargo VISTA illimité(*) Subject: State Aid / Germany - Aid No SA (2015/N) - Promotion of participation to the Organic Quality Programme and the sale of bio products Sir, The European Commission ("the Commission") wishes to inform Germany that, having examined the information supplied by your authorities on the scheme referred to above, it has decided to raise no 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 Germany to the European Union notified the Commission of this scheme by letter of 26 March 2015, registered on the same day. (2) By a letter dated 22 May 2015 the Commission has asked for certain supplementary information. The German authorities provided additional information on 29 June 2015, registered on the same 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 2014 to (hereinafter: 'the AGRI Guidelines') that entered into force on 1 July 2014, the currently notified aid scheme has to be treated as new aid and has to be assessed under these new Guidelines. 1 OJ C 204, , p. 1. (*) Ce timbre porte sur l'ensemble des documents qui composent le dossier. Seiner Exzellenz Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1D Berlin Commission européenne, B-1049 Bruxelles Europese Commissie, B-1049 Brussel Belgium Telephone: 32 (0)

2 2. DESCRIPTION 2.1. Title (4) Support for the participation to the Organic Quality Programme and the sale of bio products 2.2. Budget (5) Total: 9 Mio; Annually: 1,5 Mio Duration (6) From the approval by the Commission until 31 December Legal basis (7) Bayerische Haushaltsordnung (BayHO), (Bavarian financial regulation); (8) Zeichensatzung: "Bio-Siegel für Erzeugnisse der Land- und Ernährungswirtschaft" (Statute for bio-label for agricultural and foodstuff products) (hereinafter referred to as "Statute"); (9) Grundsätze für die Förderung der Teilnahme am Bio-Qualitätsprogramm und des Absatzes von Bio-Produkten (Principles for the promotion of participation in organic quality program and the marketing of organic products) Aid beneficiaries (10) The measure will benefit (i) farmers (only active farmers are eligible) which are willing to participate in the quality scheme and (ii) producers, processors and marketers of bio-products who make use of the bio-label as described below. Large enterprises are excluded from the scheme. (11) The beneficiaries are small and medium enterprises for actions described in recital (15) below and service providers, producer groups and other organizations for actions described in recital (14) below. (12) The aid is granted to groups of users of the quality label, marketing organisations as well as other agrarian and food production organisations, independently of their legal form. The estimated number of beneficiaries is above (13) The aid is available without discrimination to all eligible farmers and undertakings active in processing and marketing of agricultural products eligible in the area concerned based on objectively defined conditions Form and intensity (14) The aid will be granted in kind with an aid intensity of up to 100 % for the eligible costs of the subsequent actions: 2

3 (a) (b) (c) Measures aimed at informing the public about the legal provisions regulating the Bio-Logo as well as about the characteristics of products labelled with the Bio-Logo; Measures aimed at encouraging the consumer to purchase products labelled with the Bio-Logo; Market research activities, aiming to improve the performance of the quality scheme, the product conception and design and a better control system. The three abovementioned measures concern costs eligible under (b), (c) and (d) of point 464 of the AGRI Guidelines. (15) With respect to costs eligible under point 464(a) of the AGRI Guidelines, the aid will be granted as a direct grant of up to 50 % of the eligible costs incurred by the beneficiary concerning the organisation of and participation in competitions, trade fairs and exhibitions, for Annex I products labelled with the Bio-Logo. The German authorities communicated that the implementation of the scheme to non- Annex I products will make the object of a block exemption addressed to the Directorate General for Competition. These products are therefore not included in the scope of the present decision. (16) Suppliers in charge with promotion activities will be selected according to open, transparent and non-discriminatory procedures and will receive direct payments for the services they provide. Producer organisations will receive the aid in kind. (17) When the aid is granted in kind, it will not include any direct payments to the final beneficiaries Objectives of the aid scheme (18) The objectives of the actions under the notified aid scheme are the production of organic products with high quality, the protection of such quality and the provision of information to consumers about the quality of organic products. The general objective of the aid scheme is thus to increase the number of enterprises producing high quality agricultural products and to promote the sales of such products. A financial support shall be provided for promotion activities related to a specific bio-label positively recognised by end consumers. The aim of the scheme is to support a healthy eating pattern, to encourage manufacturers in producing quality food and motivate sellers to increase the representation of highquality food production in the commercial network, based on the educated consumers pressure Description of the aid scheme a) Introduction (19) The measure favours the introduction and promotion of the quality label. With this label the assurance of the quality and sales of bio-products from different origins should be supported. The goal is to generate products of high quality, to ensure the high quality is sustained and to inform the consumer about this. 3

4 (20) The process of registration of the quality label with the German Patent and Trademark Office as a collective trademark has started and is pending until the adoption of the present Commission Decision. (21) The German authorities have confirmed that the label will exist in different variants depending on the origin of the given high quality products. Thus, the Bio- Siegel has an oval shape. Inside the oval, at the top, the inscription Tested quality ("Geprüfte Qualität") and at the bottom half the word "Bavaria", "Baden- Württenberg", "Germany", "Austria", "EU" (or any other region depending on the origin of the product) are reprinted in small letters. Both written in white colour. The oval is coloured from light blue (14 % Cyan) to blue (70 % Cyan, 15 % magenta). In the centre of the sign is the word bio in big bold letters coloured from blue (100% Cyan, 30% black) to dark black (30% Cyan, 0% black). In the external oval there is a wording "awarded by the Bavarian State Ministry for Food, Agriculture and Forestry in blue lettering (70 % Cyan, 15 % magenta) on a white background. (22) The German authorities have stated that depending on the structure and size of the given product, the size of the Bio-Logo will vary. They have confirmed that all applicable provisions of the Regulation (EU) No 1169/ will be respected. Thus, the word "bio" in big bold letters will be easily identified by the end consumers as a logo of high quality products. (23) The German authorities have committed that the Bio-Logo will be available in all possible variants covering the indication of origin (Bayern, Baden-Württemberg, other Länder, Germany, Austria, France (other EU Member States), EU or with no origin indication). They have reassured that undertakings will have a possibility to apply for a given variant of the Bio-Siegel suitable for their products concerned. This possibility and the application procedure will be described in detail on the informative website administrated by the Bavarian State Ministry for Food, Agriculture and Forestry (recital (52)). 2 Regulation (EU) 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers, amending Regulations (EC) No 1924/2006 and (EC) No 1925/2006 of the European Parliament and of the Council, and repealing Commission Directive 87/250/EEC, Council Directive 90/496/EEC, Commission Directive 1999/10/EC, Directive 2000/13/EC of the European Parliament and of the Council, Commission Directives 2002/67/EC and 2008/5/EC and Commission Regulation (EC) No 608/2004, OJ L304, , p

5 (24) As examples, the Bio-Siegel will have the following appearances: (25) The Land Bavaria has ownership over the quality label "Bio-Logo" trademark and will assign by means of license agreement the label to licensees. These are organisations, associations or unions of associations in the area of agriculture and food industry, which can ensure the observance of the licensing conditions. The German authorities have given assurances that the selection of licensees will be carried out in an open, transparent and non-discriminatory procedure in compliance with the rules set out in the scheme statute. After examination of the conditions, the licensee can grant the right of using the label to agriculture enterprises and food producers (label users "Zeichennutzer"). (26) The right to use the label is awarded in accordance with the special conditions for awarding and using the label "Bio-Logo" (see the specific quality and testing provisions described below in recitals (37) ff). The label users will be those active in the agriculture and food sector for organic products, as well as in the commerce with such products. (27) The use of the Bio-Siegel for the identification of the farm or undertaking will be excluded. (28) The German Authorities have confirmed that the licensees are obliged to award the right of use of the label objectively and non-discriminatingly to any producers in the EU who apply for the Bio-Logo and who fulfil the quality criteria of the programme. In such cases, the compliance with the specific quality and testing provisions will be checked by the competent national authorities of that respective Member State. The certificate of compliance thus obtained will be acknowledged by the German authorities, which will not perform any additional checks. (29) The German authorities provided the relevant documentation that although the notified aid scheme does not form part of the Regional Rural Development Programme, it is consistent with the rural development objectives of that programme and compatible with the rules on the common organisation of markets in agricultural products. 5

6 (30) The scheme supports ecological agricultural practices which minimise to the highest extent possible the influence of human activity on the environment. The scheme will therefore have positive impact on the environment. b) Rights and obligations of the participants (31) The user of the label will be responsible for ensuring that the quality provisions are complied with and that the origin of the product is correct as of the time of granting the use of the label. (32) The licensee or the inspection body authorised by the licensee will be entitled and obliged to monitor compliance with the conditions for the use of the label and to monitor against unauthorised use as well as other misuse and deformations of the quality label by users and outsiders. (33) The licensee and the inspection body must be accredited certifier in accordance with DIN EN (and from 15 September 2015 with ISO/IEC 17065). Any inspection bodies in any region of any Member State, which are approved in accordance with the applicable EU rules and which also control the requirements in accordance with the quality and inspection provisions, may conduct the inspection and control tasks for the purpose of using the Bio-Siegel. The German authorities have committed that these checks will be acknowledged for the purpose of applying for the Bio-Siegel. If a dependency relationship exists between the licensee and the user of the label, then the inspections must be carried out by another independent inspection body. (34) The Landesanstalt für Landwirtschaft (the State Institute of Agriculture) monitors the licensees' compliance with the provisions of the label rules, the license agreement and the "special conditions" on the use and protection of the label as well as the quality and inspection provisions. In particular, the State Institute of Agriculture is entitled to request access to the records of performed audits, controls and checks of the label users kept by the licensee. On request unrestricted access to the premises has to be granted to it. The State Institute of Agriculture is also authorised to directly perform the appropriate and necessary control measures at the premises of the label users. (35) By way of derogation, the control activities of processed products carried out in other Member States are recognised by the State Institute for Agriculture and no further evaluation takes place for products originating in other Member States. (36) In the label statute, detailed descriptions of the conditions for use of the label, the conditions for granting the right to use the label, the rights and obligations of participating parties, the monitoring and control measures, measures in case of violations and infringements and conditions for loss of right to use the label can be found. c) Quality criteria for the award of the quality label Bio-Logo (37) The German authorities have reassured that the quality and testing provisions will by constantly monitored and reviewed by the licensee in cooperation with the State Ministry for Food, Agriculture and Forestry and with the participation of the 6

7 associations, organisations, etc. with respect to actual or legal changes or new scientific evidence to guarantee the objectives of the Bio-Logo. The use of the label requires the observance of certain quality criteria. Central element of the programme is the complete documentation from the production to the end consumer by a quality and control system. (38) The quality and test regulation for the use of the label Bio-Siegel contains detailed rules for the eco-quality. The basic legal provisions are: Council Regulation (EC) No 834/ ; Commission Regulation (EC) No 889/ ; Guidelines for Implementation of the Bavarian landscape programme - Part 1 (Measure 1.1 Organic farming in the overall operation of No G /552) (Richtlinien zur Durchführung des Bayerischen Kulturlandschaftsprogramms Teil I (Maßnahme 1.1 Ökologischer Landbau im Gesamtbetrieb vom Nr. G /552); Notice of the Bavarian Ministry of Agriculture and Forestry of (AllMBl. No 16/2003, pp. 890, LMBek) for enforcement of laws in the field of organic agriculture (Bekanntmachung des Bayerischen Staatsministeriums für Landwirtschaft und Forsten vom (AllMBl. Nr. 16/2003, S. 890, LMBek) zum Vollzug der Rechtsvorschriften auf dem Gebiet des ökologischen Landbaus); Council Regulation (EEC) No 1836/93 5. (39) The above mentioned framework stipulates processing rules and quality requirements which shall ensure the production of nutritionally full-fledged food of high quality from the primary production through the processing to final consumption. (40) The main processing principles are as follows: For the purpose of processing organic food, the use of certain ingredients of non-agricultural origin, certain food processing aid and certain nonorganic ingredients of agricultural origin are allowed. The German authorities confirm that when using ingredients of non-agricultural origin and processing support elements, at least the requirements of Annex VIII to Regulation (EC) No 889/2008 (recital (38) above) shall be observed; When processing, non-renewable sources of energy shall be consumed at the lowest possible level; it shall be ensured that the greatest possible protection of raw materials has been achieved; 3 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. 5 Council Regulation (EEC) No 1836/93 of 29 June 1993 allowing voluntary participation by companies in the industrial sector in a Community eco-management and audit scheme, OJ L 168, , p. 3. 7

8 The processing and packaging must be performed in operating units located in the given region, exceptionally in other regions if need for the compliance with the high quality and certification requirements; they have to be certified by inspection bodies approved in compliance with the EU applicable law; As far as companies are not simultaneously a label user under an association of organic farming, in each individual case the manufacturing processes have to be transparent and inspected by the licensee in cooperation with the Bavarian State Institute of Agriculture. (41) In addition to complying to the criteria in Regulation (EC) 834/2007, the following additional requirements apply to all users of the Bio-Siegel label: On arable land, at least 20% of vegetables must be grown in rotation; In summer considerable amounts of basic feed for ruminants must consist of green fodder. Exclusive silage feeding is not allowed; For pigs and poultry, the following upper limit of animals per ha apply: a) Porker 10 b) Laying hens 140 c) Broilers chickens 280 d) Pullets 280 e) Ducks 210 f) Turkeys 140 g) Fattening geese 280 h) Breeding sows 6,5 j) Piglets 74 No use of fresh, dried or composted poultry manure nor liquid animal excrements (slurry, urine...) from conventional production; Use of composted or fermented household waste only in case of compliance with other ecological quality assurance criteria; No use of products or by-products of animal origin in fertilizers, with the exception of hoof, hair and horn meal; Purchase of organic manure is limited to max. 40 kg N/ha with the exception of horticulture and permanent crops; When using copper preparations, the amount of active agent is limited to maximum 3 kg/ha per year (hops maximum 4 kg/ha per year); No use of soilless cultivation methods for growing vegetables, with the exception of sprout production; At least 50% of the feed have to be produced on the farm or in fixed feed/manure cooperatives (except small producers: holding below 1000 hens, 30 sows, 60 porkers, 10 horses). (42) A processed product may only carry the quality label, if 100% of the agricultural ingredients are grown in accordance with Regulation (EC) 834/2007 and the special quality criteria presented in point (41) above. In the case of processing, a lowest possible use of non-renewable energies and greatest possible preservation of the raw materials is to be strived for. (43) In the case of processed products, the manufacturing process will be examined in each case. An expert opinion has to be given on the manufacturing process and 8

9 the recipe by the licensee in co-operation with the Bavarian Institute for Agriculture. By way of derogation, the products of other regions and Member States can participate in the quality programme without restriction, provided that the relevant controls are carried out in their respective Member States. The relevant controls are recognised by the German authorities and no additional assessment by the State Institute of Agriculture is required. (44) A processed product may only carry the quality label, if 100% of the ingredients are of agricultural origin according to the Regulation (EC) No 834/2007 and to quality criteria as described in recitals (37) ff. (45) The respect of the above criteria will be checked through independent controls and it will be ensured that the products are fully traceable. d) Declarations of origin (46) The Bio-Siegel will be used to promote high quality bio agricultural production. Therefore, promotional campaigns will concern quality products covered by the quality schemes the main features of which are described above in recitals (37) ff. The system will also enable the full transparent traceability of the agricultural production. (47) The producer can choose to display in a subsidiary message on the Bio-Logo either the region of origin, the superior regional reference "Europe" or no indication of origin. (48) The purpose of the campaign is to inform the customer without creating a bias towards any origin in particular and therefore maintaining a non-discriminatory and generic character. The reference to origin will be made on an equal footing for all origins of all EU Member States. (49) The website of the scheme will display all possible logos with subsidiary messages from all EU Member States. The posters which make the object of promotion campaigns will either display the logo with non-origin subsidiary message or will present a selection of logos from at least three different origins, in order to ensure a generic and non-discriminatory character of the campaign. A link to the web-site of the scheme will complement this information. e) Openness, transparency and non-discriminating character of the aid scheme (50) The German authorities have committed that the notified aid scheme will be administrated and implemented in an open, transparent and non-discriminatory manner. They reassured that it will be the production of high quality products no matter of which origin which will be supported under the notified aid scheme. The aid will not be intended to support only local, regional or national bio quality production and will not discriminate products based on their origin. (51) Support will be given to the recognised Bio quality scheme, which is open to all producers and operators throughout the EU on equal terms with domestic producers. The promotional campaigns will not be earmarked for the products of a particular brand or a particular company or companies. 9

10 (52) Every interested undertaking will have a possibility to apply for a variant of the Bio-Logo suitable for their products and depending on their origin. The German authorities have committed that the competent authorities will approve such application provided all requirements of the quality scheme have been complied with. (53) In the view of the German authorities the message of the origin of the promoted high quality products is clearly in the background and subsidiary. The most visible element is the word "bio" in the centre of the sign written in big bold letters. A message which is discriminatory based on origin or defensive in the way of highlighting the origin will be avoided. The emphasis is put on quality criteria and not on a specific origin. This is equally valid for the promotion campaign. (54) The German authorities committed to make sure that the consumers will be sufficiently well informed about the fact that the Bio-Logo does not only cover high quality agricultural products of Bavarian/German origin but also high quality products coming from different EU Member State and their regions provided they fulfil the quality criteria as described above. To this extent, the German authorities will make all potential Bio-Logo variants (including those still not being applied for by the undertakings) available in the promotion and information campaigns directed to consumers. (55) As a first step, the Bavarian Ministry of Food, Agriculture and Forestry (StMELF) has established a central website. 6 This on-line information for the Bio-Siegel will be made available to all interested parties in both German and English versions. The information website will contain general information about organic labelling, more detailed information on the higher quality standards, as well as specific information where and how interested undertakings can apply for and participate in the program (incl. contact details, address of the competent authority, information on the procedural steps). Moreover, the possibility for undertakings to apply for different variations of the Bio-Logo will be presented in detail. (56) The information concerning the scheme will be displayed in a transparent manner on a central website, accessible at the following URL: stmelf.bayern.de/markt/003759/index.php. The website will contain logos in variants of all EU Member States, generic EU origin logo, "non-origin" logo and those for the respective German States. This will make the consumer aware that there are further variants of the logo, including non-national ones, and that these other variants stand for the same quality. It will inform interested national and foreign producers about all possible logo-variants. (57) To further increase the awareness among general public of different variants of the Bio-Siegel including those already presented on the market as well as those which are not yet present on the market, the German authorities committed that from the very beginning of the implementation of this notified aid scheme, all advertising materials will depict proportionately different variants of the Bio- Siegel. In the draft flyers and posters attached to the notification, there are some 6 Under 10

11 examples of the logo-variants EU, Germany, Austria, Bavaria and "non-origin" variant. (58) In addition, as described in recital (33), any inspection bodies in any region of the Member States, which are approved in accordance with the applicable EU rules and which also control the requirements in accordance with the quality and inspection provisions, may conduct the inspection and control tasks for the purpose of using the Bio-Logo. This also ensures, in the view of German authorities, openness of the aid scheme to all undertakings operating outside Germany. (59) The German authorities undertake to forward to the Commission yearly statistics on the implementation of the notified aid scheme. These statistics shall contain the following data: (a) (b) (c) Number of undertakings which applied for the use of the Bio-Logo; Number of undertakings that actually use the Bio-Logo (including the breakdown according to origin - Bundesländer, Germany, other EU Member States and EU). Examples of promotional materials (with various logo-variants). f) Main features of the promotional campaigns (60) The promotion campaigns will focus on the products covered by the quality scheme described in point (282) of the AGRI Guidelines as described above. (61) The campaign will encourage consumers to buy the agricultural products marked with the Bio-Logo. Furthermore, the campaign will inform the public about the characteristics of the agricultural products marked with the Bio-Logo, disseminate scientific knowledge referring to product nutrient properties, publish relevant information and support participation in trade fairs and exhibitions. (62) The campaign is without discrimination intended for the benefit of all producers of the type of product described above and must comply with Article 2 of Directive 2000/13/EC, as well as with the specific labelling rules, described in the recitals (21) to (28). (63) The result of the promotional campaign 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. (64) The campaign will contain the slogan "Enjoy bio quality" (in German "Bio- Qualität genießen"). The campaign encourages that the consumer actively seeks food products with guaranteed quality and prefer them to low-quality food products. While forming their shopping behavior in this direction, they will effectively exert pressure on food products dealers so that the latter will offer the greatest range of high quality products. (65) In order to ensure that the logo is well-known to general public, the scheme will support the following promotional activities: 11

12 (a) (b) (c) information for the public about the legal provisions underlying the logo as well as on the characteristics of products labelled with the Bio-Logo; measures aimed at the consumer to buy the promoted products labelled with the Bio-Logo; organisation of and participation in fairs and competitions for products with the Bio-Logo; (66) The selection procedure will take place in a transparent manner. The applicant will be able to submit a request to the State Ministry of Food, Agriculture and Forestry, Alp Bavaria Agency for Food - Products from Bavaria, including in the aid application at least the following information: name and size of the company, description of the project or activity with an indication of the beginning and end dates, location of the project or activity, cost of the project, type of aid and the amount needed for public financing. The application for aid will have to precede the start of works on the relevant project. (67) The scheme excludes any compulsory membership of the producer group/organisation organising the campaign or any other intermediate entity managing the aid, as well as any payment of a contribution for administration that would go beyond the cost of the promotion measure. (68) Promotional measures will take place exclusively on the territory of Germany. (69) The promotional campaigns will not exceed an annual budget of EUR 5 million. Eligible costs (70) The following costs are eligible: I). Eligible for aid in kind: (a) Costs for publication of information, with maximum aid intensity of 100%: costs of publications in print- and electronic media, websites, and spots in electronic media, on radio or television, aimed at presenting factual information about producers from a given region which are using the Bio-Logo, or producers of a given product, marked with the Bio-Logo, provided that the information is neutral and that all producers have equal opportunities to be represented in the publication; costs for the dissemination of scientific knowledge and factual information in connection with the Bio-Logo; (b) (c) Costs of market research activities, aiming at the preparation of documentation and the improvement of the performance of the programme and of the control systems; Costs for the consumer targeted promotion campaign for products labelled with the Bio-Logo, with the condition that the promotion will not be 12

13 earmarked for the products of a particular brand or a particular company or companies, with maximum aid intensity of 100%: costs for consumer-targeted promotion campaigns organised in the media or at retail outlets; costs for promotion material which is distributed directly to consumers; II). Eligible for direct grant: (d) Costs concerning the organisation of and participation in competitions, trade fairs and exhibitions for Annex I products, with maximum aid intensity of 50%: participation fees; costs of publications and websites announcing the event; the rent of premises and stands and costs of their installation and dismantling; symbolic prizes up to a value of EUR per prize and per winner of a competition; the aid for these symbolic prizes may only be paid to the provider of the promotion measures if the prize has been actually granted and upon presentation of a proof of the award Cumulation (71) According to information provided, the cumulation of 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 aid authorised under this scheme will not be cumulated with any de minimis aid in respect of the same eligible costs. The German authorities commit themselves to respect this restriction, as well as to assure that the maximum allowed intensities will be respected Other commitments (72) The implementation of the scheme shall be subject to transparency rules. The German authorities commit to respect the transparency requirements under recitals of the AGRI Guidelines. (73) Furthermore the German 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. (74) The German authorities have confirmed that companies which are in difficulty within the meaning of the Guidelines on State aid or rescuing and restructuring 13

14 non-financial undertakings in difficulty 7 are excluded from receiving any aid under the present scheme ASSESSMENT UNDER STATE AID RULES 3.1. Presence of State aid within the meaning of Article 107(1) TFEU (75) Pursuant to Article 107(1) TFEU, aid granted by a Member State or through State resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, shall, in so far as it affects trade between Member States, be incompatible with the internal market. (76) The aid scheme confers an advantage on selected beneficiaries as it favours certain undertakings economically active in Germany 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 Article 107(3)(c) and the AGRI Guidelines. (77) The aid scheme in question is financed through the State budget. Therefore, the advantage is deemed to be granted from State resources. The aid is also imputable to the State. (78) According to the case law of the Court of Justice, aid to an undertaking is deemed to affect trade between Member States where that undertaking competes with products coming from other Member States, even if it does not itself exports its products and operates in a market open to trade at EU level. 9 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. 10 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. (79) 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 11, the notified aid 7 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. To that effect see points 20 and 24(a) of the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty. 9 See in particular the judgment of the Court of 13 July 1988 in Case 102/87 French Republic v Commission of the European Communities, ECLI:EU:C:1988:391, paragraph Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission of the European Communities, ECLI:EU:C:1980:209, paragraph In 2013 Germany s import of agriculture products from other EU countries amounted to EUR 60,5 billion (more than 10% of total imports) and the export of agriculture products to other EU countries 14

15 scheme is liable to affect trade between Member States. Moreover, the competitive position of beneficiaries is strengthened compared with their competitors, and thus the aid distorts or threatens to distort competition. (80) In the light of the above, the Commission considers that the notified scheme constitutes State aid within the meaning of Article 107(1) TFEU Lawfulness of the aid (81) The German authorities have notified the aid scheme before its implementation. They have declared that the aid scheme will be implemented from the date of the adoption of the decision by the European Commission. Therefore, Germany has complied with its obligation under Article 108(3) TFEU Compatibility of aid pursuant to Article 107(3)(c) TFEU (82) The aid may be regarded as compatible with the internal market only if one of the exemptions provided for in the TFEU applies. (83) The present notified aid scheme covers aid for the participation of producers of agricultural products in quality schemes and aid for promotion measures in favour of agricultural products. Therefore, the State aid rules in the agricultural sector and forestry are applicable. (84) 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 the participation of producers of agricultural products in quality schemes and Section Aid for promotion measures in favour of agricultural products Application of the AGRI Guidelines (85) Points (278) and (452) of the AGRI Guidelines stipulate that the Commission will consider the aid for the participation of producers of agricultural products in quality schemes and the aid for promotion measures in favour of agricultural products compatible with the internal market under Article 107(3)(c) TFEU if it complies a.o. with the common assessment principles of these Guidelines. amounted to EUR 52,5 billion (more than 8% of total exports) (source: statistics/factsheets/pdf/de_en.pdf, Eurostat). 15

16 Common assessment principles (86) According to point (12) of the AGRI Guidelines, the common assessment principles apply to notifiable aid schemes and individual aid granted in accordance with Article 107(3)(c) TFEU. Pursuant to point 38 of the AGRI Guidelines a notified aid measure can be considered as compatible with the internal market under Article 107(3) of the Treaty when the Commission comes to the conclusion that the design of aid measure ensures that the positive impact of the aid towards an objective common interest exceeds its potential negative effects on trade and competition. (87) The notified aid scheme contributes to a common objective in line with point (43) of the AGRI Guidelines. As described in recital (18) above, the objective of the present notified scheme is to encourage the production and marketing of agriculture products with high quality, incl. a financial support for promotion activities related to specific bio-label products positively recognized by the end consumers. The documentation provided in the notification also shows that support is targeted on clearly defined quality criteria for the award of the quality label Bio-logo (recitals (37) to (45) above), aiming to ensure that all required quality requirements will be checked by independent controls before granting the label, in order to promote increased quality standards in the agriculture production. (88) The German authorities provided relevant documentation indicating that the notified aid scheme fits into and is consistent with the rural development objectives of the Regional Rural Development programme (recital (29)). The conditions of point (47) and (58) of the AGRI Guidelines are therefore met. (89) According to the documentation provided by the German authorities and in line with recital (30), the aid scheme will have a positive impact on the environment and does not incur any negative impact on the environment within the meaning of point (52) of the AGRI Guidelines. (90) As it is shown below in sections and of the current decision, the scheme complies with the specific conditions of the sections and of Part II of the AGRI Guidelines. There is therefore a need for state intervention, in line with point 55 of the AGRI Guidelines. (91) The Commission accepts the arguments presented by the German authorities concerning the appropriateness of the two forms of aid selected: aid in kind and direct grant. The aid instruments are chosen in line with the specific criteria specified in the AGRI Guidelines and it can therefore be concluded that points (56), (59), (60) and (64) of the AGRI Guidelines are complied with. (92) The German authorities indicated that the present notified aid scheme aims at promoting quality food products. Therefore, the promotion part of the current aid scheme is deemed to have an incentive effect for activities described in recital (14) above, as set out in point 75(m) of the AGRI Guidelines. (93) As described in recitals (10) and (66) above, the conditions set out in points 70 to 73 of the AGRI Guidelines concerning the incentive effect for activities described in recital (15) above are met. 16

17 (94) The aid for market research activities, product conception and design and for the preparation of applications for recognition of quality scheme aims to change the behaviour of undertakings in the agricultural sector, stimulating them to apply to quality schemes that go beyond EU requirements and to have an effective product design of such products. The aid is therefore contributing to the development of the agricultural sector, engaging the concerned undertakings in additional activity in which it would not have engaged in without the aid or in which would only have engaged in a restricted or different manner. As such, the conditions of point 66 of the AGRI Guidelines are therefore met. (95) As described in recital (71) above, the German authorities assured that the aid under the notified scheme will not be cumulated with aid received from other local, regional, national or European Union sources, nor with any de minimis aid in respect of the same eligible costs (recital (71)). Consequently, the risk of cumulation appears avoided. (96) According to 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 German authorities (recitals (14) and (15)), the maximum aid intensity was set up within the limits of the AGRI Guidelines (see below in sections and of the current decision). Therefore, the risk of overcompensation appears to be eliminated and it can be concluded that the requirement of proportionality is met. (97) As demonstrated in recital (18), the aid scheme does not have a direct link to the extension of production processes, nor to investment in intensive agriculture. The main objective of the general scheme is to increase the number of enterprises producing high quality agricultural products and to promote the sales of such products. The aid fulfils the specific assessment criteria and the maximum aid intensities (see below in sections and of the current decision). It can, therefore, be concluded that the negative effect on competition and trade is limited to the minimum necessary, in line with point 113 of the AGRI Guidelines. (98) Regarding the transparency requirements stipulated in points (128) to (132) of the AGRI Guidelines, the German authorities have committed to comply with these requirements (recital (72)) Aid for participation of producers of agricultural products in quality schemes (99) According to point (278) of the AGRI Guidelines, the Commission will consider aid in favour of the participation of producers of agricultural products and groups thereof in quality schemes compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of Part II and with the specific conditions of Section of the AGRI Guidelines. (100) As described in recital (10) above, the German authorities confirmed that the scheme will apply to producers of agricultural products and only active farmers can be beneficiaries of the scheme. The conditions set out in point (279) of the AGRI Guidelines are thus respected. 17

18 (101) The eligible costs respect the conditions set out in points (280)(c), as demonstrated in recital (14)(c) above. The costs are incurred in connection to the quality scheme which fulfils the criteria set out in point (282)(b) of the AGRI Guidelines (see recitals (37) to (45) above). The scheme does not cover the costs foreseen under points (280)(a) and (b) of the Guidelines. (102) The aid is accessible to all those eligible undertakings in the area concerned, based on objectively defined conditions, as demonstrated in recitals (50) to (54). Therefore, point 283 of the AGRI Guidelines is fulfilled. (103) In line with point (284) of the AGRI Guidelines, the aid for participation of producers of agricultural products in quality schemes will not involve any direct payment to the beneficiaries (recitals (14) and (17) above). (104) The maximum aid intensity specified in point (286) of the AGRI Guidelines is respected since it reaches up to 100% of the real costs incurred (see recital (14) and recitals (37) to (45) above). (105) It can be concluded that the requirements of Section of Part II of the AGRI Guidelines are met Aid for the promotion of agricultural products (106) According to point (452) of the AGRI Guidelines, the Commission will consider aid for the promotion of agricultural products compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of Part II and with the specific conditions of Section of the AGRI Guidelines. (107) In line with recital (11) above, the German authorities have confirmed that only SMEs will benefit from aid for organisation of competitions, trade fairs and exhibitions. Therefore, the requirement set out in point (453) of the AGRI Guidelines is complied with. (108) In line with recitals (60) to (62), the German authorities demonstrate that the conditions set out in points (454) to (456) of the AGRI Guidelines are fulfilled. (109) The German authorities submitted representative samples of material intended for quality promotion (recitals (23) and (23)), as well as the draft content of the website for the scheme. Therefore, the requirements under point (457) of the AGRI Guidelines are met. (110) As the German authorities have confirmed that the promotional campaigns will not exceed an annual budget of EUR 5 million (recital (69)), the requirement under point (458) in conjunction with point 37(b) of the AGRI Guidelines does not apply to the present scheme. (111) The German authorities have confirmed that the present scheme fulfils the obligations set out in point (459) of the AGRI Guidelines (recital (67)). (112) According to points (461) to (462) of the AGRI Guidelines, aid for promotional campaigns must be granted only in kind by means of subsidised services and must 18

19 be paid directly to the provider of the promotional measures. This requirement is met (recitals (14) and (16)). (113) As explained in recital (70)(d) above, the requirement concerning aid for symbolic prizes set out in point (463) of the AGRI Guidelines is met. (114) The eligible costs communicated by the German authorities (recital (70)) match those listed under point (464) (a) to (d) of the AGRI Guidelines. (115) The German authorities demonstrate that the scheme fulfils the conditions concerning the reference to particular undertakings, brand name or origin set out in set out in point (465) of the AGRI Guidelines. The promotional activities referred to in point (464)(c) and campaigns referred to in point (464)(d) are for the benefit of all producers of the type of product concerned (recital (13)) and they do not mention any particular undertaking and brand name (recitals (23) and (60)). Concerning the reference to origin, the logos under the present scheme are of various types (recital (47)). Whenever mentioned in the logo, the reference of origin will fully comply with the conditions referred to in point (466) of the AGRI Guidelines (recitals (23) and (24)). The reference of origin will not target national products but will highlight in a non-discriminatory and generic way all origins from the EU Member States (recitals (48) and 53). (116) The Commission has analysed samples of the promotional materials provided for by the German authorities and concludes that the relevant conditions of points (465) and (466) are met. (117) The maximum permitted aid intensity, as stated under point (467) of the AGRI Guidelines, is up to 100% for all eligible costs (for costs referred to in point (464)(a) to (c)). The German authorities have confirmed that the aid scheme intensities are compliant with this allowed maximum value, in the following manner: costs referred to in point 464(a) of the Guidelines have a maximum aid intensity of 50% (recital (70)(d)) and costs referred to in points 464(b) and (c) of the Guidelines have a maximum aid intensity of 100% (recitals (70)(a) and (70)(b)). (118) Generic promotional campaigns, referred to in point (464)(d) of the AGRI Guidelines 12 may also cover up to 100% of the eligible costs. The German authorities have confirmed that the aid scheme intensity is compliant with the allowed maximum value (recital (70)(c)). (119) It can be concluded that the requirements of Section of Part II of the AGRI Guidelines are met. 12 Reference is made to the similar case State Aid/Czech Republic, Aid No SA (2015/N), Promotional campaign to promote quality food. 19