EUROPEAN COMMISSION. State aid / Denmark Aid N N 597/08 Pro mille- and production levy funds in agriculture

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1 EUROPEAN COMMISSION Brussels, G:\secr\ae09\kh\Denmark\N Promilleafgiftsfond\ISC\DDEC EN final.doc Subject: State aid / Denmark Aid N N 597/08 Pro mille- and production levy funds in agriculture Sir, I have the honour to inform you that, having examined the information supplied by your authorities on the aid referred to above, the Commission has decided to raise no objections to the State aid scheme in question. In reaching this decision, the Commission has relied on the following considerations: 1. PROCEDURE 1) By letter of , registered on the same day, the Permanent Representation of Denmark notified the Commission pursuant to Article 88 (3) of the EC Treaty of the above mentioned aid scheme. Additional information was provided by letters of and registered respectively on the same day, as well as of , registered on and , registered the same day. Meetings with the Danish authorities took place on and DESCRIPTION 2.1 Title 2) Promille- and production levy funds in agriculture. M. Per Stig MØLLER Ministre des Affaires étrangères Asiatisk Plads 2 DK KOBENHAVEN K Rue de la Loi 200, B Bruxelles/Wetstraat 200, B Brussel - Belgien. Telefonomstilling: +32 (0) Telex: COMEU B Telegramadresse: COMEUR Bruxelles.

2 2.2 Budget 3) 600 Million DKK annually (about Million). 2.3 Duration 4) From until Beneficiaries 5) Agricultural producers active in primary agricultural production. 2.5 Measure 6) The notification concerns a comprehensive national aid scheme that covers State aid measures in favour of primary agricultural production that are partly or completely financed by pro mille and production levies charged in Denmark. 7) The scheme would after Commission approval replace the previous State aid schemes financed at least in part by these levies and approved by the Commission, with the exception of the scheme concerning Christmas trees and decorative greenery (State aid case N 362/2007, approved by the Commission on ) and the scheme concerning the aid granted by the Plant Improvement Fund (approved State aid case N 177/90). The Danish authorities have stated that the activities of the Plant Improvement Fund are at present under review. 8) The State aid schemes mentioned in the preceding paragraph concern the aid granted by Danish agricultural levy funds (production levy and pro mille fund schemes). The following schemes will be replaced by the notified scheme: Production levy fund Aid scheme, as lastly modified by State aid No Pig N 214/2002 Milk N 307/2000 Cattle (bovine animals) N 307/2000 Poultry N 181/2005 Horse N 172/1990 Sheep N 173/1990 Seed N 467/2001 Potato N 132/2006 Sugar beet N 225/1995 Fruit and horticultural products N 478/1990 Fur N 121/2000 Pro mille fund Fruit and horticulture N 478/1990 Agriculture N 681/1998 Aid scheme, as lastly modified by State aid No 2

3 Ecological farming N 224/2001 The Levy Funds 9) The per mille and production levy funds ("the funds") have been set up by an Act of Parliament (Act No 297 of "the enabling Act") and regulated by an Administrative Order (Bekendtgørelse om administration og revision af promille- og produktionsafgiftsfonde m.v. indenfor jordbrugs- og fiskeriområdet ("the Administrative Order", not yet in force). The funds are managed by boards appointed by the Minister, who approves the budgets and accounts of the funds as submitted by the boards. The boards and their appointed administrators act under the Administrative Order and are supervised by the Directorate of Agri- Business (a public body), which also handles complaints. The boards make the decisions concerning the applications for aid from their respective funds. The Administrative Order ( 2) limits the activities of the funds to collecting the levies and administering the financial resources of the funds with a view to granting aid to the activities pursuant to 7 of the Act. 10) The activities of the funds must be in conformity with the Administrative Order No 937 of , which transposes Directive 2004/18/EC. 11) According to 2 of the Administrative Order the funds' resources consist of production levies, a per mille levy on the use of pesticides in Denmark and exceptional appropriations. It appears from the information submitted by the Danish authorities that the appropriations come from the general budget funds. 12) Production levies are collected on products according to Administrative Orders, which are issued on the basis of the Act for each fund respectively and fix the basis and rate and the collection modalities of the levy. The rate of levy is based on a recommendation from the boards administering the funds to the Minister. The Danish authorities have confirmed that they consider the proceeds from the production levies to be State resources. The levy is charged at the following rates: Product Sub product Production levy Pigs Pigs with a slaughter weight of up to kg. Pigs with a slaughter weight of 110 kg. and above Piglets up to 15 kg. Export levy Price per unit to producer (in 2007) 5,50 DKK/pig 5,50 DKK/pig 743 DKK/pig 0,7 % 13,75 DKK/pig 13,75 DKK/pig Levy/Unit price, including standard fee (grundafgift) (%, in 2007) 1091 DKK/pig 1,30 % 3, ,70 % DKK/piglet DKK/piglet Piglets above 3, ,30 % 3

4 Cattle Milk Poultry Eggs 15 kg. but below 50 kg. Pigs weighing between 50 and 135 kg. All bovines and calves All milk delivered to dairy Chickens for slaughter DKK/piglet 13,75 DKK/pig DKK/piglet 1091 DKK/pig 1,30 % 35 DKK per 35 DKK per ,77 % animal animal DKK/animal 0,6 øre/kg. 2,22 DKK/kg 0,27 % 1,3 øre/kg. live weight + 5 øre/chicken produced = 8,05 øre/chicken corresponding to 3,68 øre/kg 3,20 DKK/1000 eggs + 10 øre/day-old chick 2,08 øre/chicken 5,94 DKK/chicken 7,69 DKK/kg (cages) and 17,44 (organic production) 0,6 % 0,73 % (cages) and 0,33 % (organic) Fur skins Of mink 0,4 DKK/unit 0,4 DKK/unit 240 DKK/unit 0,16 % Of fox 0,4 DKK/unit 0,4 DKK/unit 402 DKK/unit 0,01 % Potatoes 0,4 DKK/ DKK/hkg. 0,51 % kg. Sugar beet 43 øre/t. 296 DKK/t. 0,15 % Sheep Sheep and 10 DKK/animal % lambs DKK/animal DKK/animal Seeds Grass, clover, and vegetable seeds of Danish origin 2 0/00 of 2 0/00 of Horticulture products Pot plants Cut flowers Bulbs, tubers and corms Vegetables open land Greenhouse vegetables Mushrooms (cultivated) Nursery plants Packaged pipfruit Not packaged pipfruit Stone fruit Soft fruit 2,75 0/00 of 1,6 0/00 of 5 0/00 of 3 0/00 of 2 0/00 of 0,5 0/00 of 4,5 0/00 of 4,5 0/00 of 5,6 0/00 of 4,65 0/00 of 4,6 0/00 of 0,28 % of 0,19 % of 0,52 % of 0,319 % of 0,2 % of 0,053 % of 0,46 % of 0,67 % of 0.76 % of 0,77 % of 0,58 % of 13) As specified in the Administrative Orders fixing the rate of the levy for each fund, the levies are charged only on Danish products. The Danish authorities 4

5 have confirmed that no production levies are charged on imported products. As provided in 7 of the Act, production levies must be allocated to projects and activities within the sector where the levy has been collected. In fact the proceeds are solely allocated to projects that benefit the groups of producers on whose products the levy has been charged. The boards must ensure that this allocation to groups of producers is implemented in such a way that discrimination during a reference period is avoided. The levies may not be allocated to the general administration of the funds, which is financed from general tax resources. 14) According to the Danish authorities, these levies do not result in any discriminatory effect within the meaning of Article 90 of the EC Treaty. In particular, they state that there are no indications that products of Danish origin marketed outside Demark could not benefit from the measure to the same extent as products marketed in Denmark. In fact, the Danish authorities have confirmed that in the products subject to the levy and destined for export will benefit from the levy in proportion to their share in total production charged with the levies. 15) Further the Danish authorities have stated that the burden of the levies on the market prices is low and as such they have no or only negligible impact on prices, which are determined by market conditions. Therefore according to the Danish authorities there is no risk that the charges could impair the operation of the Community market organisations. 16) Part of the proceeds from per mille levy on the use of pesticides in Denmark are used to finance, through transfers via the State budget, the two per mille funds and the fund for organic farming. All pesticides sold in Denmark are subject to the tax. This levy is paid directly to the State budget and there is no connection between the products taxed and the use of the levy proceeds, which can be used for any purposes within the State budget. The Ministry of Agriculture receives 83 % of the proceeds from the pesticide levy, which are divided among the general budget of the Ministry and the per mille levy funds and the fund for organic farming. In 2007 the per mille levy funds and the fund for organic farming.received DKK from the pesticide levy. In addition to project funding granted by the per mille levy funds and the fund for organic farming, these financial contributions from the levy proceeds may be spent on support activities in the entire agricultural/horticultural sector, including activities supported by production levy funds. Aid granted by the funds 17) The funds grant financial assistance on application ( 19 of the Administrative Order). Aid is normally given to projects. Applicants may be associations, private and public institutions, public funds and any other legal persons. The funds must have an Internet-homepage on which the application dates and procedures are published ( 18 of the Administrative Order). The Danish authorities have confirmed that in their view the levy fund operations as measures imputable to the State. 5

6 18) Projects are chosen in compliance with national and Community rules on public procurement, in particular Directive 2004/18/EC ( 3 of the Administrative Order). The aid recipient must prove by book-keeping in conformity with the national Decree Nr. 647 of that the aid is used only for the projectrelated costs and that the services are provided at market prices. Aid to administrative costs must be limited to project-related costs ( 3 (3) of the Administrative Order). 19) The Danish authorities have explained that if the project supported involves transferring the aid to the final beneficiaries in form of subsidised services, the aid recipient (service provider) must ensure that the aid is transferred entirely by assuring compliance with the rules detailed above in point 18 as well as by separate documentation. 20) The Danish authorities have notified the following activities that the fund will support: generic advertising, the provision of technical support, combating animal and plant diseases as well as research. The detailed aid conditions are stipulated in the Bekendtgørelse om betingelserne for støtte til aktiviteter omfattet af EU s statsstøtteregler og finansieret under promille- og produktionsafgiftsfonde m. v. inden for jordbrugsområdet ("the Administrative Order on aid conditions", not yet in force). 21) Aid will be granted only towards activities begun after the Commission has authorised the aid scheme and after the competent authority has accepted the application with a binding decision indicating the aid amount. Aid for generic advertising 22) The supported generic advertising aims at increasing the consumption of agricultural products by giving information in the form of text and images about the general characteristics of such products (such as fruit, vegetables or meat). The advertising campaigns will typically consist of advertisements, brochures, newsletters, workshops, information sessions, stands at exhibitions, and distribution of background material. The campaigns will be conducted in Denmark and in other Member States. Any campaigns of an annual budget of more than 5 Million will be notified separately. Advertising campaigns in third countries will be organised only as co-financed campaigns under Council Regulation (EC) No 3/2008 and Commission Regulation No 501/ ) Chapter 2 of the Administrative order on aid conditions stipulates that the advertising activities must always be generic and benefit all producers of the product in question. The Danish authorities have elaborated on these provisions stating that the campaigns are not targeted to particular firms or identified products and contain no references to the origin of the products (landscapes, national colours or anything connected to a land or a region) and no logos where country or region is mentioned by word or symbol. The names and logos of organisations in charge of the advertising as well as the Internet applications are 6

7 always neutral. The logos must be secondary to the main message and must not occupy more than 5 % of the advertising space. 24) The Danish authorities have given as a typical example of subsidised generic advertising publicity a project of a campaign to increase the sales and consumption of seasonal products by highlighting their characteristics, as presented on the website ( The Danish authorities will supply more examples in annual reports. 25) The aid rate is 100 %. Technical support 26) Chapter 1 of the Administrative order on aid conditions contains the provisions on technical support. This support can be granted to primary agricultural producers that are small- and medium sized enterprises for the education and training of farmers and farm workers, consultancy services provided by third parties, participation in trade fairs and competitions, vulgarisation of scientific knowledge and the provision of factual information on generic products as well as for producing publications. Companies active in the processing and marketing of agricultural products are not eligible for this aid. 27) The aid is granted in form of subsidised services to all eligible primary producers fulfilling objective conditions and involves no direct payments to the benefiting producers. When the aid involves direct provision of services to end beneficiaries (such as aid for education, training, and consultancy services) all aid is transferred to the end beneficiaries in form of reduced prices for the services. 28) Aid to education and training costs may cover the costs of organising a training programme as well as the travel and subsistence expenses incurred by the participants. Aid may also be granted for the costs of replacement services to cover the absence of the farmer or the agricultural workforce participating in training. 29) Consultancy services can be provided in form of individual services, or as oral and written presentations, workshops and conferences. The Danish authorities have indicated that no aid is granted towards obtaining services which constitute a continuous or periodic activity or relate to the enterprises usual operating expenditure. To illustrate the compliance with this principle, the Danish authorities give as an example animal health consultancy services in sheep breeding, where advice on health problems affecting the stock can be obtained by or telephone. Another example is special consultancy in the sector of poultry for slaughter where, in the view of structural development, the consultants give specialised and individual advise on specific aspects of production (such as inventory and environmental matters) but excluding consultancy relating to the routine business operations. The eligible costs are the consultancy fees and actual expenses relating to the consultant's visit. 7

8 30) The costs of organisation and participation of competitions, exhibitions and fairs are limited to participation fees, travel costs, costs of publications, rent of the exhibition premises and symbolic prizes of up to 250 per prize and winner. 31) Aid for vulgarisation of scientific knowledge and concerning factual information on quality systems and generic products is open to products from other Member States. No mention of companies, brands or origin appear on the information. The origin of the products covered by Council Regulation (EC) No 510/2006 and by Articles 54 to 58 of Council Regulation (EC) No 1493/1999 may be indicated, provided that the references to the origin correspond exactly to those references which have been registered by the Community. Concerning information on quality systems, the Danish authorities mention a project in chicken rearing where first control methods are tested and the results registered, after which the information gathered is systematically presented in a manual available to all interested undertakings. The aid is granted for the production of the manual. Aid for vulgarisation of scientific knowledge typically means subsidising publications, manuals, presentations and comparable means to spread knowledge, such as practical demonstrations. As a typical example of vulgarisation, the Danish authorities have indicated a project where the use of crop rotation mechanical weeding and catch crops to control root-propagated weed with minimal nutrient leach is examined on selected lots. The aid concerns the vulgarisation of the results by the above means of communication, including practical demonstrations in situ. As for factual information on generic products, according to the Danish authorities this is typically information to consumers in order to inform them about e.g. dietary matters. 32) Aid towards producing publications such as catalogues and websites can be used to publish factual information about products and producers, i.e. the names, addresses and sector of the producers concerned. Aid is available to all interested producers of the product in question. 33) The aid rate is 100 %. Aid for research: 34) Aid can be granted by all Levy Funds for basic, industrial and experimental research concerning agricultural end products, i.e. products falling within the scope of Annex I to the EC Treaty, as stipulated in Chapter 5 of the Administrative order on aid conditions. The Danish authorities have explained that the supported research activities concern primary agricultural production, for example production systems in primary agricultural production, methods of cultivation, genetic ameliorations, use of feed as well as handling and preparation of raw materials. 35) Aid is granted directly to researching institutions or bodies and excludes nonresearch related aid and price support to producers. ( 13 of the Administrative order on aid conditions).aid can be granted only for research projects that are of common interest too all producers of the product in question. The Danish authorities have specified The Levy Funds will support only research projects 8

9 for the products within the remit of the fund. This ensures that the parafiscal charges paid by the producers of a given product are used only to finance research concerning that product. 36) By 13 of the Administrative order on aid conditions The Levy Funds are required to inform on their respective websites about the projects that can receive support, the timetable and expected results of ongoing projects as well as the results of completed research projects. All information concerning the results of research must remain accessible on the internet at least for five years. If such information is made accessible to the members of a certain organisation it has to be published on the internet at the same time. 37) The aid will never exceed 100 % of the research-related cost. 38) The Danish authorities have expressly confirmed that the aid must fulfil the conditions set out in Chapter 9 of the Community framework for State aid for research and development and innovation (OJ C 323 of , hereinafter "the Community framework"). 39) The Danish authorities have also confirmed that aid can be granted only after an evaluation confirming that the required incentive effect within the meaning of Chapter 6 the Community framework and that the reporting obligations stipulated in that Article will be complied with. Aid to combat animal and plant diseases 40) Aid can be granted to primary agricultural producers that are small- or mediumsized enterprises in animal husbandry (bovine and ovine animals, pigs, poultry, fur animals) and plant production (potatoes) according to the rules laid down in Chapter 3 of the Administrative order on aid conditions. 41) Aid is given for activities (projects) that concern disease prevention and fighting activities or compensation for losses due to animal or plant diseases. The projects must be started within three years of the expenses or losses, and any compensation must be paid within four years of the occurrence. 42) The animal diseases concerned must be included in the list of animal diseases established by the World Organisation for animal health and/or in the Annex to Council Decision 90/424/EEC. The diseases and the measures to be taken must be identified in the aid project and must relate to a Community or national provision. However, diseases in respect of which Community legislation provides for specific charges for control measures are excluded. 43) Prevention and treatment projects may be continuous or consist of punctual measures, such as vaccination campaigns against blue-tong disease. The eligible costs are health controls, tests and other examinations, as well as purchase and administration of vaccines, medicines and plant protection products. The costs occasioned by destruction of crops and slaughtering and destroying animals are also eligible. Aid is given to the producers in the form of subsidised services. 9

10 44) Compensation for losses can be granted only where the public authorities have formally recognized an outbreak. The Danish authorities have recognised that compensation is granted only in the vegetable sector. As an example the Danish authorities have mentioned potato ring rot. Compensation is limited to the market value of crops that have been destroyed by the disease or on the orders of the authorities or as the result of disease fighting measures ordered by the authorities as part of an obligatory programme to fight the disease in question. Only the products covered by existing sales contracts can be covered by compensation. The value of products sold for other purposes than those stipulated in the contract must be deducted from the eligible losses. 45) No aid is granted for measures if according to Community legislation their costs must be borne by the producers. 46) Aid intensity is 100 % of the eligible costs, which must be reduced by any amount received under insurance schemes or costs not incurred because of the disease. 47) It is possible to cumulate the aid with aid measures financed by the Community, but without exceeding the applicable maximum allowed intensity. 2.6 Legal basis 48) Lov om administration af Det Europæiske Fællesskabs forordninger om markedsordninger for landbrugsvarer m, v. (bemyndigelsesloven), jf. lovbekendtgørelse nr. 297 af 28. april 2004 (the enabling Act); Bekendtgørelse om administration og revision af promille- og produktionsafgiftsfonde m.v. indenfor jordbrugs- og fiskeriområdet; Bekendtgørelse om betingelserne for støtte til aktiviteter omfattet af EU s statsstøtteregler og finansieret under promille- og produktionsafgiftsfonde m. v. inden for jordbrugsområdet; Bekendtgørelse om respektive fonde (implementing legislation under the Act) 3. EVALUATION 3.1. Existence of aid 49) Article 87(1) of the EC Treaty states that "any 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 common market". 50) The notified measures are carried out by funds financed by proceeds from the levy on pesticides and the levies on the production of agricultural products in Denmark as well as by exceptional appropriations from the State budget. 10

11 51) Proceeds from the levy on pesticides are paid directly into the State budget and their proceeds are not used to support the products taxed. Therefore these proceeds constitute State resources, as do exceptional appropriations from the State budget. 52) The Danish authorities have confirmed that in their view the proceeds of production levies are State resources and the levy fund operations imputable to the State. The Commission notes that the proceeds of the production levies are paid to funds established and controlled by the State and are used only for the purposes laid down in the applicable Administrative Order. The Board of Governors appointed by a Danish Ministry for each fund is in charge of the administration of the funds and makes the decisions concerning the granting of support. The conditions of granting aid, including but not limited to the eligible costs are laid down in detail in the applicable administrative order issued by the Ministry. The funds have no discretional power in that regard. This being the case the levies appear not to fulfil the conditions set out in the judgement of the Court of Justice in the Pearle case 1 (C-345/02) or in the Stardust case 2 (C- 482/99). 53) It follows that the aid is granted through State resources and the measure is attributable to the State. 54) Therefore the measure constitutes State aid and Article 87 (1) of the Treaty applies. 55) Hence it must be examined whether derogation from the general principle of the incompatibility of State aid under Article 87(1) of the Treaty might be granted Assessment of the notified measures and their financing Financing of the measures Production levies 56) As regards the parafiscal financing of the measures by production levies, the Commission takes note of the applicable national provisions and the confirmation by the Danish authorities according to which no production levies are imposed on imported products (see point 13 above). 57) The Danish authorities have given assurances that the share of parafiscal funding used in favour of exported products will correspond to the share of the exported products in the total of dutiable products. It would also seem that both products destined for domestic use and export can benefit equally from the eligible aid measures, as described above; generic advertising may appear in domestic and foreign media and technical support, aid to combat animal and plant diseases as well as aid for research projects are likely to benefit exported and imported 1 Judgment of the Court (First Chamber) of 15 July 2004 Pearle BV, Hans Prijs Optiek Franchise BV and Rinck Opticiëns BV v Hoofdbedrijfschap Ambachten. 2 Judgment of the Court of French Republic vs. Commission of the European Communities. 11

12 products equally. Therefore the Commission concludes aid does not appear to discriminate against exported products and is in line with the relevant case law of the Court of Justice ("Nygard test"). 3 58) The Danish authorities have provided the information that levies amounting to, according to product taxed, from 0.01 % to 1.7 of the unit price or from 0.5 to 5.6 pro mille of (see table in point 12 above) are a marginal cost that will not influence prices of end products, which are largely determined by developments in demand and supply on the free market. On the basis of this information the Commission concludes there are no indications that the parafiscal taxes financing the aid would constitute limitations to the free movement of goods in the internal market ("Freskot test"). 4 Per mille levy 59) In regard to the per mille levy on the use of pesticides, the Danish authorities have stated that this levy is paid directly to the State budget and that there is no connection between the products taxed and the use of the levy proceeds, which can be used for any purposes within the State budget. 60) As to the per mille levies on the use of pesticides, the Commission has already noted in its Decisions in cases N 416/95 and N 224/98 that constitute an nondiscriminatory internal charge in conformity with Article 90. As appears from the annual reports on these levies submitted by the Danish authorities (lastly received by the Commission on ), there appear to have been no changes in principles governing the collection, rate or use of the levies since In particular, the Commission notes that there is still no connection between the products taxed and the uses of the revenue. In 2006 the levy has been charged on 931 different pesticides and the proceeds have been paid to the State budget from which they have been distributed to finance various activities but excluding any aid to the producers of pesticides. In the light of the most recent case law for a tax to be regarded as forming an integral part of an aid measure, it must be hypothecated to the aid under the relevant national rules, in the sense that the revenue from the charge is necessarily allocated for the financing of the aid and has a direct impact on the amount of the aid and, consequently, on the assessment of the compatibility of that aid with the common market 5. Therefore there is no need to change the previous assessment of the levy by the Commission. Incentive effect 61) The Commission takes note of the assurances by the Danish authorities that aid is granted only for activities begun after the Commission has authorised the aid scheme and after the competent authority has accepted the application with a 3 See Judgment of the Court of 23 April 2002 in Case C-234/99, Nygard,. 4 See Judgement of 22 May 2003of the Court of Justice, Case C-355/00, Freskot. 5 See, inter alia, Joined Cases C-393/04 and C-41/05 Air Liquide Industries Belgium [2006] ECR I-5293, paragraph 46 and the case-law cited, Case C-333/07, Société Régie Networks v Direction de contrôle fiscal Rhône-Alpes Bourgogne, judgement of ECJ 22 December 2008, point

13 binding decision where the aid amount is indicated. This being the case the Commission considers that the aid contains an incentive element as defined in point 16 of the Guidelines. Selection of supported projects and limiting aid to the final beneficiaries 62) As to the supported projects, these can be carried out by legal persons selected by the authorities in compliance with national and Community rules on public procurement, in particular Directive 2004/18/EC ( 3 of the Administrative Order). Furthermore, the Funds have to publish all project financing opportunities at least on their Internet sites ( 18 of the Administrative Order). From the provisions of 3, explained above (point 18), it would appear that any legal person is entitled to propose such projects and that the eligible costs are limited to the documented actual and market price based costs of the project to the exclusion of other costs. 63) The Commission notes, in particular, that to document the costs the Funds will have to approve the costs before the project in question starts and after it has been completed and will require book-keeping satisfying the national legal standards demonstrating that only project related costs are included in the costs and that all services are delivered based on market prices. If the aid concerns the provision of services to final beneficiaries, it must appear from this documentation that the aid has been transferred in its entirety to such beneficiaries in the form of subsidised services. 64) In view of these facts it appears that the legal persons in charge of the projects are chosen in an open procedure in compliance with Directive 2004/18/EC and do not receive State aid for their activities outside the supported projects. Therefore it can be concluded that these legal persons only receive a compensation for the costs they incur when organising the supported projects and cannot be regarded as beneficiaries of the aid. Instead the aid benefits in its entirety the final beneficiaries in the Annex I sector. 65) Although on the basis of the information provided by the Danish authorities the scheme prima facie seems to respect the applicable EU public procurement rules, this decision does not prejudge any further analysis of the scheme by the Commission under the public procurement perspective. Aid for generic advertising 66) Community Guidelines for State Aid in the Agriculture and Forestry Sector (hereinafter: the Guidelines) set out the rules for State aid for advertising of agricultural products in their Chapter VI.D. 67) Under point 157 of the Guidelines, State aid for generic advertising campaigns within the Community (as referred to in point 152 (l) of the Guidelines) will be declared compatible with the Treaty if the following conditions are fulfilled: 6 OJ C 319, , p.1 13

14 the advertising campaign must be generic in character and for the benefit of all producers of the type of product concerned; no mention may be made of product origin in such advertising; the advertising can be carried out by producer groups or other organisations, regardless of their size; the aid rate may be up to 100%. 68) Point 153 (b) provides that advertising campaign must not be earmarked for products of one or more particular company or companies. 69) Point 153 (c) provides that the advertising campaign must comply with Article 2 of Directive 2000/13/EC, and also with the specific labelling rules laid down for various products, such as wine, dairy products, eggs and poultry (point 152 (j) of the Guidelines); 70) Point 158 provides that advertising activities with an annual budget in excess of 5 million shall be notified separately. 71) These conditions are complied with as follows: 72) As to the generic character of advertising, the national legislation ( 5 of the Administrative Order on aid conditions) coupled with the assurances the Danish authorities have given concerning its interpretation (see point 23 above) appears to exclude all references to origin. The Commission also takes note of the example of subsidised advertising submitted by Danish authorities. Furthermore, corporate names and logos of bodies administering or managing the advertising activities must be neutral and make no reference to origin. Therefore the Commission considers that the intended advertising is generic in character while reminding the Danish authorities of their assurances to provide more representative samples of subsidised advertising. 73) As to the benefit to all producers concerned and compliance with point 153 (b), no mention may be made of products of certain producers ( 5 of the Administrative Order on aid conditions). Considered together with the generic character of the advertising, as demonstrated by the Danish authorities, this provision appears to ensure that the consumer is invited to buy the product concerned by invoking the characteristics of the product and not because it is of certain origin or connected with a certain producer. Therefore all producers of the type of product concern benefit from the advertising. 74) The Danish authorities have indicated that the provisions of point 152 (j), 153 (c) and 158 will be complied with. 75) The aid will not exceed 100 % of the eligible costs. 76) Advertising actions in the third countries will be limited to Community cofinanced projects under Council Regulation (EC) No 3/2008 and Commission Regulation No 501/2008. Therefore such aid need not be analysed in this Decision. 14

15 Technical support 77) Technical support in primary agricultural production is assessed according to Article 15 of Regulation (EC) No 1857/2006 (the Exemption Regulation) when the aid is limited to SMEs. Article 15 is applicable to the notified technical aid, as eligibility under the notified scheme is limited to SMEs. 78) The rules set out in Article 15 allow 100 % aid in subsidised services if the aid is accessible to all those eligible in the area concerned, based on objectively defined conditions. Aid must be granted in form of subsidised services and must not involve direct payments to the producers. These conditions are met (see point 26 above). 79) Article 15 (2) a allows aid for the education and training of farmers and farm workers (costs of organising the training programme and of travel and subsistence of the participants as well as of the replacement services). These conditions are met (see point 27 above) 80) Article 15 (2) c allows aid concerning consultancy services provided by third parties, the fees for services which do not constitute a continuous or periodic activity nor relate to the enterprise's usual operating expenditure, such as routine tax consultancy services, regular legal services, or advertising. The Danish authorities have limited the aid for the costs of using such services and explicitly excluded all aid for consultancy concerning continuous and periodic activity of the benefiting undertaking. The typical examples of activities, confirm the compliance with this principle. Therefore the relevant conditions are met (see point 29 above). 81) Article 15 (2) d allows aid for the organisation of and participation in competitions, exhibitions and fairs (participation fees, travel costs, costs of publications, the rent of exhibition premises and symbolic prizes of up to 250 per prize and winner). These conditions are met (see point 30 above) 82) Article 15 (2) e allows aid for the vulgarisation of scientific knowledge and factual information on quality systems open to products from other countries (individual companies, brands or origin may not be named) and on generic products. However, the origin of the products covered by Council Regulation (EC) No 510/2006 and by Articles 54 to 58 of Council Regulation (EC) No 1493/1999 may be indicated, provided that the references to the origin correspond exactly to those references which have been registered by the Community. The Danish authorities have demonstrated that the aid satisfies these provisions. The examples of typical activities mentioned by the Danish authorities (subsidising publications, presentation and similar means to spread knowledge and information, inform consumers about health aspects of generic products) fall under the eligible expenses of this Article. In particular, the Danish authorities have demonstrated that the aid is limited to presenting and spreading the results obtained by research or other experiments but excludes aid for research or experiments. Therefore the relevant conditions are met (see point 31 above). 15

16 83) Article 15 (2) f allows aid for the costs of publications such as catalogues or websites presenting factual information about producers from a given region or producers of a given product, provided the information and presentation is neutral and that all producers concerned have equal opportunities to be represented in the publication. These conditions are met (see point 32 above). Aid for research 84) According to Chapter 9 of Community framework for State aid for research and development and innovation (OJ C 323 of ) aid for research and development concerning Annex I products aid up to 100 % can be authorised, subject to fulfilment in each case of the four following conditions: it is of general interest to the particular sector or sub-sector concerned; information that research will be carried out, and with which goal, is published on the internet, prior to the commencement of the research. An approximate date of expected results and their place of publication on the internet, as well as a mention that the result will be available at no cost, must be included; the results of the research are made available on internet, for a period of at least 5 years. This information on the internet shall be published no later than any which may be given to members of any particular organisation; aid shall be granted directly to the researching institution or body and must not involve the direct granting of non-research related aid to a company producing, processing or marketing agricultural products, nor provide price support to producers of such products. 85) Moreover, according to Chapter 6 of the above Guidelines an aid scheme is deemed to have an incentive effect if the Member State has committed itself to grant individual aid under the approved aid scheme only after it has verified that an incentive effect is present and to submit annual reports on the implementation of the approved aid scheme. In the annual reports, the Member State must demonstrate how it has assessed the incentive effect of the aid before granting the aid through the use of the quantitative and qualitative indicators given above. 86) The Danish authorities have indicated that only Annex I products in primary agricultural production would be eligible and that the aid would never exceed 100 % of the eligible costs. The Danish authorities have expressly confirmed that the aid would be granted in accordance with the conditions set out in Chapter 9 and 6 of the above Community framework (see point above). Aid to combat animal and plant diseases 87) Aid in respect of animal and plant diseases and pest infestations in primary agricultural production is assessed according to Article 10 of Regulation (EC) No 1857/2006 (the Exemption Regulation) when the aid is limited to SMEs. Article 10 is applicable to the notified technical aid, as eligibility under the notified scheme is limited to SMEs. 88) Article 10 allows aid for the following: 16

17 To compensate farmers for the costs of prevention and eradication of animal or plant diseases or pest infestations incurred for the costs of health checks, tests and other screening measures, purchase and administration of vaccines, medicines and plant protection products, slaughter and destruction costs of animals and costs of destruction of crops; aid shall be granted in form of subsidised services up to 100 % of the costs and must not involve direct payments to the producers. To compensate farmers for losses caused by animal or plant diseases or pest infestations. Compensation must be limited to the market value of animals killed or plants destroyed by the disease or pest infestation or of animals killed or plants destroyed by public order as part of a compulsory public prevention or eradication programme. The aid must be limited to losses caused by diseases for which an outbreak has been formally recognised by public authorities. 89) Any to amount received under insurance schemes and costs not incurred because of the disease must be deducted from the eligible cost and losses referred to in the paragraph above (Article 10 (3)). 90) Payments must be made in relation to diseases or pests for which Community or national provisions exist, whether laid down by law, regulation or administrative action. Payments must thus be made as part of a public programme at Community, national or regional level for the prevention, control or eradication of the disease or pest concerned. The diseases or pest infestation must be clearly identified in the programme, which must also contain a description of the measures concerned (Article 10 (4)). 91) The aid must not relate to disease in respect of which Community legislation provides for specific charges for control measures or that the cost of such measures is to be borne by the agricultural holding, unless the cost of such measures is entirely offset by compulsory charges on producers (Article 10 (5-6)). 92) As regards animal diseases, the aid must be granted in respect of diseases mentioned in the list of animal diseases established by the World Organisation for Animal Health and/or in the Annex to Council Decision 90/424/EEC (Article 10 (7)). 93) Aid schemes must be introduced within three years following the occurrence of the expense or loss. Aid must be paid out within four years following the occurrence (Article 10 (8)). 94) The aid is given to prevention and treatment projects (long-term and punctual, such as vaccination campaigns) and projects to compensate the losses due to outbreak of plant diseases. The eligible losses are calculated on the basis of the market value of the crops destroyed. In this respect only the plants cultivated under contract are eligible for compensation and the amounts received from sales to other purposes have to be deducted from the eligible losses. Income losses due to quarantine obligations and difficulties in restocking and replanting are excluded from the scope of the aid. 17

18 95) It appears from the information submitted by the Danish authorities that these projects constitute or are part of official programmes for disease prevention, treatment or eradication. The projects are related only to clearly identified diseases, which are limited to those pursuant to Article 10 (5 to 7) of the Exemption Regulation, and comply with the time limits stipulated in Article 10 (8) thereof. 96) The aid rate never exceeds 100 % or, if aid is given in conjunction with Community co-financed measures, the maximum aid rate of the co-financed measure. Moreover the sums referred to in Article 10 (3) of the Exemption Regulation must be deducted from the eligible costs or losses. 97) Therefore the aid meets the relevant conditions of Article 10 of the Exemption Regulation (see point above). 4. DECISION 99) The notified measure satisfies the conditions set out in the relevant provisions of Regulation (EC) No 1857/2006 as well as of the Guidelines for State aid in the agriculture and forestry sector 2007 to 2013 and can therefore be considered compatible with the common market under Article 87(3)(c) of the EC Treaty. The Commission has accordingly decided to consider the measure compatible with the EC Treaty. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to disclosure to third parties and to publication of the full text of the letter in the authentic language on the Internet site: Your request should be sent by registered letter or fax to: European Commission Directorate-General for Agriculture and Rural Development Directorate M.2 Office: Loi 130 /128 B-1049 Brussels Fax No.: Yours faithfully, For the Commission Mariann FISCHER BOEL Member of the Commission 18