Brussels, 16 September 2014
State aid: the Commission initiates two in-depth investigations into the exceptional and temporary support package for the restructuring of FagorBrandt and Mory-Ducros
The European Commission has initiated two separate in-depth investigations in order to establish whether the loans and other measures granted by France to FagorBrandt and Mory-Ducros are compatible with EU state aid rules. In particular, the Commission will examine whether these measures were granted under market conditions, as the French authorities maintain. The opening of an in-depth investigation gives interested third parties an opportunity to submit their comments. It does not prejudge the final outcome of the investigation.
In November 2013, the Minister for Economic Regeneration announced the introduction of an exceptional and temporary support package to help viable intermediate-sized enterprises experiencing economic difficulties and undergoing collective proceedings. The package is accordingly based on the Economic and Social Development Fund (FDES), whose financial allocation was increased by €300 million in 2014.
The first two enterprises to have benefited from this are FagorBrandt and Mory-Ducros.
FagorBrandt received an initial FDES loan of €10 million in November 2013 and a second one of €47.5 million in April 2014. The company could also benefit from a write-off of social security and tax debts. Mory-Ducros received an FDES loan of €17.5 million in February 2014. This loan is accompanied by state-funded social measures for employees.
Measures granted to enterprises through state resources do not constitute state aid under EU rules if they could have been undertaken on the same terms and in the same circumstances by a private operator according to purely economic considerations and irrespective of political considerations. The State then acts as a private investor would, without giving any specific advantage to the enterprises in question. The French authorities consider that this condition is met for the FDES loans. The Commission will therefore closely examine the repayment terms of the loans and the other measures announced on the basis of this principle.
If this principle were not followed, these measures would constitute state aid under the EU rules. State aid for firms in difficulty is compatible with the EU rules under certain conditions, for instance if they are accompanied by a credible restructuring plan to restore their viability, if the firm makes a sufficient contribution to the costs of restructuring and if the distortions of competition created by the aid are offset by compensatory measures (2004 EU Guidelines on State aid for rescuing and restructuring firms in difficulty - see MEMO/04/172).
FagorBrandt and Mory-Ducros were under a court-supervised administration procedure when the public support measures were granted and they met the criteria defining firms in difficulty. Therefore, if the investigation shows that the measures constitute state aid, the Commission will examine whether they are compatible with the rules on state aid to firms in difficulty.
Intermediate-sized enterprises are defined as having between 250 and 4 999 employees and either a turnover not exceeding EUR 1.5 billion or a balance sheet not exceeding EUR 2 billion.
Mory-Ducros is the second biggest delivery and freight operator in France after Geodis. The group has four main activities: national delivery and transport services, freight, international delivery and freight services and logistics. The adverse effect of the financial crisis and increased competition from the other operators in the sector have, however, led to a decline in results compounded by above-average production costs and under‑investment in previous years. These difficulties led to the opening of a court‑supervised administration procedure by Pontoise Commercial Court on 26 November 2013.
FagorBrandt is involved in the production, marketing and repair of domestic appliances, the purchase and sale of spare parts for domestic appliances and all electrical and electromechanical machinery or equipment. The difficulties faced by the companies of the Fagor group in France are mainly due to the sharp deterioration in the economic climate since 2008 and to the difficulties of the parent company, whose Spanish market collapsed between 2008 and 2012. The Fagor group is also experiencing increased competition from Asian producers with aggressive pricing policies. FagorBrandt, like other French subsidiaries of the FagorBrandt group, was placed in court-supervised administration by the ruling of Nanterre Commercial Court of 7 November 2013.
Under the 2004 EU Guidelines on State aid for rescuing and restructuring firms in difficulty (see MEMO/04/172), companies in difficulty may receive state aid under certain strict conditions. Aid may be granted for a period of 6 months ('rescue aid'). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved ('restructuring aid'). The plan must ensure that the long-term viability of a company is restored without further state support, that distortions of competition induced by the state support are addressed through compensatory measures and that the company owners contribute sufficiently to the costs of restructuring.
The non-confidential version of the decisions will be made available under case numbers SA.38545 (Mory-Ducros) and SA.38644 (FagorBrandt) in the State Aid Register on DG Competition's 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.