EUROPEAN COMMISSION Brussels, 19-05-2004 C(2004)1801fin Subject: State aid Aid N 175/2003 - United Kingdom Meat and Livestock Commission Generic Meat Advertising Scheme Sir, Concerning state aid scheme N 175/2003, approved with decision C(2004)935 of 30 March 2004, the Commission has approved with decision of 19.5.2004 the following correction of a wrong citation: In point 2.6, paragraph 39, the citation of the legal basis is changed from The Agricultural Marketing Act 1983, as amended, and the Regional Development Agencies Act 1998 to The Agriculture Act 1967. The assessment of the aid scheme remains unchanged. For convenience a consolidated version of the approval of state aid N 175/2003 has been provided which is attached to this letter. Yours faithfully, For the Commission The Right Hon Jack Straw MP Secretary of State for Foreign and Commonwealth Affairs Downing Street LONDON SW1A 2AL United Kingdom Franz FISCHLER Member of the Commission Rue de la Loi 200, B-1049 Bruxelles/Wetstraat 200, B-1049 Brussel Belgium. Telephone: exchange (+32-2)299.11.11.
EUROPEAN COMMISSION Brussels, 30.4.2004 C(2004)935 fin COR Subject: State aid N 175/2003 - United Kingdom Meat and Livestock Commission Generic Meat Advertising Scheme Sir, I have the honour to inform you that, having examined the information supplied by your authorities, the Commission has decided to raise no objection to the State aid scheme for generic meat advertising. In reaching this decision, the Commission based itself on the following considerations: I. PROCEDURES (1) The measure was notified by letter dated 10 April 2003, registered on 15 April 2003. Additional information was provided by letter of 16 July 2003, registered on 17 July 2003, by letter of 29 October 2003, registered on 30 October 2003, by letter of 9 December 2003, registered on 12 December 2003, and by letter of 5 March 2004 (summarizing e-mail of 7 January 2004). On 12 November 2003, a meeting took place with the UK authorities. The Right Hon Jack Straw MP Secretary of State for Foreign and Commonwealth Affairs Downing Street LONDON SW1A 2AL United Kingdom Rue de la Loi 200, B-1049 Bruxelles/Wetstraat 200, B-1049 Brussel Belgium. Telephone: exchange (+32-2)299.11.11.
II. DESCRIPTION 2.1. Title (2) Meat and Livestock Commission Generic Meat Advertising Scheme 2.2. Budget (3) 2003/4 2.1 million ( 3.1 million) 2004/5 2.2 million ( 3.2 million) 2005/6 2.3 million ( 3.4 million) 2006/7 2.3 million ( 3.4 million) 2007/8 2.3 million ( 3.4 million) (4) The budget will predominantly be spent on advertising activities, with a small proportion (estimated at a maximum of 5%) being used for the administrative activities of the Meat and Livestock Commission (MLC). 2.3. Duration (5) Date of Commission approval of the scheme until 31 March 2008 2.4. Beneficiaries (6) Beneficiaries will be all operators in this sector (both within and outside the UK). (7) There are approximately 85 000 beef and sheep producers and 8 000 pig producers in Great Britain, and a very substantial number of businesses in the distribution chain. 2.5. Measures (8) The aim of the scheme is to promote and advertise on a generic basis the advantages of eating red meat and red meat products 1 and therefore to increase consumption. The production and processing of red meat and red meat products are largely in the hands of small and medium sized enterprises. (9) The programme is administrated by the MLC. (10) The scheme applies to Great Britain. Advertising will place in the United Kingdom, in the European Union outside the United Kingdom and in third countries. 1 Bovine, sheep and pig meat ( red meat ), and products prepared from or containing such meat ( red meat products ), in each case for human consumption. 2
(11) Generic advertising includes advertising relating generically to red meat or red meat products and advertising relating generically to specific meats obtained from individual red meat species or specific types of products of these meats. It thus includes advertisements referring simply to meat, beef, pork, lamb, mutton and veal and their products (e.g. bacon, roast beef). (12) This scheme does not include advertising providing a principal message relating to the quality of meat or meat products produced in accordance with a quality scheme ( quality advertising, for which separate notifications are being made 2 ). 2.5.1. Administrative costs of the MLC (13) The MLC is a statutory corporation (a non-departmental public body) created by the Agriculture Act 1967. Besides a variety of specified functions under that Act, advertising of red meat or red meat products falls within the MLC's functions. The MLC may authorise another body to undertake activities as a distributor of aid, performing certain activities funded by the state which would otherwise be performed by the MLC, including the administration and dissemination of this aid. (14) Up to about 5% of the budget will be used for the administrative activities of the Meat and Livestock Commission (MLC). (15) Any advertising activities will, if not performed by the MLC, be the subject of a tender on the basis of an open, transparent, non-discriminatory procedure. 3 2.5.2. MLC parafiscal levy (16) The budget is raised by a parafiscal levy. The MLC parafiscal levy is collected on cattle, pigs and sheep slaughtered in Great Britain for human consumption. It is possible that additional non-parafiscal funding may be obtained from the private sector. The UK authorities haven given assurances that parafiscal and private funding (voluntary contributions and parafiscal levies and compulsory contributions) will provide at least 50% of the costs of any activity. (17) The MLC levy is applicable to all animals slaughtered in the UK for human consumption (irrespective of weight, breed etc). The levy is raised in two parts: The general levy is paid equally by the producer (farmer) and slaughterhouse operator and may be used for any activities. The promotion levy is paid by the producer, and is used for promotional purposes, including advertising. 2 The MLC Quality Beef and Sheep Meat Advertising Scheme, the MLC Quality Meat Advertising (Joint Promotions) Scheme and the MLC Quality Pig Meat Advertising Scheme. 3 See TED Contract Notice 2003/S212-191235 of 4 November 2003; Internet: http://ted.publications.eu.int/dynamic/doccur/en/en/sfmm/57/191235-2003.htm?cdbnr=&qfile=&sid=ybcl. 3
Species General levy Promotion levy Total levy pence per animal pence per animal pence per animal Cattle 215 242 457 Calves 14 0 14 Pigs 40 65 105 Sheep 33 34 67 (18) The UK authorities haven given assurances that the levy is not charged on live animals brought into the UK from other Member States if these live animals are brought in less than three months (in the case of sheep, two months) before the date on which they are slaughtered. (19) The MLC levy also applies to animals designated other than as slaughter animals and purchased by livestock exporters only. The levy rates are the same but no promotion levy has to be paid for sheep. (20) At present, cattle and pigs are not exported live in significant quantities from Great Britain. 4 However, exports of meat and edible meat offal are substantial. 5 Therefore, the levy may be applied to exports of cattle, pigs and sheep. (21) The MLC (Meat and Livestock Commission) levy has been subject to decentralisation in order to ensure that levy payers can participate in the decisionmaking. Aid schemes funded by the MLC levy exist at a national and regional level. 6 The UK authorities have provided information showing that, taking into account decentralisation and the participation of the levy payers in the decisionmaking process, the whole red meat sector seems to benefit equally from the various grants under the aid schemes. The UK authorities have given assurances that the MLC levy will be refunded at an appropriate level where exporters do not receive a benefit proportionate to that obtained by operators processing or marketing on the national UK market. 4 In 2002, UK exports on live animals amounted to 218 576 900; mostly horses and poultry. 5 In 2002, UK exports of meat and edible meat offal amounted to 626 344 830, mostly bovine meat ( 20 948 540), pigmeat ( 48 615 210), lamb ( 190 196 900), poultry ( 121 972 400) and pigmeat, salted, in brine, dried or smoked ( 39 814 100). 6 See in particular this aid scheme, notifications N 195/03 MLC Quality Beef and Sheep Meat Advertising Scheme, N 196/03 MLC Quality Pig Meat Advertising Scheme, N 218/03 MLC Generic Meat Joint Promotions and N 219/03 MLC Quality Meat Joint Promotions, not yet approved by the Commission and the approved schemes aid Nos N 228/03 Red Meat Industry Forum Scheme, N 70/03 Meat Industry Development (Scotland) Scheme, N 231/2003 Meat Generic Advertising (Scotland) Scheme, N 230/2003 Quality Meat Advertising (Scotland) Scheme, N 697/02 Meat Industry Development Scheme (Wales), N 696/02 Meat Generic Advertising Scheme (Wales), and N 716/02 Meat Quality Advertising Scheme (Wales). 4
2.5.3. MLC logo (22) The MLC logo (British Meat logo) is used in publications funded or partfunded by the MLC. Figure 1: MLC logo (British Meat logo) (23) The British Meat logo is a registered trademark in the UK and has traditionally been used as the MLC s public signature. Its use refers to the status of the MLC as a British organisation and its functions in connection with the British meat market. Any indication of origin which it may provide will not be a principal message. (24) The advertising will ordinarily include an indication of the ownership of the campaign by the MLC. This will frequently be in the form of the MLC logo. (25) The UK authorities are aware that the MLC s public signature includes a reference of origin (the word British ). The UK authorities have given assurances that the following provisions will be met: in advertising campaigns, the MLC logo will occupy not more than 0.5% of the area of any printed page or double-page spread or poster on which it appears, and similarly for other media. However, for design reasons or in particular where the words in the logo would be illegible or difficult to read if this size restriction is applied, it may be used at a larger size. It will ordinarily be positioned at the bottom of the page and not on a background which emphasises the word British. It will be presented where reasonably practicable and taking account of design limitations with a statement indicating that the logo is the signature of MLC. It will not be linked with any other words, picture or graphics which when taken together are likely to mean that origin is the primary message. 2.5.4. British Pig Executive logo (26) The functions of the MLC in Britain relating to pig are guided by its BPEX (British Pig Executive) Committee. Where advertising is carried out only in relation to Britain, the BPEX logo may replace the MLC's "British Meat" logo. Figure 2: BPEX logp 5
2.5.5. British Beef and Lamb Executive logo (27) The functions of the MLC in England relating to beef and sheep meat are guided by its EBLEX (English Beef and Lamb Executive) Committee. Where advertising is carried out only in relation to England, the EBLEX logo may replace MLC's "British Meat" logo. Figure 3: EBLEX logo 2.5.6. Generic advertising (28) The measures relate to activities throughout the European Union and elsewhere. (29) The measures will provide benefits to these agri-food products irrespective of their origin within or outside the Union since the scheme relates to generic advertising, which is not inherently origin dependent. (30) The measures are targeted fundamentally at raising consumer and trade demand for beef, pork and sheepmeat (red meat) and meat products derived from red meat. (31) The use of MLC parafiscal funds in advertising relating to each species is proportionate to the levy generated from each species. (32) The following generic advertising measures are intended: (a) (b) (c) (d) (e) communicating directly with consumers through a range of appropriate public media (including radio, television, posters and the Internet); communicating directly with consumers through purchase of space in a range of channels which are made available at commercial rates by retailers and others, including in-store magazines, loyalty card mailings and in-store recipe leaflets; providing materials to enable others to communicate to consumers (for example, materials containing MLC s generic advertising messages for retailers or caterers to use with their customers); advertising in trade press journals, to an audience of retailers, caterers and meat processors. Such advertising activity would include best practice features, for example on how to maximise red meat sales and how to increase consumer demand for red meat; providing the industry and supply chain outlets with market research information and insights, which may be published as advertising copy or supplements in trade press publications. 6
(33) The primary message of the generic advertising will be: easy and quick preparation of tasty meat dishes, health recipes, advice on good and nutritious food, on nutrition and on the storage, handling and cooking of meat, advice to all classes of retailers supplying meat of the results of research carried out by MLC or others and developments in meat retailing, encouraging the provision of valueadded products, encourage retailers to use consumers own preferences to market meat and thereby to increase the sale of meat and meat products, encouraging hospital caterers to take up red meat recipes, promotion of events relevant to the consumption of meat, information of the types of activities run by the MLC foodservice team and encouraging caterers to contact it to obtain information (technical information, cooking methods and recipes), roasting is a tasty way of preparing meat. (34) On non-uk markets, the Meat Chronicle is used. The British Meat logo will appear more prominently than in UK. (35) Eligible costs: concept design, development and implementation: consultancy and other fees (e.g. advertising agencies fees and photographic and celebrities' fees), printing for posters, magazines and recipe leaflets, distribution for posters, magazines and recipe leaflets, purchase of display space, and of radio and television airtime, web-site development and maintenance, and associated administrative costs, estimated at less than 10% of the total costs. (36) No aid will be given to promotions related to individual products or producers. 2.5.7. Promotion activities (37) The promotion measures will provide information material for consumers concerning recipes and healthy eating. Recipe leaflets will be distributed and the benefits of healthy eating will be promoted. These activities are carried out for the benefit of all producers in a sector. No selection of beneficiaries is undertaken by the UK authorities. (38) Eligible costs: printing and distribution of recipe leaflets and information material, related web-site development and maintenance, and associated administrative costs, estimated at less than 10% of the total costs. 2.6. Legal basis (39) The Agriculture Act 1967 2.7. Aid intensity (40) Up to 100% (para-fiscal levy) 7
2.8. Cumulation (41) No cumulation with other aid schemes is possible. III. EVALUATION (42) Under Article 87(1) of the EC Treaty, aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is prohibited, insofar as it affects trade between Member States. It is obvious that there is an important crossborder trade in agricultural products. 7 (43) The aid measure is financed by a parafiscal levy raised by the MLC. Therefore, it has to be qualified as being granted through State resources. (44) It favours certain enterprises of the red meat sector in the United Kingdom. It is therefore liable to distort competition and to affect trade between Member States. (45) Therefore, Article 87(1) of the EC Treaty applies. (46) According to Article 87(3)(c) of the EC Treaty, aid to facilitate the development of certain economic activities or of certain economic areas can be regarded as compatible where such aid does not adversely affect trading conditions to an extent contrary to the common interest. Concerning this aid, the Community guidelines for state aid for advertising of products listed in Annex I to the EC Treaty and of certain non-annex I products (hereinafter: Community advertising guidelines) 8 and point 14 of the Community guidelines for state aid in the agriculture sector 9 (hereinafter: Community agriculture guidelines) apply. 3.1. Administrative costs of the MLC (47) The activities of the MLC concern advertising for red meat, mostly coordination and project management. The related administrative costs are financed from public sources. The coordination activities concern policy development and implementation of State aid measures. The project management concerns the organisation and implementation of promotion and advertising activities. (48) The question to be examined here is whether these activities are an economic activity. 7 Trade in agricultural products of the United Kingdom with other Member States in 2002: imports 21 870 million, exports 10 568 million (source: Eurostat). 8 OJ C 252, 12.9.2001, p. 5. 9 OJ C 232, 12.8.2000, p. 19. 8
(49) The Court has consistently held that in the context of competition law, the concept of undertaking covers any entity engaged in an economic activity, regardless of the legal status of the entity or the way it is financed. 10 The basic test is whether the entity in question is engaged in an activity which consists in offering goods or services on a given market and which could, at least in principle, be carried out by a private actor in order to make profits. 11 (50) The co-ordination activities of MLC are to be regarded as a non-economic activity, because a part of state activity is outsourced and there is no intention to offer goods or services on a certain market. Therefore, this activity must not be assessed under the competition law of the EC Treaty. (51) The project management activities of MLC are to be regarded as an economic activity. The UK authorities have given assurances that related overheads (administrative costs, etc.) will be included in the calculation of aid to the beneficiaries. (52) Though, on the basis of the information provided by the UK, the scheme prima facie seems to respect the applicable EU public procurement rules, this decision in no way prejudges any further analysis by the Commission from the point of view of public procurement. 3.2. MLC parafiscal levy (53) The scheme is financed by MLC parafiscal levies, with some grants from government and its agencies. The MLC levy is charged only on imported live animals after a three-month period of stay in the UK (sheep: two months). In line with Commission practise (see decision N 716/02), such animals are not to be considered imported animals any more. (54) Parafiscal levies are considered as discriminatory internal taxation prohibited by Article 90 of the EC Treaty if and to the extent to which charges imposed on the products produced and processed on the national market are only partially compensated by advantages deriving from the use made of its revenue and thereby disadvantaging exported domestic products. 12 The levy is charged at the point of slaughter or export. The UK authorities have given assurances that the MLC levy will be refunded at an appropriate level where exporters do not receive a benefit proportionate to that obtained by operators processing or marketing on the national UK market. (55) Therefore, based on the information provided by the UK authorities, the financing of this scheme with an MLC parafiscal levy does not raise objections. 10 See Cases C-41/90 Höfner and Elser [1991] ECR I-1979, paragraph 21 of the judgment; C-159/91 and C-160/91 Poucet and Pistre [1993] ECR I-637, paragraph 14 of the judgment; C-244/94 Fédération française des sociétés d'assurance [1995] ECR I-4013; C-55/96 Job Centre [1997] ECR I- 7119, paragraph 21 of the judgment; C-67/96 Albany [1999] ECR I-5751, paragraph 77 of the judgment; Case T-319/99 FENIN (available at: www.curia.eu.int) paragraphs 35 and 36. 11 Opinion of Advocate General Jacobs delivered on 13 September 2001 in Case C-218/00 INAIL [2002] ECR I-691, paragraph 28. 12 Case C-234/99, Nygård, [2002] ECR I-3657. 9
3.3. Advertising (56) The compatibility of aid for the advertising of agricultural products within the Community is assessed by the Commission in the light of the Community advertising guidelines. (57) In accordance with point 3.1. of the Community advertising guidelines, aid cannot be authorised which is considered incompatible with the common interest in accordance with the negative criteria described in point 3.1. (58) Export advertising of agricultural products for a non-uk audience on the markets of another Member State is not open to objection under Article 28 of the Treaty (point 19(a) of the Community advertising guidelines). (59) The MLC advertising campaigns organised on the home market are intended to advertise products in a purely generic manner but contain a reference to origin via the use of the label of the MLC (point 19 of the Community advertising guidelines). However, a reasonable balance is struck between references to the products and the national origin. The MLC logo may be included in publications and advertisements but does not appear on products. The size of the logo of MLC will be very small. Based on the information and undertakings provided by the UK authorities, the MLC logo will only be subsidized when used for the purpose of providing origin information as a part of the advertising campaigns and the origin message does not focus primarily on origin (point 23 of the Community advertising guidelines). (60) The UK authorities have given explicit assurances that in no circumstances aid for advertising relating directly to the products of one or more particular firm or firms will be paid (point 29 of the Community advertising guidelines). (61) In order to enable the Commission to verify the nature of the advertising activities, the United Kingdom authorities have undertaken to provide an annual report. (62) Furthermore, the advertising of foodstuffs has to comply with the provisions of Article 2 of Directive 2000/13/EC on the approximation of the laws of the Member States relating to labelling, presentation and advertising of foodstuffs. 13 The UK authorities have given assurances that these rules will be respected. (63) Moreover, the measure concerns agricultural products that are in structural surplus at Community level, and therefore complies with the positive criterion of the first indent of point 32 of the Community advertising guidelines. (64) Eligible costs for advertising are costs for an operation which is designed to induce economic operators or consumers to buy a relevant product. The eligible costs of this scheme cover consultancy and other fees, printing for posters, magazines and recipe leaflets, distribution for posters, magazines and recipe leaflets, purchase of display space, and of radio and television airtime, web-site 13 OJ L 109, 6.5.2000, p. 29. 10
development and maintenance, and associated administrative costs, estimated at less than 10% of the total costs. (65) The aid rate of up to 100% is also consistent with the ceiling laid down at point 5 of the Community advertising guidelines. The rate of direct aid should not exceed 50%, and undertakings from the sector have to contribute at least 50% of the cost, either through voluntary contributions or through the collection of parafiscal levies. The aid scheme is financed by the MLC levy. (66) The United Kingdom authorities have given assurances that they will comply with the provisions of Council Directive 92/50/EEC relating to the coordination of procedures for the award of public service contracts 14 or, if that Directive does not apply, that the entities entrusted with carrying out the works will be selected on the basis of an open, transparent and non-discriminatory procedure (point 30 of the Community advertising guidelines). (67) In the light of these findings, the measure complies with the conditions of the Community advertising guidelines. (68) Advertising under the scheme is done within the European Union and also outside this area. The Community advertising guidelines do not apply to the advertising of agricultural products outside the Community. (69) Therefore, the Commission makes an ad hoc examination of each case of aid for the advertising of agricultural products outside the Community. The Commission notes that the UK authorities have fixed the maximum aid intensity for all advertising measures at up to 100% but the sector will contribute at least 50% of the cost through a para-fiscal levy. Moreover, the aid scheme regarding advertising outside the Community is identical regarding advertising outside the Community to what as has been explained above is compatible when done within the Community. The Commission is therefore of the opinion that as regards activities outside the Community the measure is compatible with the state aid rules. 3.4. Promotion activities (70) Aid for information like recipe leaflets or promoting the benefits of healthy eating demand products from professionally run farms is considered by the Commission as soft aid which contributes to the long term viability of agriculture in the Community while producing only very limited effects on competition. According to point 14 of the Community agriculture guidelines, such aid may be granted at a rate of 100% of costs. The total amount of support granted should not exceed 100 000 per beneficiary over any three-year period or, in the case of aid granted to undertakings falling within the scope of the Commission s definition of small and medium sized enterprises, 50% of eligible costs whichever is greater. For the purpose of calculating the amount of aid, the beneficiary is considered the person receiving the services. 14 OJ L 209, 24.7.1992, p. 1. 11
(71) These programmes contribute to the long-term viability of the agricultural sector. The scheme covers the costs for information measures that are eligible costs under point 14 of the Community guidelines. (72) The United Kingdom authorities have given assurances that the aid schemes will be available to all eligible farmers and food processors in the area concerned. (73) The United Kingdom authorities have given assurances they will comply with the provisions of Council Directive 92/50/EEC or, if that directive does not apply, that they will choose the entities entrusted with carrying out the works on the basis of an open, transparent and non discriminatory procedure. 15 (74) The United Kingdom authorities have confirmed that the total amount of support granted for these activities will not exceed 100,000 per beneficiary over the three-year period or, in the case of aid granted to undertakings falling within the scope of the Commission s definition of small and medium sized enterprises, 50% of eligible costs whichever is greater. (75) Therefore, the conditions of point 14 of the Community guidelines are met. IV. DECISION (76) The measure complies with the Community guidelines for State aid for advertising of products listed in Annex I to the EC Treaty and of certain non-annex I products and point 14 of the Community guidelines for state aid in the agriculture sector. The Commission has accordingly decided that the aid is compatible with Article 87(3) of the EC Treaty. 15 Case C-324/98, Telaustria, [2000] ECR p. I-10745. 12
If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to disclosure to third parties and to publication of the full text of the letter in the authentic language on the Internet site http://europa.eu.int/comm/secretariat_general/sgb/state_aids/. Your request should be sent by registered letter or fax to: Yours faithfully, European Commission Directorate-General for Agriculture Directorate B Office: Loi 130 5/120 B-1049 Brussels Fax No.: 0032.2.296 7672 For the Commission Franz FISCHLER Member of the Commission 13