The Commission has found €33 million investment aid to Hamburger Rieger GmbH, a German paper and plasterboard manufacturer, to be in line with EU state aid rules, in particular the Guidelines on Regional State Aid for 2014-2020, because it furthers regional development without unduly distorting competition in the Single Market. In a separate decision, the Commission has opened an in-depth investigation to assess whether €4 million aid to REHAU AG+Co (a polymer business based in Switzerland active amongst other things as automotive supplier) was in line with theGuidelines. These decisions apply for the first time provisions under the Guidelines requiring for certain projects that the production processes supported are genuinely innovative. They provide guidance to Member States on how the Commission assesses such projects under these rules.
EU Commissioner in charge of competition policy Margrethe Vestager said: "It's important that public investments foster economic growth in disadvantaged regions in Europe. We have carefully assessed the project. The investment aid to Hamburger Rieger will further develop the region without distorting competition and will help bringing truly innovative production processes to market. At the same time we have opened an in-depth investigation to assess whether the aid to REHAU AG+CO will bring genuinely innovative production processes to market."
The purpose of regional state aid is to support economic development and employment in lesser developed regions in the EU and foster cohesion in the Single Market. The Guidelines on Regional State Aid for 2014-2020 allow Member States to support regional investment according to criteria depending on the extent of a region's economic problems, with stricter conditions for less disadvantaged regions. In order for taxpayer money to be used effectively and to limit the risk of competition distortions, the criteria ensure that aid is only approved if the company's decision to invest in a specific region in fact depends on the support, and would not otherwise have happened. Since for large companies such investment decisions are often taken on the basis of other factors, investment projects of large companies for existing plants in less disadvantaged regions may receive support only in exceptional cases.
For example, the Commission can approve state aid in such cases if the investment introduces a new process innovation. In its decisions today, the Commission has clarified that the basic criteria for investment projects to become eligible for state aid under this new concept are:
- The planned production process has to represent a substantial change to the state of the art, and should not simply cover an incremental or routine improvement.
- The innovative element must have a significant impact on the overall production process.
- The innovative process should be applied for the first time in the sector concerned in the European Economic Area (EEA).
Hamburger Rieger GmbH is a large German manufacturer of paper and plasterboard. It has plans to invest €363 million to extend its paper production capacity by setting up a new stock preparation process and building an additional paper machine in its existing production plant in Spremberg. Spremberg is situated in the Spree Neiße area, in Brandenburg and is eligible for regional aid under EU state aid rules (Article 107(3)(c) of the Treaty on the functioning of the European Union - TFEU). The project is expected to create 195 new jobs.
Germany plans to grant public funding of €33 million to support the project. Both parts of the production process are based on innovative technology. The stock preparation process will implement a patent for the first time worldwide. The construction of the paper production machinery will combine for the first time different innovative elements. An independent expert report submitted by Germany confirmed the novel character of the process. The Commission also found that without the public funding, the project would not have been carried out in the Spremberg region. The Commission therefore concluded that the positive effects of the project on regional development clearly outweigh any distortion of competition brought about by the state aid.
REHAU AG+Co is a large processer of polymer, among others for car parts, headquartered in Switzerland. It has plans to invest €50 million in replacing its existing paint shop in Viechtach, which is reaching its technical life-expectancy, and to double its existing painting capacity. Viechtach is located in the Regen area, in Bavaria, an area eligible for regional aid under Article 107(3)(c) TFEU.
Germany plans to grant public financing of €4 million in support of the project. At this stage, the Commission has doubts on whether the planned production process is sufficiently innovative to qualify as innovation for purposes of theRegional Aid Guidelines. Moreover, the Commission has concerns that the investment project would have been carried out in any event, even without aid. The Commission also has doubts about the contribution of the aid to regional development. The Commission will now investigate in-depth, to determine whether these initial concerns are confirmed or not. The opening of an in-depth investigation provides interested third parties with an opportunity to comment on the measure. It does not prejudge in any way the outcome of the investigation.
Evidence shows that large companies' decisions to invest in a given region are prompted by numerous factors, including the cost and availability of labour and land, tax legislation their existing operations in the given region, and the business environment, rather than just by state aid. Granting aid in a context where a large company would have invested in any event would merely reduce the company's ordinary operating costs which its (local) competitors have to meet without aid. This leads to a waste of taxpayers' money and to competition distortions. Therefore, the Guidelines on Regional State Aid for 2014-2020 limit aid to large enterprises in less disadvantaged areas to exceptional cases, including new process innovation.
Aid for new process innovation must also be necessary to trigger the investment in the region and cannot be granted for subsidising projects that would have been carried out anyway (incentive effect). Moreover the aid must contribute to the development of the region and must be limited to what is necessary to achieve this change. Overall, the positive effects of the investment on the development of the region must outweigh the negative effects of the aid on trade and competition.
The non-confidential version of the decisions will be made available under the case numbers SA.43624 (Hamburger Rieger GmbH) and SA.43014 (REHAU AG + Co) in the State Aid Register on the 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.