Brussels, 2nd April 2008
State aid: Commission opens inquiry into UK state financing of capital costs of digital switchover of Channel 4
The European Commission has launched an investigation under EC Treaty state aid rules into state aid proposed by the UK authorities for Channel 4 to help it meet the capital costs of digital switchover. The Commission will investigate whether this subsidy threatens to distort competition in the Single Market. The investigation will provide interested parties with the opportunity to comment on the planned measures. The opening of a formal investigation procedure does not prejudge the final outcome.
Competition Commissioner Neelie Kroes commented: “The Commission is firmly committed to encouraging the digital switchover process, which has many advantages for consumers and innovation. However, it needs to make sure that any state support does not distort competition unduly.”
In October 2007, the UK authorities notified to the Commission their proposal to grant £14 million of aid to Channel 4 to assist it to meet the capital costs of digital switchover. Channel 4 is a broadcaster incorporated as a public corporation with no shareholders and entrusted with a public service remit. It is the core channel of Channel 4 Corporation (C4C) and is run on a commercial basis only (all revenue is derived from advertising and other commercial activities, with no public funding). Already in August 2006, the Commission had received a complaint by a UK commercial broadcaster which objected to any kind of possible financial assistance toward Channel 4 on the grounds that C4C has ample and sufficient cash reserves to meet the costs of digital switchover without any need for public support.
The Commission has serious doubts as to whether the proposed aid to Channel 4
meets the criteria of the Commission's 2001 Broadcasting Communication that is,
that the aid is necessary and proportional and does not overcompensate Channel
4. In particular, the information provided so far by the UK does not enable the
Commission to assess whether, given the costs of its digital switchover
obligations, and taking into account its commercial revenues, C4 will have in
the short term a net public service cost which would allow it to receive state
aid. The opening of the formal investigation procedure will allow the Commission
to evaluate the notified measures in more detail and will offer interested
parties an opportunity to submit comments.