EUROPEAN COMMISSION. SA (2017/NN) Rheinland-Pfalz Implementation of the law on sales promotion of wine

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1 EUROPEAN COMMISSION Brussels, C(2018) 2886 final Subject: State aid / Germany SA (2017/NN) Rheinland-Pfalz Implementation of the law on sales promotion of wine Sir, The European Commission ("the Commission") wishes to inform Germany that, having examined the information supplied by your authorities on the State aid scheme referred to above, it has decided not to raise any objections to the relevant scheme as it is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union ("TFEU"). The Commission has based its decision on the following considerations: 1. PROCEDURE (1) By letter of 14 August 2017, registered by the Commission on the same day, Germany notified the above mentioned aid scheme. (2) The Commission sent a request for additional information on 12 October 2017 which the German authorities answered by letter of 9 November 2017, registered by the Commission on 10 November (3) According to the German authorities, the aid has been granted since 1 January Since then and until 31 December 2017 the aid already granted amounts to EUR Therefore, Germany has not met its notification obligations according to Article 108(3) TFEU. Consequently, the Commission decided to register this case as non-notified aid under number SA (2017/NN). The German authorities were informed of this by letter of 20 December 2017, which the German authorities answered by letter of 1 February 2018, registered by the Commission on the same day. Seiner Exzellenz Herrn Heiko Maas Bundesminister des Auswärtigen Werderscher Markt 1D Berlin Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË

2 2. DESCRIPTION 2.1. Title (4) Rheinland-Pfalz: Implementation of the law on sales promotion of wine 2.2. Objective (5) With the present scheme the authorities of Rhineland-Palatinate aim to support the sales promotion of wine produced in Rhineland-Palatinate and, in particular, to communicate upon the quality of as well as upon the food safety and environmentally-friendly production aspects of quality products of the wineproducing regions of Rhineland-Palatinate. (6) Furthermore, the aim of the support is to strengthen the competitiveness of producers, processers and marketers of wines from Rhineland-Palatinate and to increase the dissemination of knowledge about these products to consumers Legal basis (7) Verwaltungsvorschrift des Ministeriums für Wirtschaft, Verkehr, Landwirtschaft und Weinbau von Rheinland-Pfalz zur Durchführung des Absatzförderungsgesetzes Wein (Administrative provision of the Ministry for Economy, Transport, Agriculture and Wine of Rhineland-Palatinate on the implementation of the law on sales promotion of wine). (8) Deutsches Weingesetz (German Wine Law). (9) Absatzförderungsgesetz für Wein (AbföG Wein) des Landes Rheinland-Pfalz (Law on the sales promotion of wine of Rhineland-Palatinate). (10) Landeshaushaltsordnung (LHO) von Rheinland-Pfalz (Financial Regulation of Rhineland-Palatinate) Duration (11) From 1 January 2015 to 30 June Budget (12) The overall budget is EUR The budget is financed exclusively through parafiscal levies Beneficiaries (13) The final beneficiaries are undertakings active in the wine production sector; the aid will consist in subsidised services provided by sales promotion organisations and other organisation promoting the marketing of wine produced in Rhineland- Palatinate, which are therefore the recipients of the aid. The aid will not be granted to: (a) undertakings in difficulty within the meaning of point (35)(15) of the Guidelines of the European Union Guidelines for State aid in the 2

3 agricultural and forestry sectors and in rural areas 2014 to (hereinafter, "the Guidelines"); (b) (c) undertakings subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market; sales promotion organisations which are not small and medium sized undertakings (SMEs) within the meaning of Annex I to Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Article 107 and 108 of the Treaty on the Functioning of the European Union Description of the scheme (14) Support will be provided to measures and projects aimed at improving the efficiency and professionalism of production, processing 3 and marketing of quality products from Rhineland-Palatinate in the European Union and in third countries. The above-mentioned measures and projects include in particular quality schemes, sales promotion activities, knowledge transfer and information and advisory services. These activities will be described below (sections , , and ). (15) The granting authority is the Rhineland-Palatinate Chamber of Agriculture (Landwirtschaftskammer Rheinland-Pfalz). The granting authority calculates the maximum aid amount when granting the aid. (16) Part of the aid (less than 5 %) is paid as an additional national aid of the National Support Programme for the wine sector for the period for information and sales promotion measures according to article 45(1) of Regulation (EU) No 1308/ corresponding to measures carried out at the level of the Land Rhineland-Palatinate. (17) Germany confirmed that the conditions of granting the aid remained the same between 1 January 2015 and 31 December Quality schemes (18) Support will be provided for the eligible costs in relation to quality schemes and their corresponding labels, namely the following Protected Designations of Origin (PDOs): Ahr, Mittelrhein, Mosel, Nahe, Pfalz, Rheinhessen and the following Protected Geographical Indications (PGIs): Ahrtaler Landwein, Landwein der Mosel, Landwein Rhein, Landwein der Ruwer, Landwein der Saar, Nahegauer Landwein, Pfälzer Landwein, Rheinburgen Landwein, Rheinischer Landwein. 1 OJ C 204 of , p. 1. Amended by the Notice published in OJ C 390, , p. 4 and by the Corrigendum published in OJ C 265, , p OJ L 193 of , p The outcome of the processing is a viticultural (Annex I) product. 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

4 (19) For the participation in the above mentioned quality schemes to be eligible for support, the quality schemes need to comply with the following criteria: - being established under Part II, Title II, Chapter I, Section 2 of Regulation (EU) No 1308/2013, Regulation (EU) No 1151/2012 5, Regulation (EC) No 834/ and Regulation (EU) No 251/ ; - the specificity of the final product produced is derived from clear obligations to guarantee specific product characteristics and specific production method; - being open to all producers; - involving binding final product specifications and compliance with those specifications that are verified by an independent inspection body; - being transparent and assuring complete traceability of agricultural products. Moreover, besides the participation in the above-mentioned quality schemes, support can also be given for participation in voluntary agricultural product certification schemes recognised by Germany meeting the requirements laid down in Commission Communication - EU best practice guidelines voluntary certification schemes for agricultural products and foodstuffs 8. (20) The eligible costs in relation to quality schemes cover market research activities. The aid intensity will not exceed 100 %. VAT is not eligible, except where it is not recoverable. (21) The aid will not involve direct payments to the final beneficiaries but will be granted in the form of subsidized services. (22) The aid is available to all eligible undertakings who apply for aid, based on objectively defined conditions Promotion measures (23) The promotion measures are designed to inform the public about the characteristics of agricultural products and to encourage economic operators or consumers to buy the agricultural product in question by way of promotion campaigns. The following activities are included: events (fairs, exhibitions, conferences, press briefings and travels, presentations and awards), dissemination of scientific knowledge, publications with factual information on the production of quality products, environmentally friendly production and the Rhineland- Palatinate winegrowing areas, public relations for raising awareness of the quality 5 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 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 Regulation (EU) No 251/2014 of the European Parliament and of the Council of 26 February 2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products and repealing Council Regulation (EEC) No 1601/91, OJ L 84, , p OJ C 341, , p

5 and origin of the products, creation and dissemination of flyers and brochures to inform consumers and resellers, advertisements in print and on-line medias, including the design of internet publications, production of other advertising materials, sales promotion projects in third countries, in compliance with the relevant local provisions, public relations and information campaigns about quality production, food safety, moderate wine consumption and regional origin. The promotion campaigns focus on products covered by quality schemes mentioned in recital (18) and comply with the relevant provisions of Regulation (EU) No 1169/ The promotion activities do not mention any particular undertaking or brand name. When the promotion activity focuses on Unionrecognised denominations, it refers to the origin of products only where the reference corresponds exactly to that registered by the Union. (24) The eligible costs relate to the participation fees to fairs, exhibitions, travel costs, costs of publications and media concerning the events, rent of premises and stands and costs of installation and dismantling. Furthermore, the following costs are financed: costs of media publications, costs for disseminating scientific knowledge and factual information on the quality schemes referred to in recital (18) and costs for consumer-targeted promotion campaigns and promotion material distributed directly to consumers. (25) The aid is granted in kind (subsidized services). The sales promotion measures are implemented by the sales promotion organizations. Membership in a sales promotion organisation is not a prerequisite for participation, and any contributions to the administrative costs of the promotion facilities are limited to the costs incurred in implementing the promotion measures. The German authorities submitted samples of promotion material. (26) The aid intensity is 100 %. For promotion campaign related activities, the sector contributes with at least 50 % of the costs. VAT is not eligible, except where it is not recoverable. The German authorities have confirmed that none of the promotion campaigns will exceed an annual budget of EUR Knowledge transfer and information measures (27) Concerning knowledge transfer and information measures, the following activities are eligible for support: vocational training of producers, processers and marketers, as well as workers working in the wine sector, organization of and participation in events for the exchange of knowledge between companies, and promotion and dissemination of innovation. Eligible costs are the following: costs of the organization of measures of vocational training and the acquisition of qualifications as well as of information measures. In addition, costs for travel and stay as well as daily allowances for the participants are eligible. 9 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 (28) Germany confirmed that the providers of knowledge transfer and information services have the appropriate capacity in the form of qualified staff and regular training in carrying out these tasks. (29) The aid is granted in the form of subsidized services. The aid intensity is 100%. VAT is not eligible, except where it is not recoverable Advisory services (30) With regard to advisory services, the following activities are supported: consultancy activities to raise awareness of producers, processors and marketers concerning consumer information in the framework of community presentations (Gemeinschaftspräsentationen), workshops and projects, consultancy services for the promotion of quality wines, in the case of their production standards, which are demonstrably above the legal minimum standards; consultancy services for the promotion of sales in the internal market and in third countries. (31) The aim of the advisory service is to support the information and promotion measures, including within the meaning of Regulation (EU) No 1144/ , in order to increase the competitiveness of the wine sector and to secure and develop the production of quality products. (32) The aid is also designed to help undertakings active the agricultural sector and young farmers benefit from the use of advisory services for the improvement of the economic and environmental performance as well as the climate friendliness and resilience of their undertaking and/or investment. (33) The advice is linked to the following Union priorities for rural development: Priority 1: Promote knowledge transfer and innovation in agriculture, forestry and rural areas and Priority 3 (a): Increasing the competitiveness of primary producers through their better integration into the food chain through quality schemes, increasing the value added of agricultural products, promotion of local markets and short supply routes, producer groups and organizations and interbranch organizations. (34) The advisory services concern agricultural practices beneficial for the climate and the environment as laid down in Chapter 3 of Title III of Regulation (EU) No 1307/ and the maintenance of the agricultural area as referred to in point (c) of Article 4(1) of that Regulation as well as measures aiming at farm modernization, competitiveness building, sectoral integration, innovation and market orientation as well as the promotion of entrepreneurship. (35) The selected providers of advisory services have adequate resources in the form of regularly trained and qualified staff, experience in advisory activities and reliability in the areas of consultancy Regulation (EU) No 1144/2014 of the European Parliament and of the Council of 22 October 2014 on information provision and promotion measures concerning agricultural products implemented in the internal market and in third countries and repealing Council Regulation (EC) No 3/2008, OJ L 317, , p Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009, OJ L 347, , p

7 (36) The aid amount for consultancy services is limited to EUR per advice. VAT is not eligible, except where it is not recoverable. The aid will be paid to the provider of the advisory services. The letter will respect the non-disclosure obligations referred to in Article 13(2) of Regulation (EU) No 1306/ Levy system (37) A charge is levied on owner-occupiers or legitimate holders of vineyards in Rhineland-Palatinate for special support for wine produced in Rhineland- Palatinate. This charge is fixed, levied and collected by the local/municipal authorities. The levy is calculated annually per Are of the vineyard area (above 10 Ares 13 ) and amounts to 0,77 EUR in the specific cultivation areas Ahr, Mittelrhein, Nahe, Pfalz and Rheinhessen and to 0,87 EUR in the specific cultivation area Mosel. Germany confirmed that the amount of the levy does not have a significant impact on the market prices and does not create competitive disadvantages by affecting market prices. Based on the calculations provided by the German authorities, it was demonstrated that the levy charged constitutes only a fraction of the final price of wine (0,25 1%). Germany furthermore confirmed that the levy is not imposed on imported products nor will exported products be disadvantaged by its imposition. (38) From the revenue raised by the levy the local authorities receive a contribution corresponding to administrative costs as compensation for the personnel and material expenditure involved. The local authorities then submit the levy, less the administrative costs contribution, to the body designated by the ministry responsible for viticulture. The administration of the levy is the responsibility of the Ministry for Economy, Transport, Agriculture and Wine of Rhineland- Palatinate that may entrust the management to another regional authority, an institute or body governed by public law. The Land Rhineland-Palatinate has entrusted the management of the revenue from the levy to the Rhineland- Palatinate Chamber of Agriculture. The Rhineland-Palatine Chamber of Agriculture carries out inter alia tasks on behalf of the State pursuant to the Law on the Chamber of Agriculture (LwKG - Landesgesetz über die Landwirtschaftskammer). To cover the administrative expenditure, the Rhineland- Palatinate Chamber of Agriculture may keep 1.0 % 14 of the annual revenue from the levy. (39) A business plan must be drawn up by the Rhineland-Palatinate Chamber of Agriculture for each budgetary year for the management of the funds from the levy, subject to approval by the ministry responsible for viticulture. The revenue from the levy is earmarked and may only be used for the purpose of promoting sales of wines produced in Rhineland-Palatinate. Here, due consideration must be given to each specific wine growing region commensurate with its revenue from the levy. The funds are administered by the Rhineland-Palatinate Chamber of Agriculture on the basis of a business plan. The business plan is to be established Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008, OJ L 347, , p for the period 1. January 2015 until 31. December 2017 above 5 Ares. for the period 1 January 2015 until 31. December %. 7

8 annually, before the start of the financial year. It has to contain the following elements: the revenue from the levy, the aid granted, listed by beneficiaries and by aided activity and also the administrative costs. 10% of the annual revenue needs to be earmarked for promotion measures in several regions ("Community measures"). The decision regarding the amount and the type of aided activity is taken by the Ministry after consulting the promotion advisory board. (40) The promotion advisory board consists of seven members: five representatives of the wine-growing sector, including one representative from the producers associations, one representative from the wine industry, and one representative from the Deutscher Weinfonds (German Wine Fund) Other commitments (41) The German authorities commit to grant the aid only for activities undertaken after an application containing data on the beneficiary, on the activity, on the commitment period and the eligible costs, together with all necessary documents, properly submitted to the competent authority and accepted by the latter. (42) The German authorities confirmed that the aid was designed to be compatible with the rules on the common organisation of the markets in agricultural products and that the rules on area related payments provided for in Article 47 of Regulation (EU) No 1305/ and its delegated act are complied with. (43) According to the German authorities the scheme will not have any impact on the environment. (44) According to the German authorities, aid under the scheme can be cumulated with other State aid or ad hoc aid, however they ensure that such cumulation will not result in exceeding the allowed aid intensity (100%) or aid amount applicable. The German authorities furthermore confirmed that aid under this scheme will not be cumulated with de minimis aid. (45) Germany has informed the Commission that in order to comply with the transparency requirements, the publication of the aid scheme and the individual aid grants above EUR will be done through the following web page: (46) In case aid will be granted after 2020, Germany ensures that the legal basis will be adjusted in order to comply with any new agricultural guidelines on State aid. 3. ASSESSMENT 3.1. Existence of aid - Application of Article 107(1) TFEU (47) According to Article 107(1) of the TFEU, "[s]ave as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring 15 Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005, OJ L 347, , p

9 certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market". (48) The qualification of a measure as aid within the meaning of this provision therefore requires the following cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and affect trade between Member States. (49) The scheme in question confers an advantage on its beneficiaries consisting of subsidized services for sales promotion and communication upon the quality of products of the wine-producing regions of Rhineland-Palatinate. This advantage is granted through State resources, is imputable to the State (recitals (7)-(10), recital (12) and recital (15)). (50) As regards the question of whether or not revenue from parafiscal levies can be regarded as State resources, it should be noted that for State resources no distinction needs to be made between cases in which the aid is being granted directly by the State or by public or private bodies that have been appointed or created by the State. 16 (51) In its Pearle judgment 17, the Court of Justice gave indications as to when obligatory contributions collected by an intermediary body from all enterprises of a certain business sector could be regarded as not being State resources, namely if the following conditions were met: - the measure in question is established by the professional body that represents the enterprises and the employees of a business sector and does not serve as an instrument for the implementation of policies established by the State; - the goals of the measure in question are fully financed by the contributions of the enterprises of the sector; - the way of financing and the percentage/amount of the contributions are established by the professional body of the business sector, by representatives of employers and employees, without any State interference; - the contributions are obligatorily used for the financing of the measure, without the possibility for the State to intervene. (52) The notified scheme does not conform to all the conditions of the above mentioned Pearle case. The first, the third and the fourth condition of the Pearle case in recital (51) are not fulfilled. (53) As regards the first condition of the judgment in the Pearle case, it has to be noted that the scheme is established by the State (recital (37)) and managed by an entity under State influence (recital (38)) See judgments in PreussenElektra AG v Schleswag AG, C-379/98, ECLI:EU:C:2001:160, para. 58, and in Ministère de l'économie, des Finances et de l'industrie v GEMO SA, C-126/01, ECLI:EU:C:2003:622, para. 23. Judgment in Pearle BV, C-345/02, ECLI:EU:C:2004:448. 9

10 (54) Concerning the third condition, the levy and the amount of the contributions are imposed by means of law, i.e. by the implementation regulation of the Law on the sales promotion of wine of Rhineland-Palatinate. The levy is compulsory and the administration of the levy is the responsibility of the Ministry for Economy, Transport, Agriculture and Wine of Rhineland-Palatinate as described in recital (38). These concrete elements indicate clearly that the State adopts the financing method and that the measure is used as an instrument for implementing a policy adopted by the State. (55) As regards the fourth condition, the State has the possibility to influence the use of the collected levy and the individual aid decisions as described in recital (39). (56) For these reasons, the revenues from the parafiscal levies to be used for financing the notified aid scheme do constitute State resources and are imputable to the State. (57) The scheme is selective because other undertakings in a comparable legal and factual situation, in the light of the objective pursued by the scheme, within the wine production sector or other sectors, are not eligible for aid and thus will not receive the same advantage. The scheme therefore gives only certain undertakings (recital (13)) a selective economic advantage, by strengthening their competitive position on the market. (58) According to the case law of the Court of Justice, the mere fact that the competitive position of an undertaking is strengthened compared to other competing undertakings, by giving it an economic benefit which it would not otherwise have received in the normal course of its business, points to a possible distortion of competition. 18 (59) Pursuant to the case law of the Court of Justice, aid to an undertaking appears to affect trade between Member States where that undertaking operates in a market open to intra-eu trade. 19 The beneficiaries of aid operate in the wine sector, which is a market sector where intra-eu trade takes place. 20 The sector concerned is open to competition at EU level and therefore sensitive to any measure in favour of the production in one or more Member States. Therefore, the present scheme is liable to distort competition and to affect trade between Member States. (60) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the proposed scheme constitutes State aid within the meaning of that Article. The aid may only be considered compatible with the internal market if it can benefit from one of the derogations provided for in the TFEU. 18 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: 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: Statistical data show that in 2016 German trade with all agricultural products with EU countries amounted to EUR ,3 million for exports and to EUR ,7 million for imports. Source: European Commission, Agriculture in the European Union and the Member States - Statistical factsheets, Germany - June Available at Germany produced in k HL of wine, for a total of k HL for EU28. Source: European Commission. EU Wine Market Data Portal Statistics for , available at: 10

11 3.2. Lawfulness of the aid Application of Article 108(3) TFEU (61) The aid scheme was notified to the Commission on 14 August However, given that Germany granted aid since 1 January 2015 (see recital (3)), Germany has not complied with its obligation under Article 108(3) TFEU Compatibility of the aid Application of Article 107(3)(c) TFEU (62) Under Article 107(3)(c), an aid may be considered compatible with the internal market, if it is found to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. (63) For this derogation to be applicable, the aid must comply with the relevant Union State aid rules Application of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (64) As regards the notified aid scheme, Part II, Sections 1.1.9, , and of the Guidelines is applicable. Thus, the Commission will examine below whether the notified scheme complies with the common assessment principles of the Guidelines as well as the specific conditions laid down in Part II, Sections 1.1.9, , and of the Guidelines Common Assessment Principles Contribution to a common objective (65) As described in recitals (5) and (6) above, the objective of the present notified scheme is to support the sales promotion of wine produced in Rhineland- Palatinate and, in particular, to communicate upon the quality of as well as upon the food safety and environmentally-friendly production aspects of quality products of the wine-producing regions of Rhineland-Palatinate. The Commission is of the view that the compatibility with the rules on the common organisation of the markets in agricultural products is respected (recital (42) given also in particular that part of the aid is paid as an additional national aid of the National Support Programme for the wine sector for the period approved by the Commission according to Regulation (EU) No 1308/2013. The scheme is not included in the Rural Development Programme of Rhineland-Palatinate for , however as described in recital (33), the aid scheme can be regarded as contributing to the rural development priorities No 1 and 3. The Commission thus considers that the conditions of point (47) and (50) of the Guidelines are met. (66) As mentioned in recital (43) above, no negative impact on the environment within the meaning of point (52) of the Guidelines has been identified. The scheme includes communication upon the environmentally-friendly production aspects of quality products of the wine-producing regions of Rhineland-Palatinate, as described in recital (5). Need for State intervention 11

12 (67) According to point (55) of the Guidelines, the Commission considers that the market is not delivering the expected objectives without State intervention concerning the aid measures fulfilling the specific conditions laid down in Part II of the Guidelines. Therefore, such aid should be considered necessary to achieve the objectives of common interest specified under Section 3.1. of Part I of the Guidelines. As the current aid scheme fulfils the specific conditions laid down in Part II, Sections 1.1.9, , and of the Guidelines, as described in recitals (77)-(107) below, point (55) of the Guidelines is complied with. Appropriateness of aid (68) According to point (57) of the Guidelines, the Commission considers that aid granted in the agricultural sector, which fulfils the specific conditions laid down in the relevant Sections of Part II of the Guidelines, is an appropriate policy instrument. As the aid scheme fulfils the specific conditions laid down in Part II, Sections 1.1.9, , and of the Guidelines, as described in recitals (77)-(107) below, point (57) of the Guidelines is complied with. (69) In order to support the sales promotion of wine, subsidised services were chosen by Germany as aid instrument. As this instrument is foreseen to be used for supporting activities related to the provisions of Part II Sections 1.1.9, , and of the Guidelines, they may be considered as the most appropriate instruments by virtue of point (60) of the Guidelines. (70) As regards market research activities, quality schemes, aid for knowledge transfer and information actions, aid for advisory services, aid for promotion measures, point (64) of the Guidelines is applicable. As stated in recitals (21), (25), (29) and (36), the aid is granted to the final aid beneficiaries indirectly, by means of subsidised services. The aid is paid to the provider of the service or activity in question, in this case to the sales promotion organisations. Incentive effect and need for aid (71) The aid is granted only for commitments that start after the submission of the application form which contains data on the beneficiary, the activity, the commitment period (see recital (41)). Therefore, the incentive effect requirements under points (70) and (71) of the Guidelines are complied with. Proportionality of the aid and cumulation (72) Pursuant to point (82) of the Guidelines, in principle, in order for the aid to be proportionate, the Commission considers that the aid amount should not exceed the eligible costs. Point (84) of the Guidelines states that the criterion of proportionality is deemed to be fulfilled if the eligible costs are correctly calculated and the maximum aid intensities or maximum aid amounts set out in Part II of the Guidelines are respected. The current aid scheme fulfils the specific conditions laid down in Sections 1.1.9, , and of Part II of the Guidelines, (recitals (77)-(107)), and therefore the requirements under point (84) of the Guidelines are complied with. With regard to point (85) of the Guidelines, the maximum aid amount is calculated by the granting authority when granting the aid (recital (15)). In line with point (86) of the Guidelines, VAT is not eligible except where it is not-recoverable under national VAT legislation (recitals (20), (26), (29) and (36)). 12

13 (73) Pursuant to points (99) and (104) of the Guidelines, the legal basis and the compulsory application form include rules for cumulation and avoidance of double funding. They are described in recital (44). (74) In the light of the above, the Commission considers that the aid is proportionate. Avoidance of undue negative effects on competition and trade (75) According to point (113) of the Guidelines, the Commission considers that where an aid fulfils the conditions laid down in the applicable Sections of Part II of the Guidelines, the negative effect on competition and trade is limited to the minimum. The aid scheme fulfils the conditions laid down in Part II, Sections 1.1.9, , and of the Guidelines, as described in recitals (77)- (107) below, and therefore point (113) of the Guidelines is complied with. Transparency (76) The transparency requirements are complied with as shown in recital (45) Conditions set out in Section of Part II of the Guidelines Aid for the participation of producers of agricultural products in quality schemes (77) The German authorities confirmed that the scheme will apply to producers of agricultural products. This condition set out in point (279) of the Guidelines is thus respected. (78) The eligible costs respect the conditions set out in points (280) (c) of the Guidelines, as demonstrated in recital (20) above. The costs are incurred in connection with different types of quality schemes which fulfil the criteria set out in point (282)(a)(i)-(iii) and 282(c) of the Guidelines (see recital (19) above). (79) The aid is accessible to all the eligible undertakings in the area concerned, based on objectively defined conditions, as stated in recital (22). Therefore, point (283) of the Guidelines is complied with. (80) In line with point (284) of the Guidelines, the aid for participation of producers of agricultural products in quality schemes will not involve any direct payment to the beneficiaries (recital (21)). (81) According to point (286) of the Guidelines, the aid referred to in point (280)(c) of the Guidelines may reach 100% of the real costs incurred. This requirement is met, as described in recital (20). (82) It can be concluded that the conditions set out in of Section of Part II of the Guidelines are met Conditions set out in Section of Part II of the Guidelines Aid for knowledge transfer and information actions (83) According to point (290) of the Guidelines, the Commission will consider aid for knowledge transfer and information actions compatible with the internal market under Article 107(3)(c) of the Treaty if it also complies with the general 13

14 conditions for aid for technical support. The beneficiaries of the present scheme are undertakings active in the wine production sector (recital (13)) therefore point (287) of the Guidelines is complied with. (84) Pursuant to point (289) of the Guidelines, the aid must be accessible to all those eligible in the area concerned, based on objectively defined conditions. Under the present scheme, the aid is available to all eligible undertakings who apply for aid (recital (17)). As described in recital (25) membership of the concerned sales promotion organisations is not a condition for access to the service. Any contribution of non-members towards the administrative costs of the sales promotion organization concerned is limited to the costs of providing the service. The conditions of point (289) of the Guidelines are therefore fulfilled. (85) In line with point (291) of the Guidelines, the aid for technical support covers vocational training, skills acquisitions and information actions (recital (27)). (86) The eligible costs communicated by the German authorities (see recital (27)) match those listed under point 293 (a) and (b) of the Guidelines. As explained in recital (29), the aid will not involve direct payments to the beneficiaries but is granted in form of subsidized services. The requirements of point (296) of the Guidelines are thus met. (87) Pursuant to point (295) of the Guidelines, bodies providing knowledge transfer and information services must have the appropriate capacities in the form of staff qualifications and regular training to carry out those tasks. As described in recital (28), this requirement is met. (88) Pursuant to point (297) of the Guidelines, the aid intensity must be limited to 100 % of the eligible costs. It follows from recital (29) that this condition is fulfilled. (89) It can be concluded that the requirements of Section of Part II of the Guidelines are met Conditions set out in Section of Part II of the Guidelines Aid for advisory services (90) According to point (299) of the Guidelines, the Commission will consider aid for the provision of advisory services compatible with the internal market under Article 107(3)(c) of the Treaty if it also complies with the general conditions for aid for technical support. The beneficiaries of the present scheme are undertakings active in the wine production sector (recital (13)) therefore point (287) of the Guidelines is complied with. (91) Pursuant to point (289) of the Guidelines, the aid must be accessible to all those eligible in the area concerned, based on objectively defined conditions. Under the present scheme, the aid is available to all eligible undertakings who apply for aid (recital (22)). As described in recital (25) membership of the concerned sales promotion organisations is not a condition for access to the service. Any contribution of non-members towards the administrative costs of the sales promotion organization concerned is limited to the costs of providing the service. The conditions of point (289) of the Guidelines are therefore fulfilled. 14

15 (92) Based on the information provided by the German authorities (recital (32)), the Commission considers that aid scheme complies with the requirements of point (300) of the Guidelines. (93) Point (301) of the Guidelines stipulates that the advice must be linked to at least one Union priority for rural development; it also lists the elements the advice must cover. Based on the information provided by the German authorities (recital (33)), the Commission agrees that this aid scheme is linked to Union priorities for rural development and covers the necessary elements set out in point 301(b) and (c) of the Guidelines. (94) The aid will be paid to the provider of the advisory service (recital (36)), in line with point (303) of the Guidelines. (95) According to point (304) of the Guidelines, the bodies selected to provide the advisory service must have the appropriate resources in the form of regularly trained and qualified staff and advisory experience and reliability with respect to the fields they advise in. In addition, under point (305) of the Guidelines, when providing advice the advisory service providers must respect the non-disclosure obligations referred to in Article 13(2) of Regulation (EU) No 1306/2013. As described in recitals (35) to (36) those requirements are met. (96) The amount of aid is limited to EUR per advice (recital (36)), in line with point (307) of the Guidelines. (97) On the basis of the above, the Commission concludes that the conditions in Section of Part II of the Guidelines are fulfilled Conditions set out in Section of Part II of the Guidelines Aid for promotion measures in favour of agricultural products (98) The beneficiaries of the present scheme are undertakings active in the wine production sector (recital (13)). The German authorities have confirmed that only SMEs will benefit from aid for the organisation of and participation in competitions, trade fairs and exhibitions (recital (13)). Therefore, the requirement set out in point (453) of the Guidelines is complied with. (99) As described in recital (23), the German authorities have demonstrated that the conditions with regard to the promotion campaigns that are set out in points (454) to (456) of the Guidelines are fulfilled. (100) The German authorities have submitted representative samples of material intended for quality promotion (recital (25)). Therefore, the requirements under point (457) of the Guidelines are met. (101) As the German authorities have confirmed that none of the promotion campaigns will exceed an annual budget of EUR (recital (26)), the requirement under point (458) of the Guidelines does not apply to the present scheme. (102) The German authorities have confirmed that the present scheme fulfils the obligations set out in point (459) of the Guidelines (recital (25)) with regard to the provision of the promotion measures. 15

16 (103) According to points (460), (461) and (462) of the Guidelines, the aid must be granted in kind or on the basis of reimbursement of real costs incurred by the beneficiary; aid for promotion campaigns must be granted only in kind by means of subsidised services; where the aid is granted in kind, it must not include direct payments to the beneficiaries but must be paid to the provider of the promotion measures. As described in recital (25), these conditions are fulfilled. (104) The eligible costs communicated by the German authorities (recital (24)) match those listed under point (464) (a) to (d) of the Guidelines. (105) The German authorities have demonstrated 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 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 and they do not mention any particular undertaking or brand name (recital (23)). When the promotion activity focuses on Union-recognised denominations, it refers to the origin of products only where the reference corresponds exactly to that registered by the Union (recital (23)). (106) The maximum permitted aid intensity, as stated under point (467) of the Guidelines, is up to 100% for all eligible costs (for costs referred to in point (464)(a) to (c) and also for 464(d)). The German authorities have confirmed that the aid scheme intensities are compliant with this allowed maximum value (see recital (26)). In line with point (468), for promotion campaigns focused on products covered by quality schemes, the wine sector contributes to 50% of the costs (recital (26)). (107) It can be concluded that the requirements of Section of Part II of the Guidelines are met Parafiscal levies (108) According to point 29 of the Guidelines, Member States are requested to notify a parafiscal levy used for financing an aid measure if this forms an integral part of the aid measure. The German authorities notified the parafiscal levy being used to finance the current scheme as described in recitals (37)-(40)). (109) Since State aid financed by a parafiscal charge is involved, the Commission must examine both the measures financed, i.e. the aid, and the way they are financed. According to the Court, where the method of financing the aid, in particular through compulsory contributions, forms an integral part of the aid measure, the Commission must take that method of financing into account when examining the aid. 21 (110) For a levy to be considered as forming an integral part of an aid measure, it must be hypothecated to the aid measure under the relevant national rules, in the sense 21 See for example the judgment in Van Calster, joined cases C-261/01 and C-262/01, ECLI:EU:C:2003:

17 that the levy revenue is allocated for the financing of the aid 22 and the amount of the levy has a direct impact on the amount of State aid 23. (111) Firstly, all the measures under the present scheme are covered exclusively by the revenue of the levy (recital (12)). The parafiscal charges are collected by the local authorities in Rhineland-Palatinate and are ultimately placed at the disposal of the Rhineland-Palatinate Chamber of Agriculture, which manages the aid scheme (recital (38)). Secondly, as regards the amount of the levy, it has a direct impact on the amount of State aid as the levy is the only source of financing of the aid scheme as described in recital (12). In light of the above, the Commission considers that the levy in the case at hand forms an integral part of the aid scheme. (112) A levy may be regarded as discriminatory internal taxation prohibited by Article 110 TFEU if the levy revenue is used for the benefit of domestic products only, so that the advantages accruing from it fully or partly offset the charge borne by those products. If the scheme discriminates between imported products and national products, the Commission cannot qualify the scheme as being compatible as the method of financing the aid would then infringe Article 110 TFEU. 24 (113) As confirmed by the German authorities, the levy will not be imposed on imported products nor will exported products be disadvantaged by its imposition (recital (37)). (114) In relation to the Freskot judgment 25, the German authorities could demonstrate that the levies do not have a significant impact on the market prices (recital (37)) and do not breach the common market organisation rules (i.e. the charges do not create competitive disadvantages by affecting market prices), they constitute only a fraction of the final price of wine (recital (37)). Therefore, the Commission considers that it is unlikely that cost increases as a consequence of the levy have an influence on the market prices, and that the levies do not have a significant impact on trade, in particular on price formation. (115) On the basis of these considerations, it can be concluded that the financing of the scheme through parafiscal levies raises no objections Other general conditions (116) Pursuant to point (719) of the Guidelines, the Commission only authorizes schemes of limited duration. Aid schemes other than those benefiting from cofinancing under Regulation (EU) No 1305/2013 and its implementing regulation should not apply for more than seven years. It follows from recital (11) that this requirement is met. Moreover, Germany ensures that the legal basis will be adjusted in order to comply with any new agricultural guidelines on State aid (recital (46)) Judgment in Streekgewest Westelijk Noord-Brabant, C-174/02, ECLI:EU:C:2005:10, paragraph 26; and judgment in Laboratoires Boiron, C-526/04, ECLI:EU:C:2006:528, paragraph 44. Judgment in Streekgewest Westelijk Noord-Brabant, ECLI:EU:C:2005:10, paragraph 28; judgment in Société Régie Networks v. Direction de contrôle fiscal Rhône-Alpes Bourgogne, ECLI:EU:C:2008:764, paragraph 99. Judgment in Van Calster, joined cases C-261/01 and C-262/01, ECLI:EU:C:2003:571, paragraph 48. Judgement in Freskot AE v Elliniko Dimosio, C-355/00, ECLI:EU:C:2003: