State aid: Commission prohibits tax exemption to Slovak subsidiary of Glunz&Jensen
European Commission - IP/07/1909 12/12/2007
Brussels, 12 December 2007
The European Commission has decided that a Slovak regional investment aid worth SKK 42 million (some €1.15 million) in the form of a tax exemption in favour of Glunz&Jensen is incompatible with the EU state aid rules (and in particular the Regional Aid Guidelines) and could not be granted. After a formal investigation launched in April 2007 (see IP/07/558), the Commission found that the proposed aid did not contribute to regional development and would have created significant distortions of competition in a specific market in which Glunz&Jensen has an important share (graphic arts pre-press processing equipment). As the aid has not yet been granted, the aid does not have to be recovered.
Competition Commissioner Neelie Kroes said “This decision illustrates my determination to curb regional aids that distortcompetition in favour of a major market player and lead to a significant effect on trade between Member States."
On 24 April 2007 the Commission opened the formal state aid investigation procedure (see IP/07/558), as it had doubts as to the compatibility of the proposed aid with the Single Market based on Article 87(3)(a) of the EC Treaty and on the Guidelines on National Regional Aid 2007-2013 (see IP/05/1653).
State aid that threatens to distort competition and trade between Member States can only be approved if the negative effects are outweighed by a positive contribution to a Community objective such as regional development. Thus as a general rule, regional aid should be granted under a multi-sectoral aid scheme which forms an integral part of a regional development strategy with clearly defined objectives. Where, as in the present case, it is envisaged to grant individual ad hoc aid to a single firm, it is the responsibility of the Member State to demonstrate that the project contributes towards a coherent regional development strategy and that, having regard to the nature and size of the project; it will not result in unacceptable distortions of competition.
The Commission considered that the aid given to the project lacked the incentive effect required by the Regional Aid Guidelines, since the project had already started before the application of the aid. That is also an indication that the project could be carried out without the aid. Moreover, the beneficiary has very high market share of in the relevant market (graphic arts pre-press processing equipment). The project concerns the relocation of the beneficiary's activities from Denmark and the United Kingdom to Slovakia, which includes closing down Glunz&Jensen's facilities in these countries and displacing the machines and equipment to its Slovakian site. The Commission concluded that the notified aid would have a major impact on competition and trade in the extremely specific relevant market in which the beneficiary is active.
As neither the Slovak authorities nor any third parties have submitted comments during the in-depth investigation, the Commission can only confirm its initial doubts, as expressed in its decision to open the formal investigation procedure.
The non-confidential version of the decision will be made available under the case number C12/2007 in the State aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News."