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Brussels, 13th February 2008

State aid: Commission investigates funding of major Spanish film studio complex

Following complaints from two major players in the European film sector, the European Commission is launching an in-depth investigation under EC Treaty state aid rules into the funding of the Ciudad de la Luz film studio complex near Alicante in Spain. The investigation should enable the Commission to determine whether the funding by the Valencia Regional Government constitutes illegal state aid which distorts competition between European film studios. The Commission would welcome comments from interested parties and, in particular, from competing film studios. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

EU Competition Commissioner Neelie Kroes commented: “The Commission is concerned that the substantial public funding may have allowed the Ciudad de la Luz complex to distort fair competition in the European market for film studio facilities."

Designed to accommodate the largest film productions, the Ciudad de la Luz complex has been under construction since 2002 and opened for filming in 2005. One of the films made at the complex was "Astérix and the Olympic Games".

The assets of the complex are owned by Ciudad de la Luz SAU, which is entirely owned by the Valencia Regional Government via 'Sociedad Proyectos Temático de la Comunidad Valenciana'. According to their published accounts, over €200 million of public funds have been invested in the complex. As construction is still in progress, the final figure may be significantly higher. The Spanish authorities have also informed the Commission of significant discounts which had been offered to attract film productions to the complex.

The complaints were received in February and July 2007 from unrelated companies in two different Member States. They allege that the market for large film studios in Europe is very competitive, and increasingly so following EU enlargement and the setting up of major studios in new Member States. In this competitive scenario, they doubt that the decision to invest in Ciudad de la Luz can be the result of normal commercial considerations.

The Spanish authorities primarily claim that the public support was not state aid as a private investor would have invested on the same terms.

However, after examining Ciudad de la Luz' business case, the Commission doubts that a private investor would have provided 100% funding for such a new, large scale entrant in a competitive market. As a result, at this stage, the Commission considers that state aid may be involved and doubts that this would be compatible with the EU state aid rules.

The non-confidential version of the decision will be made available under the case number C 8/2008 in the State aid Register on DG Competition's website once any confidentiality issues have been resolved. Once a summary of the decision has been published in the Official Journal, interested parties will have a month to submit their comments. New publications of State aid decisions on the internet and in the Official Journal are listed in the State aid Weekly e-News.

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