State aid: Commission endorses loan to Spanish lollipop producer Chupa Chups, but vetoes subsidies
European Commission - IP/07/652 10/05/2007
Brussels, 10th May 2007
The European Commission has closed an in-depth investigation under EC Treaty state aid rules (Article 87) concluding that a number of measures in favour of the Spanish producer of candies Chupa Chups S.A., and in particular a €35 million loan granted by a financial entity belonging to the Catalonian Region in 2003, did not constitute state aid because it was granted on conditions that a market economy investor would have accepted. However, the Commission found that €900 000 of subsidies for the companydid constitute illegal state aid, €100 000 of which will have to be paid back.
Chupa Chups is the holding company of an industrial group established in Spain in 1940. Its main activity consists in the production and commercialisation of sweets, notably lollipops (70% of sales), for which the group is the main world supplier. Currently the group has four production centres, located in Russia, Mexico, Sant Esteve de Sesrovires (Barcelona) and Villamayor (Asturias). In June 2006 Chupa Chups, until then a family-owned group of companies, was sold to the Italian-Dutch sweets corporation Perfetti Van Melle.
In April 2005, the Commission received a complaint from a competitor about alleged aid measures in favour of Chupa Chups S.A. Following a preliminary assessment, the Commission opened in January 2006 the formal investigation procedure pursuant to Article 88 (2) of the EC Treaty as it had doubts about the compatibility of the measures with the EC Treaty's state aid rules (see IP/06/85).
The Commission’s investigation found that a majority of the measures were in fact compatible with the state aid rules. In particular, the Commission concluded that a €35 million credit from the 'Instituto Catalán de Finanzas' (ICF) did not constitute state aid because it was granted on conditions that a market economy investor would have accepted.
However, the Commission found that an €800 000 subsidy to Chupa Chups agreed by Spain in 2003 would have constituted illegal investment aid (under the guidelines on rescue and restructuring aid), because at the time the company was in difficulties. But as the Spanish authorities have confirmed that this aid has not yet been paid out, there is no need forthe money to be recovered. On the other hand, the Commission also concluded that a further €100 000 that Chupa Chups received from the 'Instituto de Comercio Exterior' "ICEX" also constituted an illegal state aid given that the Spanish authorities failed to provide any justification. This €100 000 will have to be paid back by Chupa Chups.