State Aid: Commission orders Germany to recover incompatible aid for disposal of animal carcasses and slaughterhouse waste in Rhineland-Palatinate

European Commission - Press release

State Aid: Commission orders Germany to recover incompatible aid for disposal of animal carcasses and slaughterhouse waste in Rhineland-Palatinate

Brussels, 25 April 2012 - The European Commission found that public support in favour of "Zweckverband Tierkörperbeseitigung in Rhineland-Palatinate" (ZT) - a local provider of services for the disposal of dead animal carcasses and slaughterhouse waste - was incompatible with EU state aid rules and has ordered Germany to recover incompatible aid of approximately €30 million from the beneficiary. The Commission's investigation found, in particular, that ZT had no extra costs for discharging a public service, because it had sufficient spare capacity besides its normal operations to master an epidemic outbreak, and was therefore not entitled to receive public compensation.

ZT has continuously received annual support of approximately € 2.25 million from its owners, i.e. the regional authorities of Rhineland-Palatinate, to make good for its incurred losses. Germany contends that those annual public payments would be justified to compensate ZT for the discharge of a public service obligation, namely the retention of spare capacity to be able to deal with the increased number of carcasses in case of an epidemic outbreak (e.g. foot-and-mouth disease). This line of reasoning was also taken by the highest German Administrative Court (Bundesverwaltungsgericht) in national proceedings on the same case.

In its in-depth investigation, the Commission established that the ZT had no extra costs for retaining extra spare-capacity, because it could rely on unused capacity at night and on weekends in times of crisis. Furthermore, the Commission, taking into account the jurisprudence of the European Court of Justice (ECJ) in its GEMO judgement of November 2003 (case C-126/01), concluded that polluters (e.g. farmers and slaughterhouses) are fully liable to pay for all costs related to the disposal of animal waste. Finally the Commission's investigation established that ZT had used the state support to pursue an economically unsustainable and aggressive pricing policy by offering disposal services at a loss.

Consequently, the Commission found that ZT's annual loss compensations could not be justified as public service compensation but merely covered normal operating costs of the company, giving it an undue economic advantage over its competitors who have to operate without such subsidies.

Background

In July 2010, following a complaint, the Commission opened an in-depth investigation into the activities of ZT. ZT holds an exclusive right for the disposal of hazardous animal waste in Rhineland-Palatinate. It also offers disposal services for non-hazardous animal waste and in 2007 won a bid for the disposal of hazardous animal waste in Hesse.

Today's decision is in line with EU rules on state aid in the agriculture and forestry sector (see OJ/C2006/319), which clearly hold that only farmers are eligible for state aid to finance the disposal costs of dead animal carcasses. Any other companies, like ZT, are not eligible for state aid, in order to avoid any undue distortions of competition.

The non-confidential version of the decision will be made available under case number C19/2010 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.