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Brussels, 23 rd September 2009

State aid: Commission approves €54.5 million investment aid to Dell plant in Łódź, Poland

The European Commission has authorised, under EC Treaty state aid rules, €54.5 million of regional aid, which the Polish authorities intend to grant to Dell Products Poland for the establishment of a manufacturing plant in Łódź (Poland). In December 2008, the Commission opened a formal investigation (see IP/08/1943 ) as it had doubts about the compatibility of the aid with the rules on regional aid for large investment projects (see IP/05/1653 and IP/09/993 ). Following an in-depth assessment, the Commission has concluded that the investment project will significantly contribute to the regional development of the Łódzkie region and that these benefits outweigh any potential negative effects of the aid on competition and trade.

Competition Commissioner Neelie Kroes said: “Our assessment shows that the project’s contribution to regional development and job creation in a disadvantaged region of Poland outweighs any potential negative effects. For cases like this, which could present a high risk of distorting competition and where job losses in other Member States have been pointed to, we need to conduct a detailed economic analysis of the market and of the impact of the aid before taking a decision."

Dell Products Poland Sp.z o.o., a company wholly owned by Dell Inc. of the US, built a plant for the production of desktops, notebooks and servers which is expected to create up to 3 000 direct jobs in the Łódzkie region.

The Łódzkie region is eligible for regional aid under Article 87(3)(a) of the EC Treaty as an area with an abnormally low standard of living and high unemployment. The investment costs taken into account for the calculation of the aid are €189.58 million and the planned aid amount is €54.5 million. The manufacturing plant was opened in January 2008 and currently employs 1 700 workers.

The Commission opened a formal investigation (see IP/08/1943 ) because it had doubts about the market definition of the products made at the plant, the increase in production capacity generated by the project, the possible decline in the desktop market and Dell’s market share for servers.

The Commission assessed the aid on the basis of the provisions of the regional aid guidelines for large investment projects and in accordance with the criteria for the in-depth assessment of regional aid to large investment projects (see IP/05/1653 and IP/09/993 ) which set out how to evaluate the positive and negative effects of such aid. This is the first case where the Commission has conducted an in-depth assessment of regional aid to a large investment project.

During the in-depth investigation, the Commission verified whether the thresholds of the regional aid guidelines are respected, whether the aid was necessary for the investment to take place in the assisted region and whether the benefits of the measure outweigh the resulting distortion of competition. For this purpose, the Commission took into account information received from the Polish authorities and from interested parties, including two of Dell’s competitors.

The Commission's investigation found that the aid provided an incentive for Dell to locate its manufacturing plant in Łódź by compensating for less favourable investment conditions in comparison with another envisaged location in Eastern Europe . The aid is limited to the amount necessary to compensate for the net additional costs of locating the plant in Łódź. As a result of the investment permitted by the aid, the region of Łódź will receive substantial economic benefits, in terms of job creation and regional development.

Regarding the negative effects of the aid, the Commission found that the aid would not cause the crowding-out of competitors or the creation of significant production capacity in an underperforming market (desktops) since it has been demonstrated that the plant would have been built in any event, regardless of the aid, albeit in a different location. For the same reason, the Commission also concluded that job losses at other locations in the EU, such as those that result from Dell’s decision to close its manufacturing facility in Ireland, are not a consequence of the aid granted by the Polish authorities.

On balance, the Commission has therefore concluded that the positive effects of the aid outweigh the negative effects on trade in the alternative location. As a result, the Commission has concluded that the aid does not raise competition concerns and is compatible with the Single Market.

The non-confidential version of the decision will be made available under the case number C 46/2008 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 .

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