State aid to PSB in Denmark

1
State aid to PSB in Denmark

• Erik Nordahl Svendsen
• Mediesekretariatet
• EPRA, Budapest October 2005

2
TV 2 History

• 1988 Lauched as second national channel
• Financed 70 adv. 30 license fee
• Succesfull against DR TV (100 license fee)
• 2000 Complaint from TV Danmark (SBS) about
  illegal state aid to TV 2
• 2003 TV 2 turned into plc (for privatisation)
• May 2004 Decision from EU-Commission

3
State Aid? (Art. 87, 1)

• Is license fee state aid? Yes!
• Altmark test
• mandate and definition? Yes
• ex ante calculation? No
• compensation of net cost? ??
• tender or efficiency-test? No
• Effect on trade? Yes
• EU Conclusion Yes, new state aid.

4
Service of General Economic Interest,
compatability with Art. 86, 2? 1

• 1) Definition of PS (broad, ok)
• except commercial internet services manifest
  error!
• 2) Entrustment by Act (and later - Contract)
• Monitoring Authority?
• National Audit Office
• (financial and management audit)
• Radio and Television Board
• (approval of yearly report from TV 2 about PS)

5
Service of General Economic Interest
compatability with Art. 86, 2? 2

• 3) Proportionality test
• Programme costs (all programmes)
• specified investments (digital tv)
• commercial and other income (adv. etc)
• --------------------------------------------------
  -
• Net cost for PS
• license fee funds (1995 2002)
• --------------------------------------------------
  -
• Overcompensation
• (84,4 mio. EURO plus interests)

6
Advertising prices?(State Aid-Communication,
point 58)

• Might be tempted to depress prices
• Prices are low in Denmark (vs. Nordic level)
• But relative Cost Per Point is not alarming
• EU-Conclusion
• No clear evidence that Danish advertising market
  was depressed due to TV 2s pricing behaviour

7
Recapitalisation of TV 2 1

• Equity capital, based on estimated market value
  of TV 2 (amount is a business secret)
• Recovery leads to technical bankruptcy
• Selling with recovery claim less advantagous
• A market economy investor would rather
  recapitalise the TV 2 company
• EU accepts the methods

8
Recapitalisation of TV 2 2

• Incorporation (plc) reduces the risk for
  distortion of competetion
• Limits the amount of (state-) equity
• Seperates state roles as authority and
  entrepreneur
• Conclusion EU acccepts the need for
  recapitalisation against Article 86, 2

9
Claims after decision about overcompensation(Augu
st 2004)

• Denmark and TV 2
• Licensefee is not state aid
• Surplus is reasonable
• Crosssubsidising has not taken place in fact

• MTG/SBS
• PS is not defined precisely
• Crosssubsidising has in fact taken place
• New aid, not notified (Art. 88, 3)
• Not sufficent control with PS-performance
• State aid was not necessary

10
Claims after EUs acceptance of
recapitalisation(January 2005)

• MTG/SBS (among other items)
• EU omits to state elements of state aid, and to
  establish netcosts for PS and PS is not clear
• Decision on overcompensation loses its meaning
• Art 86, 2 allows compensation for net cost, not
  for investments to prepare for sale
• Should have opened formal investigation (Art. 88,
  2), so others could be heard

11
Denmark postpones the sale of TV 2 (April 2005)

• Because of the pending courtcases
• It is not possible to guarantee a buyer against
  eventual recovery
• So two or more years to go

12
DR (no case)

• 100 license fee, existing aid, not reported
• Indications of overcompensation (only future
  danger, Art. 88, 1)
• Will Altmark apply?
• Mandate and definition
• Ex ante principles of compensation
• Net cost compensation
• Efficiency, when neither tender or market

13
DR Proposal from professor Frands Mortensen

• More precise definition of PS obligations
• DR publish Budgets for programmes and (net-)
  ressources, which should be
• Approved by Board of Radio and TV for efficiency
• Accepted by Ministry of Culture in relation to
  amount of license fee
• Radio and Television Board controls performance
  ex post

14
Future?

• Is the broad definition of PS eternaly safe
  (online and digital services) ?
• Art. 151 on culture is interpreted narrowly (as
  arts and high culture)
• Could culture in a broader sense be a common
  interest of EU?
• Do member states support such an idea?

15
References

• State aid to TV 2 C(2004) 1814, 19. May 2004
• Recapitalization C(2004) 3632, 6. October 2004
• Altmark CaseC-280/00, 24. July 2003
• Pending cases about TV 2
• T-309/04 by TV 2
• T-317/04 by Denmark
• T-329/04 by Viasat
• T-336/04 by TV Danmark (SBS)
• T-12/05 by TV Danmark (SBS)
• T-16/05 by Viasat
• Frands Mortensen fmorten_at_imv.au.dk (Ask for
  Timeline for state aid cases)