Excmo. Sr. Don José Manuel García-Margallo

Ministro de Asuntos Exteriores

Plaza de la Provincia, 1

ES – 28071 Madrid

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

EUROPEAN COMMISSION

Brussels, 25.7.2016 C(2016) 4711 final

In the published version of this decision,

some information has been omitted,

pursuant to articles 30 and 31 of Council

Regulation (EU) 2015/1589 of 13 July 2015

laying down detailed rules for the

application of Article 108 of the Treaty on

the Functioning of the European Union,

concerning non-disclosure of information

covered by professional secrecy. The

omissions are shown thus […]

PUBLIC VERSION

This document is made available for

information purposes only.

Subject: State Aid SA.35474 – Spain

State aid to the news agency EFE

Sir, /Madam,

1. PROCEDURE

(1) On 26 September 2012 the Spanish news agency Europa Press filed a complaint

regarding possible State aid to the Spanish news agency EFE. This complaint was

sent to your authorities. On the basis of the information received by the Spanish

authorities, the Commission sent on 19 November 2013 a letter to Spain, in which

it raised questions concerning the compliance with State aid rules of certain

aspects of the financing of EFE with the Treaty and asked for more information in

that respect. Your authorities replied by letter dated 14 March 2014.

(2) On 9 October 2014, pursuant to Article 17(2) of Council Regulation No

659/19991, as amended by Council Regulation (EU) No 734/2013 of 22 July

1 Council Regulation No 659/1999 of 22 March 1999 laying down detailed rules for the application of

Article 108 of the Treaty on the Functioning of the European Union, OJ L 83, 27.03.1999, p. 1 (now

Article 21 of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the

application of Article 108 of the Treaty on the Functioning of the European Union, OJ L 248,

24.9.2015, p. 99).

2

20132, and as replaced by Council Regulation (EU) 2015/15893 (hereinafter: the

"Procedural Regulation") the Commission sent to Spain its preliminary

conclusions concerning the compatibility with the internal market of measures of

financial support in favour of the news agency EFE.

(3) Following a meeting with the Spanish authorities on 10 March 2015, Spain sent

its response to the Commission's letter of 9 October 2014.

2. DETAILED DESCRIPTION OF THE AID

2.1. The beneficiary

(4) EFE is a Spanish general news agency with a wide international presence. It was

created in 1939 and is exclusively held by the Sociedad Estatal de Participaciones

Industriales (SEPI) and thus State owned. It is the leading Spanish language news

agency and the fourth largest news agency in the world, after Associated Press

(AP), Reuters and Agence France-Presse (AFP). It has offices or is otherwise

represented in 120 countries and distributes almost 3 million pieces of news every

year in the form of text, photographs, audio, video and multimedia to more than

[…]() news media clients in the world.

(5) A press or news agency is an undertaking which has the objective to collect and

research news and to edit them, focussing on the impartial presentation of facts,

with the purpose to distribute them on a continuous basis against remuneration to

the media and institutional customers. The main customers of news agencies are

different media which use them for their publications, or institutions which need a

constant and reliable flow of the latest news for their own purposes, like national

or regional governments or large companies.

(6) In principle, there are two categories of general news agencies. One category are

national agencies. They focus on collecting news of their country and and have

their clients only in that country. They have a limited international presence by

having offices or correspondents in a few important capitals, with a view to report

from there for the national public. In order to be able to offer a full coverage of

international news, they subscribe to the news services of global or international

news agencies.

(7) These global or international agencies form the other category of news agencies.

They are characterised by a waste international network of correspondents; They

collect news globally and process and edit them with the objective to sell them

not only to the media of the country of their establishment but also to media in

countries all over the world. They also serve as the the international input

providers to the national agencies. The only full scale global agencies are AP,

Reuters and AFP. EFE is an exception to this categorisation. With its international

presence its regional scale of activities goes far beyond the range of a national

agency; on the other hand its regional focus does not reach the range of the three

2 OJ L 204, 31.07.2013, p. 15.

3 Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of

Article 108 of the Treaty on the Functioning of the European Union , OJ L 248, 24.9.2015, p. 99.

() Confidential information.

3

true global agencies. EFE is not only the national Spanish news agency. It is also

very present in Latin America and serves there also as a direct news supplier to

media.

2.2. The relations between EFE and the State

(8) In 1978, the Administracion General del Estado (AGE) entered into a contract

with EFE on the provision of national and international news services to the State

and for the media. Among the requested services are global and national news

coverage, presenting the image of Spain in the world via the media subscribing to

EFE services, the coverage of all conflict zones in the world which may have

significance for the international policy of Spain, international news reporting

towards Spain, and the coverage of the relations with Latin America. EFE is also

expected to diffuse the Spanish culture in the entire world, in particular in the

Spanish speaking part of it ("los países de alguna forma de origen ibérico"), and

to collect via EFE offices abroad information about international developments

and to inform government departments about those developments which they may

find important for Spain's external action.

(9) For that purpose EFE is expected to have permanent offices in the countries of

interest, to pay particular attention to the information needs of the government

departments and for the regional administrations via the local EFE offices. The

contract specifies the human and technical resources necessary for this. This

contract has been renewed annually on a continuous basis and remained

unchanged since 1978 and also after Spain's accession in 1986. The annual

contracts are negotiated directly, without a tender procedure. Currently, AGE

pays around EUR 40 million per year for the required services.

(10) EFE is distributing the news it has collected in the context of the contract with

AGE to the rest of its customers (mainly media). According to Spain, the pricing

behaviour of EFE would follow commercial principles and there would be

separation of accounts.

(11) In addition to the annual payments, in 2013 Spain injected EUR 14 million as

new capital into EFE, to finance EFE's strategic plan 2013-2017. This measure

consists of a capital increase of EUR 2.1 million and a EUR 11.9 million

shareholder loan.

3. PRELIMINARY ASSESSMENT OF THE MEASURE

(12) In its letter of 9 October 2014 pursuant to Article 17(2) (now Article 21(2)) of the

Procedural Regulation, the Commission shared with Spain the following

preliminary conclusions.

3.1. Presence of aid

(13) Any financial support granted by a Member State may be qualified as State aid

according to Article 107(1) TFEU, concerning aid granted by Member States, if it

is granted by the State or through State resources in any form whatsoever, distorts

or threatens to distort competition by favouring certain undertakings or the

production of certain goods and is capable to affect trade between Member States.

(14) The provision of news wire services to media is a commercial activity which is

pursued in most Member States on the national market by the respective national

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news agencies and on an international market by agencies like AFP, AP or

Reuters, and, to a lesser extent, by EFE. Accordingly, any State aid to a news

agency is capable to affect competition and trade in the internal market.

(15) EFE is receiving considerable amounts of money from the State budget, which

are imputable to the State and constitute a selective advantage for EFE, since this

undertaking is the only beneficiary of this measure. These payments put EFE in a

better position than it would be under market terms. They cannot be classified as

a normal commercial transaction, as a counterpart for news services provided to

the State upon a subscription. The governments of other Member States pay

considerably less for news services subscriptions (according to information

received from Member States, Germany pays e.g. EUR 3.75 million, smaller

Member States pay around EUR 500 000 to 2 million per year). France has

recently accepted to reduce considerably its payments for subscriptions to AFP4.

Therefore it can be assumed that it would be possible for the Spanish authorities

to obtain a subscription for comparable services for a much lower amount than

EUR 40 million per year.

(16) This view is also shared by the Spanish judiciary. In a legal dispute between the

Spanish authorities and EFE about the question whether the EFE services to the

state are subject to VAT, i.e. whether their payment constitutes a commercial

remuneration for services, the Spanish Supreme Court held in 2003 that the

overall subsidy or allocation received by EFE is not calculated on the basis of any

service unit or volume provided to the government but is covering the costs

caused by goals and purposes that follow a public interest instead of pursuing

economic profitability5. The Spanish Court of Auditors (Tribunal de Cuentas)

shared this assessment in a later statement6.

(17) The capital injection mentioned in paragraph 11 is also financed by the State,

through the State holding SEPI, and is thus imputable to the State. For the same

reasons as for the annual payments of AGE, it is capable to affect competition and

trade in the internal market. It seems to constitute a selective advantage granted to

EFE, it is not obvious, on the available evidence, that it meets the market

economy investor (MEI) test. It is not clear whether SEPI expected a reasonable

return on investment. Since several years, EFE has not paid dividends and it is not

apparent that this investment will improve the performance of EFE to such an

extent that it could possibly generate profits for the investor. It could therefore not

be excluded that also the capital injection constituted aid.

(18) The Commission's preliminary conclusion was therefore that the annual payments

and the capital injection constituted State aid according to Article 107(1) TFEU.

3.2. Existing or new aid

(19) The series of subsequent contracts with EFE has existed since 1978 without

substantial modification. The Commission concluded therefore preliminarily that

4 Commission Decision of 28.10.2014 in Case SA.30481 State Aid in favour of Agence France-Press

(AFP) (not yet published in the OJ).

5 Judgment of the Tribunal Supremo of 21 June 2003, STS 4333/2003 - ECLI:ES:TS:2003:4333.

6 Tribunal de Cuentas, Informe de fiscalización de la agencia EFE y de sus sociedades dependientes.

Ejercicio 2009, of 21 March 2013, section 5.7.

5

the presumed aid in the form of annual payments predates the accession of Spain

to the EU and is existing aid according to Article 108(1) TFEU.

(20) The Commission came also to the preliminary conclusion that the capital

injection mentioned in paragraph 11 could, if it constituted aid, constitute a new

and separable aid measure.

3.3. Compatibility of the aid

3.3.1. The annual payments to EFE

(21) According to Article 107(1) TFEU, safe as otherwise provided by the Treaty, any

aid granted by a Member State shall, in so far as it affects trade between Member

States, be incompatible with the internal market. In its letter of 9 October 2014

pursuant to Article 17(2) of Council Regulation No 659/1999, the Commission

did not identify a reason why the measure could be compatible with the Treaty

according to Article 107(3) TFEU. However, the annual payments to EFE which

go beyond a reasonable price for a news services subscription could be

compatible with Article 106(2) TFEU as aid for services of general economic

interest (SGEI).

(22) In that context, the Commission found that it would be necessary to distinguish

between the public service mission of EFE and the information services which the

government buys for its own needs. Spain had argued that it has not charged EFE

with a public service mission. EFE would provide its services only to AGE and

not to the public. The acquisition of services from EFE would thus only be

subject to public procurement rules and not classify as SGEI, and thus not being a

State aid matter.

(23) The Commission did not find these arguments convincing. The services requested

and paid by AGE are not a pure service to the administration. They are also

provided to third parties and can hence be defined as services of general

economic interest.

(24) This is supported by the existing mandate of EFE. Although EFE is indeed

required to provide information services to the state (which is the usual objective

of any news agency subscription), it is also asked to perform specified activities

and maintain a necessary infrastructure in order to provide a certain range, level

and quality of information - not only to the State but also to the media in Spain

and elsewhere, thereby promoting the Spanish language, culture, economy,

Spain's image in the world, and closer relations with regions and countries of

special interest for Spanish foreign policy.

(25) Therefore, the Commission concluded preliminarily that EFE is fulfilling tasks in

the general interest of the State as defined by the Spanish Government. It receives

regular payments for the fulfilment of these tasks. With the support it is offering

news services on the market, in competition with the complainant. Its pricing

behaviour may be influenced by the huge volume of funding. The financial

contributions could therefore be assessed under Article 106(2) TFEU as State aid

for the provision of SGEI and under the European Union framework for State aid

in the form of public service compensation (hereafter "the Framework")7.

7 OJ C 8, 11.01.2012, p. 15.

6

(26) However, the Commission found that several elements, which are necessary

under these provisions for an SGEI aid to be compatible, were missing or not

sufficiently elaborated. This concerned inter alia:

the demonstration that market operators would not provide satisfactorily similar

services (points 13 and 14 of the Framework);

the detailed definition of EFE's mission and of the parameters of compensation

(points 15 and 16(a) and (d) of the Framework);

the necessity of aid at all, which should be established, ideally with the help of a

net avoided cost model which could use as counterfactual model e.g. a large

national agency with considerably limited international exposure (points 21 et seq

of the Framework);

mechanisms regarding transparency and avoidance of overcompensation (points

16(e) and 49 of the Framework); and

mechanisms to enhance the efficiency of the agency (point 39 to 43 of the

Framework); and

compliance with public procurement rules (point 19 of the Framework).

(27) Regarding public procurement rules, EFE's annual contracts with the State are

concluded without a tender procedure. Spain was invited to demonstrate how this

position is compatible with Article 48(3) of the Directive 2004/18/EC of the

European Parliament and of the Council of 31 March 2004 on the coordination of

procedures for the award of public works contracts, public supply contracts and

public service contracts are fulfilled, according to which for the required technical

ability an economic operator may, where appropriate, rely on the capacities of

other entities, regardless of the legal nature of the links which it has with them8.

3.3.2. The capital injection

(28) Regarding the capital injection by SEPI, in its letter of 9 October 2014 the

Commission came to the preliminary view that should it be found to constitute

aid, it was not able to conclude on its possible compatibility, e.g. under the rules

on aid for rescuing and restructuring of firms in difficulty9 or as aid for SGEI.

4. OBSERVATIONS OF SPAIN

(29) In its reply of 10 March 2015 to the Commission's letter of 9 October 2014

pursuant to Article 17(2) (now Article 21(2)) of the Procedural Regulation, Spain

agreed that the support to EFE would qualify as State aid according to Article

107(1) TFEU. Spain argued that it would be an existing aid scheme which was

put in place in principle in 1978. Spain expressed its willingness to amend the

public financing of EFE so that it becomes compatible with the Treaty and

declared its willingness to work together closely with the Commission to attain

this objective.

8 OJ L 134, 30.4.2004, p.114.

9 Community guidelines on State aid for rescuing and restructuring firms in difficulty, OJ C 244,

01.10.2004, pages 2, and the guidelines on State aid for rescuing and restructuring non-financial

undertakings in difficulty of 2014, OJ C 249, 31.07.2014, p.1.

7

4.1. The annual subsidies to EFE

(30) Regarding the annual subsidies, Spain agreed that they have to be considered as

aid to compensate for SGEI. In that context it referred to the decisions of the

Spanish Supreme Court and the Court of Auditors report cited in the

Commission's letter of 9 October 2014 and in paragraph 16 above.

(31) Spain also agreed to amend the financing of EFE according to Article 106(2)

TFEU and the relevant Commission rules. It agreed furthermore to establish the

net costs of EFE for accomplishing the SGEI it is mandated with, in line with the

Commission Decision in the case of AFP10, and to distinguish this from the costs

of the continued State subscriptions according to the parameters used by EFE for

establishing the subscription prices for large commercial customers.

(32) Spain furthermore undertook to notify aid to EFE again after ten years following

the adoption of appropriate measures in answer to this letter, and in any case any

significant change to the financing of EFE.

4.1.1. The definition of a public service mandate for EFE

(33) Spain explained that the public service mandate of EFE will be defined in the

binding document of a programme contract. Spain also communicated to the

Commission the detailed description of the mandate.

(34) In general terms, the required public service will consist of the impartial and

independent collection, editing and distribution of news and information of

general and more special character on all supports, with the objective to

guarantee a complete and objective coverage of the information needs of the

Spanish society;

contribute to an informed Spanish society, diffusing its identity and cultural

diversity;

assure the news coverage of its Communities and autonomous regions;

cover the activities and trips of the royal family and the head and the members of

the government;

support the external projection of Spain, by contributing to the expansion of the

Spanish language and strengthening the external action of the State;

facilitate the exchange of information between Spain and the rest of the world, in

particular with the countries of the European Union, Latin America and Northern

Africa, and the United States.

(35) To fulfil this task, EFE will be in particular obliged to

guarantee a continued supply of information, equally open to its customers;

promote and preserve media pluralism and freedom of expression, political

pluralism and a democratic process;

10 Cf. footnote 4.

8

guarantee appropriate coverage on all possible supports of events of special

interest for Spain;

diffuse in the entire world information on social and economic aspects of Spain,

to foster external trade and investment;

favour the exchange of information between Spain and the rest of the world, with

emphasis on priority regions;

maintain permanent offices in other countries, in particular of the European

Union, Latin America and Northern Africa, and the United States, in order to

collect there news and to diffuse to the media there also news about Spain;

guarantee the supply of news in Spanish and in other languages;

satisfy the information needs of a multicultural society.

(36) Spain expects that EFE disposes of sufficient resources and an adequate network

of permanent offices to fulfil the expected tasks with a certain minimum quality

and efficiency.

(37) The mandate will establish, starting on the basis of the current available technical

and human resources, the required level of quality and efficiency. These levels

will be subject to a control mechanism which verifies the fulfilment of the tasks

and, in case of need, identifies the appropriate corrections.

4.1.2. Compensation, including State subscription for information services

(38) For the determination of the funding needs of EFE, Spain proposes to apply the

net avoided costs method, following the method accepted by the Commission in

the case concerning AFP11. Following this methodology, the net cost necessary,

or expected to be necessary, to discharge the public service obligations is

calculated as the difference between the net cost for the provider of operating

with the public service obligation and the net cost or profit for a news agency

services provider operating without that obligation and under market conditions.

(39) For that purpose, Spain compares all costs incurred and all services provided by

EFE with the hypothetical counterfactual scenario of a news agency without

public service obligations. In this scenario, EFE would be active only as a

national news agency, like e.g. the German DPA or the Italian ANSA. This would

be a model which is commercially sustainable. Regional and national news are

indispensable for the media of the country and are therefore likey to be sold at

prices which cover their costs. The calculation will need to be updated for each

year.

(40) In the counterfactual scenario, EFE would collect information in Spain, as it does

currently. However, Spain assumes that the extent to and the way in which EFE

collects and distributes news within Spain would be wider and accordingly more

costly than a commercial operator would be able or willing to cover. Without

such mission, EFE would not have the obligation to fully cover all the activities

and trips of the royal family and the members of the central and the regional

governments and could reduce the number of it own offices. Furthermore, the

current task of EFE to promote cultural diversity in Spain would include

11 Cf. footnote 4.

9

additional costs for covering the news in the various national languages. Spain

suggests therefore that the national network of a national news agency without a

public service mission would have a slightly reduced dimension, unlike in the

case of AFP.

(41) For the collection of international information, EFE would rely on a considerably

smaller network of own correspondents. It would acquire the international news

coverage for its customers in Spain and Latin America from one of the global

agencies.

(42) The revenues would mostly be realised by sales of news in Spain and by the sale

of Spanish news to a limited number of national news agencies in Latinamerica.

To a certain extent EFE will also be able to sell its international news to the

Spanish language media outside Spain. EFE will maintain some of the bilateral

contracts it has with the other national European news agencies.

(43) On that basis, and with reference to the costs and revenues of EFE in the year

2014, the avoided costs and revenues can be attributed to the following

categories:

A. Avoided costs

1. International network: EFE is present with offices and representations in 42

countries (North America 3, in Central America in 8 countries, in South America

in 10 countries; Europe except Spain 10, Asia 4, Africa 7). This network is run by

a workforce of […] employees. To this adds an extensive network of international

correspondents which allows to to dispose of the services of altogether […]

permanent offices allover the world. This network generates costs of EUR […]. In

the counterfactual scenario, the international network would be substantially

reduced. EFE would maintain […] permanent offices in the various world regions

and […]. This would reduce the workforce to […] employees. […]. This scenario

would lead to avoided costs of […] %.

EFE would substitute that infrastructure by subscriptions to the global news

agencies which may cost EUR […]. Estimated additional staff costs for the

translation of the wire services of the global news agencies, which are mostly in

English or French, are EUR […].

2. National network: For the collection of news in Spain EFE operates 30 offices

of different size. […] employees are working in these offices. In addition, EFE

runs a large network of about […] correspondents and other contractual agents in

further […] offices, with effective presence in all cities of the country. The costs

are EUR […]. A public service mission for the national news coverage required

presence in all 17 autonomous communities and in the autonomous entities of

Ceuta and Melilla, and in addition in the majority of provincial capitals. Spain

argues that in case of the scenario of a national news agency without a public

service mission this network would have a slightly reduced dimension […].

Without such mission, EFE would not have the obligation to fully cover all the

activities and trips of the royal family and would be more selective in covering

the activities of […]; therefore it could reduce the number of it own offices.

Furthermore, the current task of EFE to promote cultural diversity in Spain would

for example include additional costs for covering the news in the various national

languages. The counterfactual scenario would therefore, unlike in the case of

10

AFP, allow moderately trimming down the network and lowering the costs by

around EUR […], representing […] % of the costs. Spain argues that this

reduction of the news about Spain would not significantly affect the demand by

the clients.

3. Central services:

a) The number of employees in the central services for production of texts and

audiovisual services is currently […]; the costs in 2014 were EUR […]. One part

of those services is exclusively dedicated to the national news services. They will

be fully maintained in the counterfactual scenario.

Another part is dedicated exclusively to the production of international

information services. Spain assumes that in the counterfactual scenario this area

of activity will be reduced to the same extent as the international network of

offices and colaborators. This would represent a reduction of […] %. Although

the international network would disappear for the most part, there remained work

in the elaboration of the texts received by global news agencies.

Other services, like editorial tasks, design, or archives, are simultaneously

dedicated to all information services, be they national or international. The

number of the employees for those central services and the related costs will be

reduced, accordingly, in line with the proportion of the contribution to the

editorial output of the national and the international news coverage and the

percentage of reduction of work for these two areas. National services represent

[…] % of the production, international services […] %. As a result of the

reduction of the costs of international services of […] %, Spain estimates the

avoided costs for the shared services ar […] % and the overall net avoided costs

at […] % of the current costs for the central services for text production.

b) The central support services linked to the management of the network and the

production are provided by a workforce of […], at a cost of EUR […]. Some of

those services are affected by the downsizing of the international network and the

information production activities linked to it, like technology, human ressources,

finance, or sales. Spain expects that in the counterfactual scenario the related

costs will be reduced to the same extent than the costs for the production services,

i.e. by […] %. However, other parts of the central support services will remain

largely unaffected by the disappearance of the international activities of EFE, like

top management or the legal department. The related costs constitute […] % of

the central support services; so Spain estimates avoided costs of […] % of those

costs.

B. Avoided revenues

1. Regarding the income in a counterfactual scenario, Spain expects that the

commercial revenues from its clients in Spain would remain unaltered. They

constitute […] % of EFE's sales. Certainly, the volume and the range of the news

would be smaller than for an international agency. The international news would

come from the remaining offices and for the rest be acquired from the

international news agencies. With that, EFE would remain the sole provider of

global news in the Spanish language. The revenues on the Latin American market

11

constitute […] % of EFE's international sales and […] % of the overall sales.

They would suffer from the disappearance of the offices and the collection of

news in these regions which are of particular interest for the Latin American

media. Revenue may remain from the media which still subscribe to the Spanish

news thread of EFE, given the widespread interest of information from Spain in

that region. However, the volume of the subscribed information services will be

lower than in the case of the current situation where EFE also covers news from

that entire region. A new international service in Spanish, based on news

subscriptions with international agencies, may attract a certain interest, but it is

likely that many media will in that case directly revert to the other international

news agencies. Spain expects that the Spanish-American markets revenue would

drop by […] %. Overall, that would lead to a […] % revenue decrease in the joint

Spanish/Spanish-speaking American markets.

2. The sales in the other parts of the world constitute […] % of EFE's

international sales and […] % of the overall sales. Outside the Spanish speaking

countries, the information offer of EFE will lose much of its value to media

customers. In the absence of news from Latin America, there will remain few

subscriptions by larger European news agencies to the national news services

from Spain. Without a genuine international coverage with a focus on Latin

America, EFE's offer for the bilateral contracts with the other national European

news agencies will lose in value. In other parts of the world EFE would not have

sales anymore. Spain estimates that this will lead to a reduction of global sales

outside Latin America to EUR […] or by […] %.

(44) The State subscriptions for information services will be calculated on the basis of

prices for commercial corporate clients of EFE, including a rebate for larger

volume contracts. The subscription would cover the access to EFE news services

by 195 institutions (Royal House, President and Vice-President of the

Government, 129 ministries and ministerial institutions, and 63 other

governmental offices). On the basis of these services obtained during 2012 to

2014, a calculation model would lead to an annual subscription fee of EUR 8.653

million. This would signify a rebate of […].

(45) A calculation for the year 2014 (see table below) shows that this model will

constitute a significant reduction to the financial contributions of the State to

EFE. For the determination of the amount of State support, Spain will make an ex

ante estimation of the necessary amount expected. This will be complemented by

an ex post evaluation of the actual costs and revenues, in order to establish the

eventual financing needs of EFE and to take steps to avoid overcompensation.

Table 1: calculation of net avoided costs for 2014 (without a reasonable profit;

figures in million EUR):

Scenario EFE

international

Scenario EFE

national agency

Avoided

Commercial revenues […] […] […]

State subscriptions […] […] […]

Sales Spain and Latin America […] […] […]

Sales elsewhere […] […] […]

Other revenues […] […] […]

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Costs […] […] […]

Headquarter, production […] […] […]

Headquarter, administration […] […] […]

National network […] […] […]

International network […] […] […]

Other costs […] […] […]

Subscription to other agencies

and translation costs

[…] […] […]

Net costs […] […] […]

(46) In the model calculation in table 1, based on the figures of 2014, one has to

consider that the EUR 38 million, which EFE actually received from the Spanish

State in 2014, would also contain the EUR 8.653 million in State subscriptions.

Within the model, the part of the actual State payments in 2014 constituting aid to

cover the net costs of the public service mission would therefore amount to EUR

29.347 million.

4.1.3. The necessity of aid for an international news agency

(47) Regarding the necessity of public financial support to EFE as an international

news agency, Spain refers to the arguments developed by France to justify the

financing of AFP. These arguments are reproduced in paragraphs 61 to 71 of the

respective decision in case SA.3048112. In this case, France underlined that, apart

from AFP, there exist only two other genuinely international or global agencies,

AP of the USA, and Reuters, of British origin and established in Canada.

(48) While AP's offer focusses mainly on the expectations of the North American

media and public, Reuters addresses in particular business and finance issues.

AFP offers a more continental European perspective with news from a wide range

of areas.

(49) Only AP, a cooperative of the North American press, is by the huge size of its

home market in terms of members and subscribing media able to maintain a dense

international network of offices and correspondents. It is a non-profit

organisation. Reuters is a subsidiary of the business and finance information

group Thomson Reuters. With its widely known and respected name, it

contributes to the reputation of Thomson Reuters but not to its profits. It

contributes 2 % to the annual revenues of Reuters and makes recurrent substantial

losses which have to be supported by the other activities of the group13.

(50) None of the three agencies responds to the interest of Spain to have available the

services of an agency which facilitates the exchange of information between

Spain and the rest of the world, in particular with the countries of the European

Union, Latin America and Northern Africa, and the United States, and which

reports from these regions. In view of the fact that even the large anglophone

12 Cf. footnote 4.

13 Thomson Reuters Fact Book 2015, p. 19.

13

agencies are not able to operate a dense international network on a profitable

basis, it is excluded that an agency even of a large Member State could fulfil this

task without financial support. The home market is not able to generate sufficient

financing.

4.1.4. Other elements of the entrustment of EFE with a public service

mission

(51) The public service mandate will also include efficiency objectives and provisions

for a separation of accounts for the possible activities of EFE outside its public

service mission.

(52) Regarding the application of public procurement rules, Spain refers to a decision

of the (Spanish administrative high court) Audiencia Nacional of 2005, stating

that the contracts with EFE could be negotiated without tender because there

would be only one undertaking eligible for the contract14. For Europa Press as

potential competitor to qualify as eligible, it would not be sufficient that it is

another company with a comparable business objective. If this other undertaking

does not actually have the technical capacity and the human resources to fulfil the

requested tasks on its own, it would be irrelevant that in theory it could by some

efforts or means achieve this capacity or buy part of the required services from

third parties. The Audiencia Nacional concluded that there was only one agency

capable of providing the requested Spanish language services.

(53) Spain further explained that the only potential competitor could not demonstrate

that by relying on the capacities of other entities it could assure the required

technical ability. The only entity having at its disposal the necessary technical and

human resources infrastructure at the required geografic area for the provision of

the requested Spanish language services would be EFE. This concerns in

particular the permanent overseas offices. Obviously, its competitor could not rely

on these capacities of EFE. Spain considers it essential for the required services

that EFE collects and distributes its news overseas and assures their quality by its

own means.

(54) Spain argues that subcontracting such services to one or more of the three

international agencies would not fulfil the objective to collect the news overseas

with a special regard to the Spanish media and matters of particular interest for

Spanish citizens. It could not fulfil the objective to sell, via the permanent offices

of EFE in Latin America, to the Latin American media news subscriptions which

convey news from Spain with a Spanish perspective and support the external

action and reach of Spain. Spain argues that subcontracting would not allow to

proceed and produce news in the Spanish language in the rapidity which is

desired. The three other international news agencies offer their full services only

in English and French, and offer only a limited news service in Spanish, which

would not fulfil the required volume of news services provided by EFE.

According to Spain, also the collaboration with various national news agencies

could not fulfil the tasks entrusted to EFE. It does not ensure the production of

news from abroad with the particular relevance to Spain; outside Latin America it

would also be hampered by additional translation requirements, and in many

14 Audiencia Nacional, Sala de lo Contencioso Madrid, Judgment of 20 December 2005 on appeal

509/2002, ECLI:ES:AN:2005:7405.

14

Latin American countries it would not be possible to find a reliable partner.

Furthermore, local national agencies would not offer competing services to the

local media, and the international news agencies would most likely also prefer not

to sell the production of a Spanish news agency to the media outside Spain. Thus,

an own offices network would be a necessary requirement for fulfilling the

services required by Spain.

(55) Spain undertakes however to notify within ten years the public service mandate

for news agency activities, as amended following the Commission's proposals.

4.2. The capital injection

(56) Spain advises that between 2012 and 2014 the State holding SEPI injected funds

into EFE of a value of EUR 14 million. This took place in the form of a capital

increase of EUR 2.1 million and of a shareholder loan of a value of EUR 11.9

million.

(57) For the same period between 2012 and 2014, the State subsidies and other

payments for EFE's public service mission led to a significant accumulated

underfinancing of the SGEI provided by EFE of EUR 23.968 million, as

demonstrated in table 2, for which Spain provided the figures. The figures are the

result of an application of the net avoided costs calculation on the basis of real

and hypothetical revenues and expenses in those three years.

Table 2: difference between net avoided costs and the actual compensation paid

by Spain (figures in million EUR):

2012 - 2014 2012 2013 2014

net public service costs 36.872 33.874 36.827

+ reasonable benefit 142 142 164

- State compensation (without

assumed State subscriptions

of EUR 8.653 million)

27.909 26.797 29.347

Undercompensation 9.105 7.219 7.644

(58) Spain agrees that in view of the losses EFE made over the last years since 2009, a

market investor would have been likely to hesitate to make a comparable injection

of fresh capital. Spain also agrees that it cannot be expected to consider the

support to be a commercial investment where EFE's activity is not carried out

primarily with a view to generating a return on investment. In this context Spain

refers to the Commission Decision of 15 October 2003 on RAI15. Spain does

therefore not contest that this measure confers a selective advantage on EFE

which it would not have under normal market conditions.

(59) Spain, however, considers the capital injection as a means to compensate for net

costs which were not yet covered in the previous years where they accrued.

According to Spain, EFE was not a firm in difficulty which would have faced

insolvency in the short or medium term. But restructuring its financing was

15 Commission Decision 2004/339/EC of 15 October 2003 on the measures implemented by Italy for

RAI SpA (Case C62/99) OJ L 119, 23.04.2004, p. 1, at paragraph 84.

15

considered necessary due to the earlier undercompensation, and also to avoid EFE

cutting down its services. Without capital injection, EFE could not make

investments necessary to improve its service. Thus the fresh capital was necessary

for EFE to continue fulfilling the tasks it is entrusted with. This State aid

cumulated with the annual payments to EFE does not exceed the net costs of the

public service mission.

(60) Spain explains that the series of public service contracts into which the

government entered with EFE since 1978 is based on the understanding that the

State expects EFE to perform certain, defined services, and that the government

will cover the necessary costs as far as they are not covered by commercial

income. This is corroborated by the finding of the Spanish Supreme Court and the

Court of Auditors which held that the overall subsidy or allocation received by

EFE is not calculated on the basis of any service unit or volume provided to the

government but as the net costs caused by requiring services of public interest16.

(61) Spain underlines that also in the State aid case regarding France 2 and France 3

the Commission followed that approach17. Between 1988 and 1991, France 2

accumulated losses such that the French State had to inject capital to enable the

broadcaster to continue operating in the short term, and to grant two more capital

injections. In that case the Commission found that all the public funding received

by France 2 and France 3 did not exceed the net cost of their public service

activity during the years under consideration, and that it does not matter for that

finding whether the funding consists of annual payments or exceptional

contributions in the form of capital injections.

(62) Also in a case regarding Danish TV2, the Commission has accepted that a certain

equity structure was justified to maintain the public service provision of

broadcasters. With regard to broadcasters, it found that Member States may in

principle provide as much public financing to public service broadcasters as

needed to safeguard the performance of the public service. This would not only

concern the running cost of performing the SGEI but also equity capital18.

(63) Spain argues that the capital injection is therefore integral part of the existing

SGEI financing of EFE and not new aid. As compensation of net costs for public

service obligations, it is part of the financing rights of EFE put in place by Spain,

covered by the same concepts of successive contracts. In making up for under-

compensations within that system, it constitutes existing aid. In any event, that

measure would be compatible with Article 106(2) TFEU.

16 Judgment of the Tribunal Supremo of 21 June 2003, STS 4333/2003 - ECLI:ES:TS:2003:4333;

Tribunal de Cuentas, Informe de fiscalización de la agencia EFE y de sus sociedades dependientes.

Ejercicio 2009, of 21 March 2013, section 5.7.

17 Commission Decision 2004/838/EC of 10 December 2003 on State aid implemented by France for

France 2 and France 3, (Case C 60/99) OJ L 361, 08.12.2004, p.21.

18 Commission Decision in Case SA.12417 (ex-C 2/2003) on measures implemented by Denmark for

TV2, OJ L 340, 21.12.2011, p. 1, paragraph 201.

16

5. ASSESSMENT BY THE COMMISSION

5.1. The annual payments by the government for the services of EFE

5.1.1. Qualification as State aid

(64) Any financial support granted by a Member State may be qualified as State aid

according to Article 107(1) TFEU, concerning aid granted by Member States, if it

is granted by the State or through State resources in any form whatsoever, distorts

or threatens to distort competition by favouring certain undertakings or the

production of certain goods and is capable to affect trade between Member States.

(65) As set out in the Comission's letter pursuant to Article 17(2) (now Article 21(2))

of the Procedural Regulation, the Commission considers the annual payments by

the Spanish authorities to EFE constitute State aid and not a commercial

transaction. In its reply, Spain agreed with this finding.

(66) Therefore, the Commission concludes that, for the reasons described in

paragraphs 14 to 16 above, the annual payments constitute State aid according to

Article 107(1) TFEU.

5.1.2. Qualification of the support as existing aid

(67) The series of subsequent contracts with EFE has existed since 1978 without

substantial modification of the desecription of the tasks of EFE, as described in

paragraphs 8 and 9 above. Therefore the aid in the form of annual payments

predates the accession of Spain to the EU and is existing aid according to Article

108(1) TFEU and Article 1(b)(i) of the Procedural Regulation.

5.1.3. Compatibility of the aid

(68) According to Article 107(1) TFEU, safe as otherwise provided by the Treaty, any

aid granted by a Member State shall, in so far as it affects trade between Member

States, be incompatible with the internal market. The annual payments to EFE

which go beyond a reasonable price for a news services subscription may be

considered a compensation for SGEI in the meaning of Article 106(2) TFEU. The

Commission approved already at earlier occasions such aid to news and

information services19.

(69) This finding is also supported by the existing mandate of EFE. The mandate asks

EFE to perform specified activities and maintain a necessary infrastructure in

order to provide a certain range, level and quality of information services to the

State and to the media in Spain and elsewhere, thereby promoting the Spanish

language, culture, economy, Spain's image in the world, and closer relations with

regions and countries of special interest for Spanish foreign policy.

(70) Therefore, EFE is fulfilling tasks in the general interest of the State as defined by

the Spanish government. As a consequence, the financial contributions of the

State have to be assessed under Article 106(2) TFEU. The conditions necessary

for this aid to be compatible with this article are laid down in the Framework.

19 Cases N54/2005 Chaine française d'information internationale, OJ C 256, 15.10.2005, and SA.30481

Aides d'Etat en faveur de l'Agence France-Presse.

17

(71) These conditions consist in particular of the detailed definition of EFE's mission

and of the parameters of compensation (points 15 and 16(a) and (d) of the

Framework), the demonstration of the necessity of the aid amount (points 21 et

seq of the Framework) and mechanisms regarding transparency and avoidance of

overcompensation (points 16(e) and 49), and finally of mechanisms to set

efficiency incentives for the agency (point 39 to 43). In that context, it is also

necessary to distinguish between the public service mission of EFE and the

information services which the government buys for its own needs.

(72) However, although the EFE's public service mission is entrusted to it by the

binding act of a contract, in accordance with point 15 of the framework, this

entrustment act does not meet the requirements of point 16(a) and (d) of the

Framework. The 1978 entrustment of EFE does not include clear parameters of

the compensation with regard to the content of the public service obligations as

referred to by point 16(a). It describes various tasks the State expects EFE to fulfil

in the general interest and combines this with the expected information services

EFE has to provide to the State as customer of the news agency without

distinguishing between these two areas. The contract lacks therefore a clear

description of the parameters for calculating and reviewing the compensation of

EFE, as required by point 16(d).

(73) The necessity of the aid amount (points 21 et seq of the Framework) is not

established for the current financing of EFE. There is no mechanism in place

which determines for example the net avoided costs of the services provided by

EFE in the general interest. Likewise, the current financing contracts lack

mechanisms regarding transparency and avoidance of overcompensation (points

16(e) and 49) or to enhance the efficiency of the agency (point 39 to 43).

(74) The Commission finds therefore that those elements, which are necessary under

the Framework for an aid to be compatible with Article 106(2) TFEU, are missing

or not sufficiently elaborated by Spain. Therefore, the aid to EFE through annual

payments in its current form is not compatible with Article 106(2) TFEU.

5.2. The capital injection

5.2.1. Qualification as aid

(75) In 2013, SEPI injected EUR 14 million as new capital into EFE, to finance EFE's

strategic plan 2013-2017. The subsidy had the purpose to balance earlier

insufficient financing of the public services required under the service contracts

with EFE, as explained in the paragraphs below. The purpose was to enable EFE

continuing the services as required.

(76) This financial support may be considered State aid according to Article 107(1)

TFEU because it is granted by the State. It would not constitute a selective

advantage for EFE if it had been made in circumstances that would be acceptable

for a private investor operating under normal market economy conditions. This

market economy investor test can, because of its very nature, be applied only to

investments in commercial activities from which a normal return is expected. In

the case in point, it appears that due to its constant under-financing, EFE did not

generate profits of which the State as its owner could have benefitted. By

injecting capital into EFE, Spain's prime objective was not to obtain an optimum

18

return; it therefore did not have the same motives as a private investor operating

in a market economy20.

(77) The capital injection fulfils also the other conditions of Article 107(1) TFEU, as

described in paragraph 17 above, and therefore constitutes State aid.

5.2.2. Qualification of the support as existing aid

(78) Although the Spanish authorities agree that these payments qualify as aid, they

consider that they constitute part of the existing public service compensation for

EFE.

(79) When looked at in isolation, the capital injection may appear to be a new ad hoc

measure. However, the capital injection was in fact an element of financing the

services of EFE and served to cover earlier undercompensation. The Commission

notes that the additional financing of EFE was necessary because the earlier

undercompensation could otherwise have forced EFE to cut down on its services

which it is expected under its service contract with the State, as described in

paragraphs 8 and 9 above, and prevent it from making investments necessary to

improve its service.

(80) The capital injection, cumulated with the annual payments to EFE, did not lead to

a financing which exceeds the net costs of the public service mission. Spain

demonstrated that EFE's financing by the annual payments led in the years 2012

to 2014 to an under-compensation of EUR 23.941 million. This is more than the

fresh capital provided by SEPI of EUR 14 million. The capital injection had the

purpose to balance earlier insufficient financing of the public services required

under the service contracts with EFE, and therefore finds its basis and

justification in the public service contracts. The purpose was to enable EFE

continuing the services as required.

(81) The Commission notes that, in principle, in the case of schemes financing SGEI it

may be an acceptable objective for exceptional aid payments to enable the

recipient continuing required services. In that case they may be considered to be

part of a scheme of that SGEI financing. It is not necessary for such financing,

that the financial balance or economic viability of the undertaking entrusted with

the operation of a SGEI should be threatened. It is sufficient that, without the aid,

it would not be possible for the undertaking to perform the particular tasks

entrusted to it21. The financing may therefore not only cover the running cost of

performing the SGEI but also equity capital22.

(82) In its decision regarding State aid to France 2 and France 3, the Commission

considered capital injections by the State to a public broadcaster, which had the

20 Cf. Commission Decisions 2004/838/EC of 10 December 2003 on State aid implemented by France

for France 2 and France 3 (Case C 60/99), OJ L 361, 08.12.2004, p.21, paragraph 50, and

2004/339/EC of 15 October 2003 on the measures implemented by Italy for RAI SpA (Case C62/99)

OJ L 119, 23.04.2004, p. 1, at paragraph 84.

21 Cases T-568/08 and T-573/08 Métropole télévision (M6) and Télévision française 1 SA (TF1) v

European Commission ECLI:EU:T:2010:272, paragraph 138.

22 Commission Decision of 20 April 2011 in Case SA.12417 (ex-C 2/2003) on measures implemented by

Denmark for TV2, OJ L 340, 21.12.2011, p. 1, paragraph 201.

19

objective to enable the broadcaster to continue fulfilling its public service

mission, as State aid to compensate for the fulfilment of public service obligations

according to Article 106(2) TFEU23. The Commission concluded so because all

the public funding received by France 2 and France 3 did not exceed the net cost

of their public service activity during the years under consideration. In that case it

would not matter whether the funding consists of annual payments or exceptional

contributions in the form of capital injections, given that the funding is based on

the existing aid scheme.

(83) Also in a decision on aid to a Portuguese public broadcaster, the Commission

found that in a case where the rules of cost compensation might underestimate the

real net cost or financing needs of a public service provider, it may happen that

the State grants not only annual compensation payments to RTP but also

additional financing in the form of share capital increases or loans24.

(84) The capital injection may be considered part of an existing aid measure if it is

provided under earlier commitments by the State towards EFE which remain

unaltered in substance25. It would be necessary that the State has been used and

committed to covering all the public service costs since before the accession of

Spain to the European Communities in 1986, in the context of the public service

contract of 1978. It is necessary that such capital injections have been planned by

the 1978 contract or at least envisaged, or took place at a more or less regular

basis in the years after 1978 so that the base for the ad hoc payments was

established and such payments were made already before 1986 and that they can

be deemed to be payments to which EFE was entitled26.

(85) Already during the years 1978 to 1982 EFE received financial allocations from

the State's general budget which included both, a contractual obligation for

covering the deficit incurred in delivering the public service and capital injections

aimed at financing EFE's investment plans. That is stated in the Court of Auditors

11th Report dated 28.02.1984 on the financing of EFE's public service mission

which covers those years. The capital injections amounted to an average of 428

million pesetas per year (approximately EUR 2,5 million).

(86) Spain did not amend the principles of its support to EFE, neither in regard to the

nature of those advantages nor in regard to the desired activities of that public

establishment, since at least 1978. The capital injection does not therefore affect

the aid arrangements put in place before Spain's accession27. Thus, one can

conclude that the State support to EFE did include already before the accession of

Spain to the European Communities in 1986 capital injections (both capital

23 Commission Decision 2004/838/EC of 10 December 2003 on State aid implemented by France for

France 2 and France 3 (Case C 60/99), OJ L 361, 08.12.2004, p.21.

24 Commission Decision C(2011) 9429 of 20 December 2011 on ad hoc measures implemented by

Portugal in favour of RTP (Case C 85/01), OJ L 183, 13.07.2012, p.1, paragraphs 201 to 205, 211.

25 Cf. Case C-44/93 Namur - Les Assurances du Crédit ECLI:EU:C:1994:311, paragraph 28.

26 Joined Cases T-231/06 and T-237/06 Netherlands and NOS v. Commission ECLI:EU:T:2010:525,

paragraphs 172 et seq.

27 Cf. Case C-44/93 Namur - Les Assurances du Crédit ECLI:EU:C:1994:311, paragraph 29.

20

increases and capital subsidies) for securing the performance of its public mission

tasks, similar to the capital injection under consideration.

(87) The capital injection is therefore part of the existing financing of EFE. If Spain

had the constant intention and obligation towards EFE to finance the net costs for

public service obligations of EFE, the compensation in form of the capital

injection of EUR 14 million in 2014 is part of the financing rights of EFE

established by Spain in 1978. It can be considered a delayed payment of amounts

due under the existing concept of financing EFE and constitutes part of the

existing aid to EFE.

5.3. Appropriate measures to render the annual financing of EFE compatible

with the internal market

5.3.1. Definition of the mission of the expected service of general economic

interest

(88) According to point 12 of the Framework, the aid must be granted for a genuine

and correctly defined service of general economic interest as referred to in Article

106(2) TFEU. According to point 13 of the Framework, Member States cannot

attach specific public service obligations to services that are already provided or

can be provided satisfactorily and under conditions consistent with the public

interest by undertakings operating under normal market conditions. As for the

question of whether a service can be provided by the market, the Commission's

assessment is limited to checking whether the Member State’s definition is

vitiated by a manifest error.

(89) Spain has proposed a definition of the public service mission of EFE, as described

in section 4.1.1. above.

(90) In general terms, the required public service will consist of the impartial and

independent collection, editing and distribution of news and information of

general and more special character on all supports, with the objective to guarantee

a complete and objective coverage of the information needs of the Spanish society

and assure the coverage of news from allover the Spanish territories; contribute to

diffusing Spains identity and cultural diversity in Spain and abroad; support the

external projection of Spain, by contributing to the expansion of the Spanish

language and strengthening the external action of the State; and to facilitate the

exchange of information between Spain and the rest of the world, in particular

with the countries of the European Union, Latin America and Northern Africa,

and the United States.

(91) EFE will be expected to gurantee a continued collection and supply of

information in Spanish (Castilian) and in other languages (Catalan, Galician,

Portuguese, English and Arabic) and to satisfy the information needs of a

multicultural society on all technical supports (text, graphics, audiovisual and

multimedia) and to promote and preserve media pluralism and freedom of

expression, political pluralism and a democratic process. EFE will have to assure

an independent editorial coverage of the national and international news in high

quality.

(92) With regard to its international vocation, EFE will be, more in particular, obliged

to diffuse in the entire world information on social and economic aspects of

21

Spain, to foster external trade and investment. EFE is expected to favour the

exchange of information between Spain and the rest of the world. Therefore, it

will also be required to offer its services to the media in Latin America.

(93) Spain expects that EFE disposes of sufficient resources and an adequate network

of permanent offices to fulfil the expected tasks with a certain minimum quality

and efficiency. The permanent offices in other countries should be situated

primarily in the European Union, Latin America, the United States, and the

countries of Northern Africa.

(94) The mandate will establish the required level of quantity of news, their quality

and the efficiency of the agency's work. These levels will be subject to a control

mechanism which verifies the fulfilment of the tasks.

(95) The interest of such an agency for Spain consists in a coverage of international

news in Spanish which focuses more on European themes and on countries whith

whom Spain and its citizens and companies traditionally entertain closer

relationships, and in particular with Latin America. This is another perspective

than the one offered by the other international agencies. Spain explained that the

permanent presence of professional jounalists in these countries allows a

continuous collection of information and the establishment of reliable information

sources and thus a much better understanding of the local circulmstances than the

occasional sending of reporters after major incidents.

(96) The stable presence in Latin America and the collection of information there is

also necessary for being able to produce a news offer for the media there. This is

condition for fulfilling the task of EFE to ensure the distribution of the Spanish

language, perspective and culture in this part of the world by a free and

independent agency.

(97) The Commission considers that the public service mission of EFE is clearly

defined by Spain. It is similar to the role given to AFP and to the international

information Television Channel “France 24”28.

(98) Subject to the conclusion of a contract of objectives and means between the

Spanish State and the Agency, the Commission considers that the public service

remit is sufficiently defined and that Spain did not commit any manifest error of

assessment in the definition of the public service remit of the Agency.

5.3.2. Mandate

(99) According to points 15 and 16 of the Framework, the provision of services of

general economic interest must be entrusted to the undertaking by a formal act

indicating the nature of the obligations, a description of the compensation

mechanism and the calculation parameters and their control, and means for

avoiding overcompensation.

(100) Spain explained that the public service mandate of EFE will be defined in a

binding document, a so called programme contract. This document will describe

the public service obligations of EFE. It will establish the parameters by which

28 Cases N54/2005 Chaine française d'information internationale (OJ C 256, 15.10.2005) and SA.30481

Aides d'Etat en faveur de l'Agence France-Presse.

22

the net costs of the fulfilment of these obligatioons is calculated and the control

requirements. Thereby it will apply the net avoided costs method, as it is

explained in paragraphs 38 to 43 above and as suggested by point 24 of the

Framework. The document will establish a separation of accounts for the services

of general economic interest and other, commercial, activities of EFE, also with a

view to avoid overcompensation. The State will control ex ante whether the

requested compensation corresponds with the expected costs and revenues and

will assure an ex post control, in order to take measures against possible

overcompensation.

(101) The Commission considers that a mandate which contains the provisions

described by Spain would fulfil the conditions of the Framework relating to the

mandate entrusting tasks of general economic interest.

5.3.3. Duration of the mandate and the way of its entrustment.

(102) According to point 17 of the Framework, the duration of the mandate of a task of

general interest must be limited. The duration must be justified by reference to

objective criteria, and in principle, it should not exceed the period required for the

depreciation of the most significant assets required to provide the SGEI.

(103) The Commission takes note of the particular nature of EFE as a State owned

company, founded by the State in 1939 for the purpose of fulfilling its mission.

However, the Commission is of the opinion that there are no grounds to disregard

the principle of a limitation in time of the mandate to provide a service of general

economic interest. Considering that the market for information and media is

currently undergoing structural changes, the Commission is of the opinion that a

revision of the mandate of EFE and its financing is needed after an appropriate

period. This revision should include the definition of tasks, the method of

allocation of the mandate and the cost of the requested services.

(104) Therefore, given the large size of the structure needed to provide services of an

international agency and the need to establish sustainable and trusted sources of

information, the Commission welcomes the commitment by Spain to re-assess the

tasks of EFE and to notify within 10 years its possible intentions concerning the

continuation of this service of general interest and the form of such a

continuation. The Commission expects that this notification will contain a market

review to check the justification for the existence of a public service and its

characteristics.

(105) Aid will be considered compatible with the internal market on the basis of Article

106(2) TFEU only where the responsible authority, when entrusting the provision

of the service to the undertaking in question, has complied or commits to comply

with the applicable Union rules in the area of public procurement. EFE's annual

contracts with the State are concluded without a tender procedure.

(106) Spain was invited to demonstrate how this is compatible with Article 31(1)(b) of

Directive 2004/18/EC of the European Parliament and of the Council of 31 March

2004 on the coordination of procedures for the award of public works contracts,

public supply contracts and public service contracts29 (which applies until

18.04.2016). Article 31(1)(b) of that Directive lays down the possibility of using

29 OJ L 134, 30.4.2004, p.114.

23

the negotiated procedure without publication of a contract notice when, for

technical reasons, the contract may be awarded only to a particular economic

operator. Article 32(b)(ii) of Directive 2014/24/EU will apply to any subsequent

award or renewal of the contract and lays down the same possibility and clarifies

that such exception "shall only apply when no reasonable alternative or substitute

exists and the absence of competition is not the result of an artificial narrowing

down of the parameters of the procurement"30. Spain was furthermore invited to

demonstrate that the award complies with Article 48(3) of Directive 2004/18/EC

(now Article 63 (1) of Directive 2014/24/EU), according to which for the required

technical ability an economic operator may, where appropriate, rely on the

capacities of other entities, regardless of the legal nature of the links which it has

with them.

(107) The Commission understands that, following a court action by Europa Press

against the contract award of 2001, the Audiencia Nacional31 found in 2005 that

the contracts with EFE could be negotiated without tender because there would be

only one undertaking eligible for the contract. Europa Press would not have the

technical capacity and the human resources to fulfil the requested tasks on its

own, and it would be irrelevant that in theory it could by some efforts or means

achieve this capacity or buy in a part of the required services from third parties.

Therefore the Audiencia Nacional concluded that there was only one agency

capable of providing the requested Spanish language services.

(108) The complainant agrees that it has no network of delegations outside Spain.

However, it would be easy to establish a network by agreements with other news

agencies, in particular the international agencies, to guarantee a news offer with

international coverage. A news coverage to the international clientele – which the

complainant does not offer at present - would also be possible by subcontracting

those services from other news agencies.

(109) Spain explained however that the complainant, as the only potential Spanish

language competitor, could not demonstrate that it could provide the required

services by relying on the capacities of other entities. The only entity having at its

disposal the necessary technical and human resources infrastructure at the

required geographic area for the provision of the requested Spanish language

services would be EFE. This concerns in particular the permanent overseas

offices. Obviously, as competitor the complainant could not rely on the capacities

of EFE. Spain considers it essential for the quality and reliability of the required

services that news are collected and distributed overseas by an agency's own

means.

(110) Spain has produced some evidence about the condition of EFE as sole provider

for technical reasons in the past. While that evidence is not conclusive, on

account of the difficultness in obtaining detailed information about past activities,

the Commission is not in a position to declare that EU public procurement rules

were breached. However, the Spanish authorities must use one of the following

two options when awarding a new public services contract upon the expiration of

30 Directive of the European Parliament and of the Council of 26 February 2014 on public procurement

and repealing Directive 2004/18/EC, OJ L 94, 28.3.2014, p. 65.

31 Audiencia Nacional, Sala de lo Contencioso Madrid, Judgment Judgment of 20 December 2005 on

appeal 509/2002, ECLI:ES:AN:2005:7405.

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the one currently in force. They can use a competitive and transparent award

procedure, for instance the open procedure under Article 27 of Directive

2014/24/EU. Alternatively, the Spanish authorities may continue using the

negotiated procedure without prior publication to the extent that they can provide

every time that the public contract is awarded sufficient justification under Article

32 of Directive 2014/24/EU. In this latter context, it is necessary that the Spanish

authorities produce conclusive and detailed evidence that EFE is the only possible

provider (in particular by analysing the technical capacity of potential tenderers,

alone, in a consortium - e.g. of international and/or national news agencies - or

relying on each other's technical capacity). In any event, the absence of

competition cannot be the result of an artificial narrowing down of the parameters

of the procurement, including the duration of the public contract.

5.3.4. The necessary amount of compensation

(111) The amount of compensation must not exceed what is necessary to cover the net

cost of discharging the public service task (see point 21 of the Framework). Spain

argues that comparable services of the required scope are not provided by the

market and therefore necessitate additional financing. In the light of the

arguments set out in points 45 to 48 above, an international agency without a

large home market like AP cannot work profitable under normal market

conditions. EFE is not an international agency of the scale of AP, Reuters or AFP.

However, it is also not a typical national agency, like DPA, of which one should

assume, at least for larger Member States, that it could work without additional

financial support. It is in the particular position to be situated between these two

profiles. It fulfils the role of an international agency for certain world regions

only, in particular for Latin America, and also with a focus on the distribution of

news from Spain and of its values in the target regions.

(112) For determining the amount of compensation, the future entrustment of EFE will

apply the net avoided cost methodology which is suggested in point 24 of the

Framework. It will also provide incentives for efficiency (point 39 of the

Framework). The mandate envisages improvements in carrying out the services of

general interest during the duration of the mandate, starting on the basis of the

current available technical and human resources. These developments will be the

subject to indicators defining the target to be achieved at the end of the period and

a yearly monitoring of their achievement.

(113) The net avoided cost methodology, as proposed by Spain to calculate the

compensation, may, in principle, be accepted. But the application of this method

is usually technically complex. Spain supplied information that could be used to

identify the actual net costs of the public service. The Commission notes in

particular that the starting point for the counterfactual scenario is that of a

“National Agency”, as for example the German DPA. The reason is that it can be

assumed that at least in large Member States a national agency can be

economically viable without public support. The model proposed leads for the

year 2014 to net avoided costs of EUR 36.827 million.

(114) The Commission notes that the net avoided cost methodology includes the

maintenance of a certain number of subscriptions of the State. […]. The

Commission is not convinced that the income of subscriptions is the same in both

scenarios. It can be assumed that particularly for services under “international” or

“out of area”, subscriptions could be eliminated or reduced (in particular those of

25

embassies). Furthermore, in the counterfactual scenario, the State would also have

the option to buy the international information from one of the three international

agencies.

(115) Therefore, the proposed net avoided cost calculation is acceptable provided that

the Spanish authorities specify in their reply to that letter the assessments of

possible revenue in the form of subscriptions to the "National Agency" EFE fully

implementing the necessary adaptation of the model in accordance with the

above-mentioned remarks. Furthermore, it is proposed to Spain to ensure, that in

the future an appropriate determination of the funding needs of EFE on the basis

of the net avoided costs model will exclude exceptional capital injections linked

to undercompensation. The calculation will need to be udated for each year and

audited by an independent expert.

5.3.5. The maintenance of subscriptions by the State

(116) Spain indicated that the State will maintain a number of subscriptions to the news

services of EFE. The price for these subscriptions will be calculated on the basis

of prices for commercial corporate clients of EFE, including a rebate for larger

volume contracts. This will lead to an annual subscription fee of EUR 8.653

million. According to the Spanish authorities, this amount would be, by reason of

the number and size of government customers, fully consistent with the tariff

structure of EFE.

(117) The Commission notes that Spain has undertaken to ensure, when calculating the

tariff for the State subscription prices, that those prices will be the result of trade

practices of EFE. Spain is furthermore asked to commit that the subscriptions of

the State do not contain any aid element.

5.3.6. Provisions to avoid overcompensation and cross-subsidisation

(118) According to points 44 and 49 of the Framework, legal provisions should be

established to ensure that undertakings are not receiving compensation in excess

of the amount determined (overcompensation) and a clear and appropriate

separation between public service and other activities. Where an undertaking

carries out activities falling both within the framework of a service of general

economic interest and outside, the internal accounts must show separately the

costs and revenues associated with the public service and those linked to other

services. This separation is essential for making the use of public funds

transparent and controllable and for avoiding possible cross-subsidisation.

(119) The Commission notes the commitment of Spain to establish transparency by the

separation of accounts for the commercial activities outside the public service

remit and control mechanisms which guarantee prevention of cross-subsidisation.

Spain will provide that any overcompensation (e.g. due to exceptional revenues)

which is identified by ex post controls will be deducted from the compensation in

the following year.

5.3.7. Conclusion

(120) The Commission considers that the project of a mandate and compensation for

services of general economic interest to be provided by EFE may fulfil the

conditions for being compatible with Article 106(2) TFEU, as detailed in the

26

Framework, provided that all the above-mentioned commitments and conditions

are fulfilled.

6. APPROPRIATE MEASURES

(121) The Commission considers that the current State financing of EFE is not

compatible with the Treaty rules on State aid, and in particular Article 106(2)

thereof.

(122) However, following discussions with the Spanish authorities, it appears that the

aid can be amended in a way that it will be compatible with the internal market

according to Article 106(2) TFEU, under the conditions laid down in the

Framework.

(123) In accordance with Article 22 of the Procedural Regulation, Spain is invited to

take the measures described above within one year from the date of receipt of this

letter. Spain is also invited to commit to notify within less than ten years after the

start of the new mandate of EFE any compensatory measure of the services of

general interest in question. This notification will include an examination of the

news agency market to allow assessing the justification for the financing of a

public service in this market.

(124) In accordance with Article 23(1) of the Procedural Regulation, Spain is invited to

inform the Commission that it accepts the proposed measures within two months

from the date of receipt of this letter. Spain is bound by its acceptance to

implement the appropriate measures. If it does not accept the proposed measures,

the Commission may initiate the procedure referred to in Article 4(4) of the

Procedural Regulation.

If this letter contains confidential information which should not be disclosed to third

parties, please inform the Commission within fifteen working days of the date of receipt.

If the Commission does not receive a reasoned request by that deadline, you will be

deemed to agree to the disclosure to third parties and to the publication of the full text of

the letter in the authentic language on the Internet site:

http://ec.europa.eu/competition/elojade/isef/index.cfm.

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Your request should be sent electronically to the following address:

European Commission,

Directorate-General Competition

State Aid Greffe

B-1049 Brussels

Stateaidgreffe@ec.europa.eu

Yours faithfully

For the Commission

Margrethe VESTAGER

Member of the Commission