Brussels, 20 June 2011
State aid: Commission consults on film support issues – frequently asked questions
(See also IP/11/757)
What is the aim of today’s consultation?
The criteria to assess the compatibility of national, regional and local film and audiovisual support schemes with EU state aid rules are due to expire on 31 December 2012. These criteria were set out in the Commission's 2001 Cinema Communication (see IP/01/1326). Their validity has been extended three times, most recently in 2009 (see IP/09/138).
In the 2009 extension the Commission identified a number of trends that would require further reflection in a review of the state aid rules. Those issues include territorial spending obligations imposed in film support schemes, support for aspects other than film and TV production (such as film distribution and digital projection), as well as competition among some Member States to use state aid to attract investments from large-scale, mainly US, film production companies.
The issues paper published today is the first step towards completing a review of the state aid rules by the end of 2012.
What did the Commission's Cinema Communication of 2001 do?
EU state aid rules maintain a Single Market where companies from all EU countries can compete and trade evenly by preventing Member States from selectively promoting companies to the detriment of competitors within the EU. In general, financial support provided by states or by state bodies to particular companies or industries are forbidden under EU law.
The Treaty on the Functioning of the European Union (TFEU) allows a few exceptions to this principle, including for state aid granted with a view to promote culture. Such aid can be deemed compatible under certain circumstances, set out in Article 107(3d) of the TFEU and in the 2001 Cinema Communication.
Under what conditions can films and audiovisual productions receive state aid?
National schemes cannot discriminate on the grounds of nationality, and must comply with the principle of free movement in the internal market. At present, under the 2001 Cinema Communication, they also have to comply with specific criteria:
Why do you consult on these criteria now?
Ten years have passed since these criteria were adopted by the Commission. Both technology and consumer behaviour have evolved considerably during this period. So the issues paper published today examines not only whether these are the most appropriate criteria but also whether film support should cover activities other than purely production.
Is the Commission questioning the need for state aid for films and audiovisual works?
No. Since the 2005 State Aid Action Plan, new state aid legislation is structured in a way that first sets out the objective of such aid and then explains the requirements for the aid to be necessary, proportionate and well-designed. That's why one of the first questions raised by the issues paper is ‘Why do we fund films?’ This question is not calling into question the principle of public funding for films, but is intended to gather views about what the common European objective of such support should be, before trying to define the state aid rules for this important sector.
The trend towards a subsidy race between certain Member States to attract major film productions was identified by the Commission in 2009 and has continued since then. Yet, avoiding subsidy races is precisely one of the objectives of the state aid provisions of the Treaty.
The only winners of such a race are the US majors, and the greatest losers the national film industries across Europe. However, the 2001 Cinema Communication was tailored to European film support schemes with a primary focus on supporting national and European culture(s). The Commission is therefore exploring this apparent contradiction.
Isn’t the idea that all film support schemes should be based on common, EU criteria inconsistent with the idea of cultural diversity promoted by the EU?
The issues paper does not suggest that all film support schemes should be based on common, EU criteria. In fact, it underlines the need to respect the principle of ‘subsidiarity’, according to which every decision should be taken at the most appropriate level.
However, according to the Treaty, all such schemes are subject to the same state aid rules. It is a difficult balance to strike but the Commission hopes that the responses to this consultation will help it to identify the most appropriate, broad, common criteria.
Why would film-funding qualify as state aid at all, if most publicly-funded European films are not shown outside their national borders, have a low market share and therefore no or very little effect on trade and competition between Member States?
As is evident from the flurry of promotional activity during international film markets such as the Cannes Film Market, European films are traded internationally and compete for attention. The conditions for public funding to be considered as state aid are therefore fulfilled since such films often receive more than €200 000 of support and have the potential to have an effect on trade and distort competition. This is particularly true of public funding for major international film productions.
It is also worth noting that the available data about cross-border viewing and market shares consider only cinema admissions. As the issues paper observes, people no longer watch films only in cinemas. Home video, pay TV, free TV, the Internet and other platforms, combined with the Internal Market, now allow easier access to films made in other EU Member States.
Doesn’t the issues paper confuse two very different issues calling for different approaches and solutions: films with truly European (even national) “culture-intensive” content and attracting/redirecting major film productions?
The issues paper simply draws attention to a potential contradiction between these two distinct approaches taken by different Member States. The Commission will review the responses to the consultation before proposing an appropriate way to assess both types of funding, each of which has its own merits.
Would extending the scope of the Cinema Communication make it more difficult to provide public funding for films and audiovisual productions?
No. The Commission has to assess the compatibility of all public funding constituting state aid under the Treaty provisions. The existence of a Commission Communication or Guidelines increases legal certainty for the sector and facilitates the design of film support schemes.
Even though the existing rules of the 2001 Cinema Communication only cover support for production, the Commission receives a growing proportion of notifications from Member States proposing support for other activities, such as film distribution.
This leads to legal uncertainty for the Member States and places an additional administrative burden on both the Member States and the Commission. Ensuring that a future Cinema Communication covers the majority of film support should therefore reduce both the administrative burden of notifying such support and the time taken by the Commission to assess it.
Why is the Commission envisaging revisiting the territorial criterion?
A basic principle of Europe’s internal market is the free movement of goods, capital, people and services. Territorial conditions, which require film producers to spend a certain proportion of the total film budget (or aid granted) in the Member State that grants the aid, may constitute a restriction to this free movement. Such a restriction must be justified and proportionate with regard to the specific circumstances of European film production activities, in line with the principles of EU law. As a result, the Commission intends to review the criteria governing its analysis, in the light of the recent evolution of markets and taking account of the specificities pertaining to the promotion of culture.
What is the timetable for the Commission’s review?
An indicative timetable is available on the public consultation web page. This will be kept up-to-date as the review progresses: