(2) Quality Label Baden-Württemberg Bio Label Baden-Württemberg Baden-Württemberg: EU quality regulations for agricultural products and foodstuffs

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1 EUROPEAN COMMISSION Brussels, C(2016) 3191final Subject: State Aid / Germany Aid No SA (2016/N) Quality Label Baden-Württemberg Aid No SA (2016/N) Bio Label Baden-Württemberg Aid No SA (2016/N) Baden-Württemberg: EU quality regulations for agricultural products and foodstuffs Sir, The European Commission ("the Commission") wishes to inform Germany that, having examined the information supplied by your authorities on the schemes referred to above, it has decided to raise no objections as those schemes are 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) TFEU, the Permanent Representation of Germany to the European Union pre-notified the three schemes above on 12 November 2015, registered on the same day. Following an informal exchange of information, the German Authorities notified the schemes on 4 March On 07 April 2016 the Commission sent a request for information to the German Authorities. The latter provided an answer on 14 April DESCRIPTION 2.1. Title (2) Quality Label Baden-Württemberg Bio Label Baden-Württemberg Baden-Württemberg: EU quality regulations for agricultural products and foodstuffs Seiner Exzellenz Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1D Berlin Commission européenne, B-1049 Bruxelles Europese Commissie, B-1049 Brussel Belgium

2 2.2. Budget (3) Each of the three schemes at hand will benefit from a total budget of EUR 9 Million. The estimated annual budget for each scheme is of 1,5 Mio EUR per year Duration (4) From the approval by the Commission until 31 December Legal basis (5) Bio-Zeichen Baden-Württemberg Gesicherte Qualität Programmbestimmungen (Baden-Württemberg Bio Label Assured Quality Terms of Reference); (6) Qualitätszeichen Baden-Württemberg Gesicherte Qualität Programmbestimmungen (Baden-Württemberg Quality Label Assured Quality Terms of Reference); and (7) Durchführungsbestimmungen zur Förderung von Qualitätsregelungen (Rules for the promotion of quality schemes ) Scope of the decision (8) Products which are not included in the Annex I of the TFEU (such as beer, spirits, bakery and pasta products) and products which are included in the Annex I of the TFEU and which are not considered to be agricultural products (such as fish and aquaculture products) are outside the scope of this decision. The German Authorities confirmed that the support for these products will be covered by de minimis aid Aid beneficiaries (9) The aid for participation in the quality schemes will benefit (i) active farmers which are voluntarily participating in those quality schemes and (ii) producers, producer organisations, processors of agricultural products, regional initiatives and associations participating in the regional quality schemes, Bio scheme participants and participants in the EU quality schemes, including associations created in accordance with Article 45 of Regulation (EU) No 1151/ (10) The aid for promotion of agricultural products under the three schemes will benefit groups of users of the scheme labels, marketing organisations, agrarian and food production organisations, independently of their legal form. The estimated number of beneficiaries is above Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, OJ L352, , p.1., and Commission Regulation (EU) No 717/2014 of 27 June 2014 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in the fishery and aquaculture sector, OJ L 190, , p Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs (OJ L 343, , p. 1). 2

3 (11) Beneficiaries are both SMEs and large undertakings. In order to receive the right to use the labels, large undertakings will describe the counterfactual scenario (the situation without the aid) in their application and submit documentary evidence in support of the counterfactual scenario described. (12) Notwithstanding recital (11) above, only SMEs will benefit from aid for organisation of competitions, trade fairs and exhibitions (see recital (20)(a) below). (13) The aid is available without discrimination to all eligible beneficiaries based on objectively defined conditions and irrespective of their origin Form and intensity Participation in quality schemes (14) Financial support will be provided for the eligible costs arising from the participation in different types of quality schemes and their corresponding labels: a) A bio-label based on a voluntary scheme respecting and going beyond the standards provided for by the EU organics Regulation (EC) No 834/ ; b) A quality label based on various voluntary quality standards which are defined and identifiable (see further recital (46) below); c) The labels established by quality schemes under the following EU Regulations: (i) Part II, Title II, Chapter I, Section 2 of Regulation (EU) No 1308/ as concerns wine; (ii) Regulation (EU) No 1151/ (15) The eligible costs concerning the participation of producers in quality schemes are the following: a) the costs for new participation in quality schemes; b) the costs for compulsory control measures in relation to the quality schemes undertaken (see recital (14) above); c) the costs of market research activities, product conception and design and for the preparation of applications for recognition of quality schemes. (16) The aid referred to in (15)a) above will be granted for a maximum period of five years and is limited to EUR per beneficiary per year. This aid will be granted in the form of an annual payment and it will be calculated according to the level of the fixed costs arising from the participation in this quality scheme. The aid referred to in (15)b) and (15)c) above will take the form of a direct grant with an aid intensity of up to 100 % 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. 1). 4 Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007, OJ L 347, , p Ibid. footnote 2. 3

4 (17) The aid referred to in recital (15)a) and b) above will not be granted towards the costs of controls undertaken by the beneficiaries themselves, or where EU legislation provides that the costs of control are to be met by producers of agricultural products and group thereof, without specifying the actual level of charges. (18) The aid referred to in recital (15) b) and c) above will not involve direct payments to the beneficiaries and must be paid to the body responsible for control measures, the research provider or the consultancy provider. Promotion measures for products covered by the quality schemes (19) Support will be provided for the eligible costs arising from the promotion of quality products related to the three types of labels described in recital (14)a), (14)b) and (14)c) above. The promotion campaigns will focus on the products covered by these quality schemes. (20) The schemes will support the following costs pertaining to promotional activities, with the aid intensities specified below: (a) Organisation and participation in competitions, events, fairs and exhibitions relating to the production of agricultural products covered by the present quality schemes, with the following aid intensity: An aid intensity of up to 100% of the cost of fees including registration fees, travel costs and costs for the transportation of animals, cost of publications and websites announcing the event, the rent of exhibition premises and stands and costs of their installation and dismantling, symbolic prizes up to a value of EUR 1,000 per prize and per winner of a competition. The beneficiaries of these actions will be exclusively SMEs. The aid for symbolic prizes referred to above 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. (b) Actions aimed at informing and educating the consumers with regard to the production, processing, marketing and use of agricultural products under quality schemes and the dissemination of information to marketing agents in the retail sector and food crafts: An aid intensity of up to 100% of the actual costs incurred for fees including participation fees, training materials, product samples, costs for publication in print and electronic media, websites, and spots in electronic media, on radio or television, aimed at presenting factual information about the supported product. (c) Publications in print and electronic media, websites, and spots in electronic media, on radio or television, aimed at presenting factual information on quality systems, producers, processors or traders and the relevant products: An aid intensity of up to 100% of the actual costs incurred. 4

5 (d) Preparation and dissemination of scientific information to producers, processors and marketers of agricultural products, as well as their intermediaries, including the marketing agents; An aid intensity of up to 100% of the actual costs incurred for fees including participation fees, training materials, product samples, costs for publication in print and electronic media, websites, and spots in electronic media, on radio or television, aimed at presenting factual information. (e) Consumer targeted advertising campaigns for agricultural products, which are produced in accordance with the respective quality scheme. The campaigns will take place in the media and in the field of retail trade, including catering, gastronomy and large scale catering facilities. An aid intensity of up to 50% of the costs of the promotion campaign, promotion material including flyers, brochures, product samples. (21) The actions described in recital (20) above will be undertaken by the Marketing and Promotion Agency for agricultural and forest products from Baden- Württemberg, MBW and, depending on the resources needed, by other enterprises selected by MBW through public tendering procedures. (22) The aid for promotion measures outside advertising and promotion campaigns (see recitals (20)(20)(a), (20)(b), (20)(c) and (20)(d)) can be granted either in kind or on the basis of the reimbursement of real costs incurred by the beneficiary. The aid for promotion campaigns (recital (20)(e)) will be granted only in kind by means of subsidised services. The aid granted in kind will be paid to the provider of the promotion measures and not directly to the producer. (23) The provision of information will comply with Regulation (EU) No 1169/2011 of the European Parliament and of the Council 6 and with the specific labelling rules set by the German authorities described in the recitals (34) to (61). (24) The campaign will contain the slogan Assured quality (in German "Gesicherte Qualität") and is intended to encourage the consumer to purchase food products with higher quality norms and at the same time to exert a certain pressure on food products dealers to offer a greater range of high quality products. (25) The campaign is without discrimination intended for the benefit of all producers of the type of products fulfilling the criteria of the scheme. (26) The provision of promotion measures may be undertaken by producer groups and there are no restrictions imposed on the size of the producer groups. The German 6 Regulation (EU) No 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 L 304, , p

6 Authorities confirm that where the promotion measure is undertaken by producer groups or other organisations, participation must not be subject to membership of those groups or organisations and any contribution in terms of administration fees for the group or organisation must be limited to the cost of providing the promotion measure. (27) The German Authorities committed that the promotional campaigns will not exceed an annual budget of EUR 5 million. (28) Promotional measures will take place exclusively on the territory of Germany Objective of the aid schemes (29) The objective of the schemes is to support participation of producers in quality schemes and to promote the ensuing products, by providing information to consumers and making this type of products widely known. The general objective of the aid schemes is thus to increase the number of producers of high quality agricultural products and to promote the sales of such products. The schemes intend thus to support a healthy eating pattern, to encourage producers to make quality food and motivate sellers to increase the representation of high-quality food production in the commercial network, based on the educated consumers pressure. (30) Two of the notified schemes, namely the Bio Label and the Quality Label schemes, are a continuation of previous schemes, which have been previously authorised by the Commission under aid schemes N 541/2002 Germany Baden- Württemberg: Quality Programme and Quality Label "Certified Quality with Indication of Origin" 7 and N 525/2002 Quality program and quality label Biolabel Baden-Württemberg Description of the aid schemes (31) The schemes favour the introduction and promotion of quality labels, aiming to give more impetus to quality products that exceed the statutory minimum requirements, to enhance farm viability and competitiveness and diversify production. The goal is to generate products of high quality, to ensure the high quality is sustained and to inform the consumer. (32) The German authorities consider that their policy regarding development and promotion of quality products follows the objectives of the TFEU with regard to the development of economic activities and the policy of the European Union. (33) The process of registration of the quality labels covered by the two schemes "Bio Label Baden-Württemberg" and "Quality Label Baden-Württemberg" with the German Patent and Trademark Office is envisaged and pending until the adoption of the present Commission Decision. The Bio Label 7 Germany (Baden-Württemberg) Aid No N 541/2002, Quality program and quality label Certified quality with indication of origin, Brussels , C(2003)3222fin. 8 Germany (Baden-Württemberg) N 525/2002 Quality program and quality label Biolabel Baden- Württemberg, Brussels, , C(2003) 1456fin. 6

7 (34) The Bio label Baden-Württemberg is a protected label for products which respect the provisions of the EU Organic Regulation and the product specific requirements which go beyond the standards of the aforementioned Regulation. The label may be used by all companies in the Trade Mark Agreement by means of a control and inspection system, regardless of where the business is located. (35) The Bio label of Baden-Württemberg may be used only in conjunction with the product in order to highlight the organic nature of the product, which fulfils and goes beyond the requirements laid down in the EU organic Regulation (EC) No 834/2007. (36) The categories of products covered by the Bio Label are the following: vegetable products (fruit, vegetables, potatoes, onions, fruit juices, fruit vinegar, cereals, edible oils), animal products (beef and veal, pigmeat, lamb, hens, chickens, eggs and egg products, honey, milk). The additional requirements based on which the Bio labels are granted are detailed for each type of product supported in the legal basis and the Terms of Reference Bio-Zeichen Baden-Württemberg Gesicherte Qualität Programmbestimmungen (Baden-Württemberg Bio Label Assured Quality Terms of Reference). (37) The Bio label exists in different versions depending on the origin of the respective product: (38) The Bio label consists of a rectangle containing the word bio in large letters, three heraldic lions and at the bottom half the name "Baden-Württemberg" or the other origins applying the scheme depending on the origin of the product (for example "Germany", "Austria", "France", Poland, "EU" etc.) Below the indication of origin there is an inscription assured quality. The colour of the writing is black on yellow background (Pantone 108). On the left hand side, there is a strip in green colour (Pantone 376) which has the same width as the part of the letter b in the word bio. On the right side, the inscription awarded by the Land of Baden-Württemberg is introduced in vertical writing. (39) As regards the former Bio label of Baden Württemberg, there are transitional provisions which apply: the users of the Bio label who participated in the previous scheme and used the previous design (see below), can continue using that particular design until , however respecting the conditions established by the current scheme. (40) The Bio label scheme is open to all EU producers and processors, provided the schemes' provisions are respected. Baden-Württemberg will sign an agreement 7

8 with the competent authority of the concerned Member State in order to make the product specific requirements binding. Upon impossibility of signing such agreement, the contract will be signed directly with the producer. (41) The German authorities took the commitment that all Bio labels will be available in all possible variants covering the indication of origin (Baden-Württemberg, other German Federal States, 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 version of the label suitable for their respective products. The application procedure and the necessary forms will be available on an informative central website, which will contain information in German and English. (42) The Bio label for products of other origins than Baden-Württemberg will consist of a rectangle containing the word bio, an indication of its origin, the flag or heraldic symbol of that country/region and the inscription assured quality. On the right side, there is a vertical inscription awarded by country/organisation in German or in the language of the country concerned. The green vertical strip remains unchanged and the background colour changes to blue (Pantone 2905). (43) The Bio label for products without specification of origin will consist of a rectangle containing the word bio and the inscription assured quality. On the right side, there is a vertical inscription awarded by country/organisation in German or in the language of the country concerned. The green vertical strip remains unchanged and the background colour changes to violet background (Pantone 2645). The Quality label (44) The quality label Baden-Württemberg is a label which certifies the use of quality requirements in the labelled products. The label may be used by all companies in the Trade Mark Agreement by means of a control and inspection system, regardless of where the business is located. (45) The quality label will be granted based on quality requirements for the following categories of products: plant products: cereals, malt, oil seeds and edible oils, hops, fruit, fruit juice, fruit wines, most, vinegar, other fruit products (dried fruit, fruit conserves), vegetables including potatoes and onions, vegetable products; animal products: beef and veal, pigmeat, sheep and lamb, chicken, turkey, laying hens, poultry for fattening, meat products, milk and dairy products, eggs and egg products, honey and beekeeping). The specific quality requirements for each type of product supported are detailed in the scheme's legal basis and Terms of Reference: Qualitätszeichen Baden- Württemberg Gesicherte Qualität Programmbestimmungen (Baden- Württemberg Quality Label Assured Quality Terms of Reference). (46) The quality labels respect the following conditions: 8

9 a) the specificity of the final product produced under such quality schemes is derived from a clear obligation to guarantee specific product characteristics; or specific farming or production methods; or a quality of the final product that goes significantly beyond the commercial commodity standards as regards public, animal or plant health, animal welfare or environmental protection; b) the quality scheme is open to all producers; c) the quality scheme involves binding final product specifications and compliance with those specifications must be verified by public authorities or by an independent inspection body; d) the quality scheme is transparent and assures complete traceability of agricultural products. (47) The quality label of Baden-Württemberg may be used only in conjunction with the product in order to highlight the characteristics of quality and origin, and to assure higher quality in a reliable manner. (48) The quality label exists in different versions depending on the origin of the respective product: (49) The mark has a circular form. The outer circle contains the peripheral inscription assured and Baden-Württemberg. The inner circle of the coin is divided by a transverse bar with the inscription quality. In the lower part of the circle, the words through controlled production and three black heraldic lions. In the upper part, there is the inscription awarded by the Land of Baden-Württemberg. The label is black in colour and has a yellow background (Pantone 108). (50) The quality label scheme is open to all EU producers and processors, provided the schemes' provisions are respected. Baden-Württemberg will sign an agreement with the competent authority of the concerned Member State in order to make the product specific requirements binding. Upon impossibility of signing such an agreement, the contract will be signed directly with the producer. (51) The German authorities took the commitment that the all quality labels will be available in all possible variants covering the indication of origin (Baden- Württemberg, other Federal States ("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 version of the label suitable for their respective products. The application procedure and the 9

10 necessary forms will be available on an informative central website, which will contain information in German and English. (52) The quality label for products of other origins than Baden-Württemberg will also have a circular form. The outer circle contains the peripheral inscription secure and country/region (name). The inner circle of the coin is divided by a transverse bar with the inscription quality. In the lower part of the circle, the words through controlled production, including the flag or the heraldic symbol of the country/region of origin. In the upper part there will be written awarded by country/organisation. The terms will be written in German or in the language of the country concerned. (53) The quality label for products without specification of origin will have a circular form. The outer circle contains the peripheral inscription assured and the inner circle of the coin is divided by a transverse bar with the inscription quality. The label will not mention a region of origin and will not contain a flag or heraldic symbols. In the upper part there will be the inscription awarded by country/organisation. The terms will be written in German or in the language of the country concerned. The label is black with violet background (Pantone 2645). The use of that sign in a different colour combination is possible in cooperation with the Ministry. (54) Independent neutral checks will be performed on a regular basis in order to ensure the credibility of the quality mark of Baden-Württemberg. The certification bodies will be accredited according to the standards DIN EN and ISO/IEC (55) Baden-Württemberg has ownership over the labels and will assign by means of license agreement the right to use the label to licensees subject to the compliance with the licensing conditions. (56) Licensees 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 licensee can grant the right of using the label to label users (processors and distributors, direct marketers etc.), by means of a contract which ensures that the scheme provisions are fulfilled. The licensees shall ensure the proper implementation and monitoring of the label users in order to prevent unlawful use of the sign. (57) The licensee shall be authorised to use the sign itself under equivalent requirements. (58) The producer will sign an express statement of participation in the quality assurance and control system set up by the scheme by means of which they agree to fulfil the specific quality provisions. (59) A system of management of the scheme and sanctioning of abuse is set up by means of advisory councils and a control and sanction council. Furthermore, the Ministry will oversee the compliance with the provisions of the scheme and will carry out controls either themselves or through third parties. (60) 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 producer 10

11 in the EU who applies for the labels and who fulfils the quality requirements of the quality schemes. 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. (61) The label user will be responsible for ensuring that the quality provisions are complied with and that the origin of the product is correct. 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 of the labels by users and outsiders. Openness, transparency and non-discriminating character of the aid schemes (62) The German authorities have committed that the notified aid schemes will be managed 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 products and quality labelled products and will not discriminate products based on their origin. (63) The selection procedure will take place in a transparent manner. The application for aid will precede the start of works on the relevant project and will include at least the following information in the aid application: 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 and the eligible costs. (64) The schemes are 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. (65) Every interested undertaking will have a possibility to apply for a variant of the Bio and/or Quality Label 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. (66) The German authorities confirm and have submitted sufficient evidence that the message of the origin of the promoted product is in the background and subsidiary. (67) The information concerning all three schemes under this decision will be displayed in a transparent manner on a central publicly accessible website 9, which 9 The web-site is accessible at the following address: 11

12 will contain labels in the versions of all EU Member States, generic EU origin label, "non-origin" label and those for the respective German States. This will make the consumer aware that there is a wide variety of labels, including nonnational ones, and that they all stand for the same quality. It will also inform interested national and foreign producers about all possible label versions. (68) To further increase the awareness among general public of different variants of the supported labels, 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 these notified aid schemes, all advertising materials will depict proportionately different versions of the Labels. The German Authorities committed to provide representative samples of promotion material before the launching of the promotion campaigns. (69) The German Authorities confirm that any inspection body in any region of the Member States, which is approved in accordance with the applicable EU rules and which also controls the requirements in accordance with the quality and inspection provisions, may conduct the inspection and control tasks for the purpose of using the labels. This also ensures, in the view of the German authorities, openness of the aid schemes to all eligible undertakings operating outside Germany. (70) No additional controls or verification will be added to the detriment of products originating from other EU Member States or regions, on top of the compulsory certification and verification mechanism. (71) The German authorities undertake to forward to the Commission yearly data on the implementation of the notified aid schemes. These data shall contain the following: (a) (b) (c) Number of undertakings which applied for the use of the bio and quality labels; Number of undertakings that actually use the labels (including the breakdown according to origin - the German Federal States, Germany, other EU Member States and the EU). Examples of promotional materials (with various label versions). (72) None of the three schemes have a negative impact on the environment. Moreover, the organic scheme supports ecological agricultural practices which reduce the influence of human activity on the environment. The organic scheme will therefore have a positive impact on the environment compared to current conventional practices. (73) The schemes are consistent with the Baden-Württemberg rural development programme "MEPL III", being demonstrated that the State aid schemes complement and support the rural development objectives, especially the development of agricultural products and the expanding of processing and marketing of agricultural products in Measure 4 of the aforementioned Programme. (74) The German authorities provided the relevant documentation that the notified aid schemes, although not forming part of the Regional Rural Development Programme, are consistent with the rural development objectives of that 12

13 programme and compatible with the rules on the common organisation of markets in agricultural products, by contributing to the development of quality products and the appropriate marketing strategies therefor. (75) The foreseen duration of the aid schemes exceeds the end date of the currently applicable Guidelines (see recital (4) above). In this regard, the German authorities have committed to adapt the notified scheme in conformity with any future amendments of the Union rules applicable to State aid in the agriculture sector Cumulation (76) 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 (77) The implementation of the scheme shall be subject to transparency rules. The German authorities have committed to respect the transparency requirements under points (128) to (132) of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to (hereafter the "AGRI Guidelines"). The accessibility of information will be ensured via the central website (see recital (67) above). (78) Furthermore, the German authorities have 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. (79) The German authorities have confirmed that undertakings in difficulty within the meaning of the Guidelines on State aid or rescuing and restructuring non-financial undertakings in difficulty 11 are excluded from receiving any aid under the present schemes OJ C204, , p. 1, amended in the Commission Notice amending the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (2015/C 390/05), OJ C 390, , p 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. 13

14 3. ASSESSMENT UNDER STATE AID RULES 3.1. Existence of State aid within the meaning of Article 107(1) TFEU (80) For Article 107(1) TFEU to apply, the measure must provide an economic benefit to an undertaking which it would not have received in its normal course of business, the aid must be granted to certain undertakings, the benefit must be granted by a Member State or through State resources and the measure must be capable of affecting trade between Member States. (81) The aid schemes confer an advantage on selected beneficiaries as they favour certain undertakings economically active in Germany by providing a support for promotion activities on quality food products (see recital (29) above). (82) The aid schemes in question are financed through the State budget. Therefore, the advantage is granted from State resources (see recitals (14) and (20) above aid in kind and direct grant). The aids are also imputable to the State. (83) 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. 13 The mere fact that the competitive position of an undertaking is strengthened compared with other competing undertakings, by giving it an economic benefit which it would not otherwise have received in its normal course of business, points to a possible distortion of competition. 14 Therefore, an aid granted by a Member State to an undertaking may help to maintain or increase domestic activity, with the result that undertakings established in other Member States have less chance of penetrating the market of the Member State concerned. (84) 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 15, the notified aid schemes are 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. (85) 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 (86) The German authorities have notified the aid schemes before their implementation. They have declared that the aid schemes will be implemented 13 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 amounted to EUR 52,5 billion (more than 8% of total exports) (source: statistics/factsheets/pdf/de_en.pdf, Eurostat). 14

15 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 (87) The aid may be regarded as compatible with the internal market only if one of the exemptions provided for in the TFEU applies. (88) The present notified aid schemes cover 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. (89) The Commission has examined the proposed aid schemes 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 (90) 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 with the common assessment principles of these Guidelines as well as the specific conditions provided in points (279) to (286) and (453) to (470) Common assessment principles (91) 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) TFEU when the Commission comes to the conclusion that the design of the aid measure ensures that the positive impact of the aid towards an objective of common interest exceeds its potential negative effects on trade and competition. (92) The notified aid scheme contributes to a common objective in line with point (43) of the AGRI Guidelines. As described in recital (29) above, the objective of the present notified scheme is to encourage the production and marketing of agriculture products with high quality and to support their promotion. The documentation provided in the notification shows that support is granted based on clearly defined quality criteria and respectively organic production criteria (recitals (35), (45) and (46)), aiming to ensure that all required quality requirements will be checked by independent controls before granting the label. (93) The German authorities provided relevant documentation indicating that the notified aid schemes fit into and are consistent with the rural development objectives of the Regional Rural Development Programme (recitals (31), (73) and (74)). The conditions of point (47) and (58) of the AGRI Guidelines are therefore met. 15

16 (94) According to the documentation provided by the German authorities and in line with recital (72), the aid schemes do not incur any negative impact on the environment within the meaning of point (52) of the AGRI Guidelines. (95) As it is shown below in sections and of the current decision, the schemes comply 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. (96) The two forms of aid selected, i.e. aid in kind and direct grant, 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. (97) As far as the incentive effect of the aid is concerned, the German authorities indicated that the present notified aid scheme aims at promoting quality food products. According to point 75(m) of the AGRI Guidelines, aid for promotion measures and for promotion campaigns which are generic in nature are deemed to have an incentive effect. Therefore, the promotion part of the current aid scheme, as described in recital (20)(b), (20)(c), (20)(d), (20)(e) above, is deemed to have an incentive effect. (98) For the rest of the schemes, as described in recitals (11) and (63) above, the conditions concerning the incentive effect for the granting of state aid, set out in points 70 to 73 of the AGRI Guidelines, are met. (99) The aid for market research activities, product conception and design and for the preparation of applications for recognition of quality schemes aims to change the behaviour of undertakings in the agricultural and food sectors, 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 they would not have engaged in without the aid or in which they would only have engaged in a restricted or different manner. As such, the conditions of point 66 of the AGRI Guidelines are therefore met. (100) As described in recital (76) above, the German authorities assured that the aid under the notified schemes 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. Consequently, the risk of cumulation appears avoided. (101) 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, 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. (102) As demonstrated in recital (29), 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 16

17 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. (103) 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 (77)) Aid for participation of producers of agricultural products in quality schemes (104) 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) TFEU if it complies with the common assessment principles of Part II and with the specific conditions of Section of the AGRI Guidelines. (105) As described in recital (8) and (9) above, the German authorities confirmed that the schemes 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 Guidelines are therefore respected. (106) The eligible costs respect the conditions set out in points (280)(a), (b) and (c) of the AGRI Guidelines, as demonstrated in recital (15) above. The costs are incurred in connection with different types of quality schemes which fulfil the criteria set out in point (282)(a)(i),(ii),(iii) and 282(b) of the AGRI Guidelines (see recitals (46) and (15) above). (107) As described in recital (16) above, the aid calculation will correspond to real costs incurred. The conditions set out in point (281) of the AGRI Guidelines are therefore met. (108) The aid is accessible to all those eligible undertakings in the area concerned, based on objectively defined conditions, as demonstrated in recitals (62) to (70). Therefore, point 283 of the AGRI Guidelines is fulfilled. (109) As described in recital (18) above, the aid for the activities specified in recitals (15)b) and c) will not involve any direct payment to the beneficiaries. The conditions set out in point (284) of the AGRI Guidelines are therefore met. (110) As described in recital (16) above, the cost for new participation in the quality scheme respects additional conditions of duration and calculation method, as set out in point (285) of the AGRI Guidelines. (111) The maximum aid intensity specified in point (286) of the AGRI Guidelines is respected, as it reaches up to 100% of the real costs incurred with the activities specified in recitals (15)b) and (15)c) above (see recital (16)). (112) It can be concluded that the requirements of Section of Part II of the AGRI Guidelines are met. 17

18 Aid for the promotion of agricultural products (113) 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) TFEU if it complies with the common assessment principles of Part II and with the specific conditions of Section of the AGRI Guidelines. (114) 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. (115) In line with recitals (19) to (21) and (23), the German authorities demonstrate that the conditions set out in points (454) to (456) of the AGRI Guidelines are fulfilled. (116) The German authorities committed to provide representative samples of material intended for the promotion campaigns before the launching of the promotion campaigns (recital (68)). Therefore, the requirements under point (457) of the AGRI Guidelines are met. (117) As the German authorities have confirmed that the promotional campaigns will not exceed an annual budget of EUR 5 million (recital (27)), the requirement under point (458) in conjunction with point 37(b) of the AGRI Guidelines does not apply to the present scheme. (118) The German authorities have confirmed that the present schemes fulfil the obligations set out in point (459) of the AGRI Guidelines (recital (26)). (119) According to points (460) to (462) of the AGRI Guidelines, aid for promotional campaigns must be granted only in kind by means of subsidised services and must be paid directly to the provider of the promotional measures and the aid for promotion measures outside advertising and promotion campaigns (such as publications with factual information, dissemination of knowledge, participation in competitions, trade fairs and exhibitions) can be granted either in kind or on the basis of the reimbursement of real costs incurred by the beneficiary. These requirements are met (recital (22)). (120) As explained in recital (20)(a) above, the requirement concerning aid for symbolic prizes set out in point (463) of the AGRI Guidelines is met. (121) The eligible costs communicated by the German authorities (recital (20)) match those listed under point (464) (a) to (d) of the AGRI Guidelines. (122) 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 (11)) and they do not mention any particular undertaking and brand name (recitals (40) and (25)). Based on the criteria of openness, transparency and non-discriminating character of the scheme (see recitals (62) to (71)), the Commission assesses that 18