18.6.2013

EN

Official Journal of the European Union

L 166/1

(1)

By letter dated 6 August 2007, France notified the Commission of restructuring aid for the FagorBrandt group.

(2)

By letter dated 10 October 2007, the Commission informed France that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘楾FEU‘� in respect of the aid.

(3)

The Commission‘檚 decision to initiate the procedure (‘the opening decision‘� was published in the Official Journal of the European Union (3). The Commission called on interested parties to submit their comments on the measure.

(4)

The Commission received comments from three interested parties, namely two competitors and the aid recipient. Electrolux submitted comments by letter dated 14 December 2007. Following a meeting with the Commission‘檚 departments on 20 February 2008, Electrolux submitted additional comments by letters dated 26 February and 12 March 2008. A competitor who wishes to remain anonymous submitted comments by letter dated 17 December 2007 (4). FagorBrandt submitted comments by letter dated 17 December 2007. By letters dated 15 January and 13 March 2008, the Commission forwarded these comments to France, inviting it to comment on them, which it did by letter dated 15 February 2008 and in a document presented at a meeting on 18 March 2008 (see paragraph 5).

(5)

France submitted its comments on the opening decision to the Commission by letter dated 13 November 2007. On 18 March 2008, a meeting was held between the Commission‘檚 departments, the French authorities and FagorBrandt. Following that meeting, the French authorities submitted information by letters dated 24 April and 7 May 2008. A second meeting was held between the same parties on 12 June 2008. Following that meeting, the French authorities submitted information by letter dated 9 July 2008. On 15 July 2008, the Commission requested additional information, which the French authorities provided on 16 July 2008.

(6)

On 21 October 2008 the Commission adopted a decision finding that the restructuring aid of EUR 31 million to be granted to FagorBrandt was compatible with the common market, subject to conditions (‘the decision of 21 October 2008‘� (5).

(7)

On 14 February 2012, in Electrolux and Whirlpool Europe v Commission, that decision was annulled by the General Court, on the ground that it contained two manifest errors of assessment: it took account of an invalid compensatory measure, and it failed to analyse the cumulative effect on competition of the aid it approved together with aid previously granted by the Italian authorities which had been held incompatible and had not yet been recovered (‘the Italian aid‘� (6).

(8)

The Commission must therefore adopt a final decision afresh. In order to do so, as the General Court has held (7), the Commission must take account only of the information that was available to it at the relevant time, that is to say on 21 October 2008 (see section 6.2.2, ‘楾he relevant period for purposes of the assessment‘�.

(9)

The aid at issue is restructuring aid. It amounts to EUR 31 million. It is to be provided by the French Ministry of Economic Affairs, Finance and Employment. The aid recipient is FagorBrandt SA, which has several subsidiaries that conduct its production and marketing business.

(10)

The French authorities indicate that given the resources available FagorBrandt would not be able to overcome its difficulties without state aid. According to France, the direct grant of EUR 31 million will enable FagorBrandt to finance half the cost of its restructuring (8).

(11)

The group (‘楩agorBrandt‘� belongs indirectly to Fagor Electrodomésticos S Coop (‘楩agor‘�, a cooperative incorporated under Spanish law. The cooperative‘檚 capital is divided among approximately 3 500 members (worker-cooperators), none of whom may hold more than 25 %.

(12)

Fagor in turn forms part of a grouping of cooperatives called Mondrag贸n Corporaci贸n Cooperativa (‘楳CC‘�, within which each cooperative retains its legal and financial autonomy. Fagor belongs to the ‘楬ousehold‘�division of MCC‘檚 ‘業ndustry‘�sectoral group.

(13)

In 2007 FagorBrandt had a turnover of EUR 903 million. It is present in all segments of the large household appliances market, which can be broken down into three main product groups: washing appliances (dishwashers, washing machines, tumble driers, washer-driers), refrigeration appliances (refrigerators, chest and upright freezers) and cooking appliances (conventional ovens, microwave ovens, cookers, hobs, extractor hoods).

(14)

In the opening decision the Commission expressed doubts for the following five reasons: a risk of circumvention of the prohibition on restructuring aid to newly created firms; a risk of circumvention of the obligation to reimburse incompatible aid; doubt about the restoration of the firm‘檚 long-term viability; inadequacy of the compensatory measures; and doubt about whether the aid was limited to the necessary minimum, and in particular about the aid recipient‘檚 contribution.

(15)

FagorBrandt was established in January 2002: accordingly, for the purposes of point 12 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (‘the restructuring aid guidelines‘� (9), it was a ‘榥ewly created firm‘�until January 2005, that is, three years after it was set up. This means that, both at the time when the company benefited from the tax exemption provided for in Article 44 septies of the French General Tax Code (‘the Article 44 septies aid‘� and at the time when, in December 2003, the Commission declared that that aid was incompatible and ordered its recovery (10), FagorBrandt was a newly created firm. Pursuant to point 12 of the restructuring aid guidelines, therefore, it was ineligible for restructuring aid. Consequently, the delay by France in recovering the aid declared incompatible in December 2003 until the time when the company no longer constituted a newly created firm, and became eligible for restructuring aid, might constitute a circumvention of the prohibition in point 12 of the restructuring aid guidelines

(16)

Observing that the notified aid seemed to serve largely to finance the reimbursement of the Article 44 septies aid, the Commission expressed concerns that it might constitute a circumvention of the obligation to reimburse that incompatible aid, rendering its recovery meaningless and redundant.

(17)

As regards the restoration of the company‘檚 long-term viability, the Commission expressed two concerns. First, observing that the turnover forecast for 2007 was approximately 20 % up on the previous year, it wondered what factors that forecast was based on. Secondly, it noted that the restructuring plan did not indicate how FagorBrandt intended to reimburse the incompatible aid received by its Italian subsidiary.

(18)

The Commission doubted whether the absence of compensatory measures additional to those already taken as part of the restructuring plan was acceptable. It drew attention to the following:

(19)

Finally, the Commission expressed doubts about whether the requirements of points 43 and 44 of the restructuring aid guidelines were met. Firstly, the French authorities had not included the reimbursement of the Article 44 septies aid in the costs of restructuring, and secondly they had not explained where certain amounts classed as ‘榬ecipient‘檚 own share‘�came from.

(20)

Electrolux states that, in order to meet the challenges of global competition, it has implemented major and very costly restructuring plans. To remain competitive, the company has had to take drastic measures such as closing eight plants in western Europe, the output of which has been mainly relocated to other existing plants in Europe and to new plants in Poland and Hungary. Most companies in the large electrical household appliances sector have carried out similar restructuring operations. Consequently, Electrolux is unhappy at the possibility of FagorBrandt receiving a subsidy to help it cope with a situation which the rest of the sector is having to manage without similar assistance. The aid will distort competition at other companies‘�expense.

(21)

First of all, this competitor, which wishes to remain anonymous, considers that the planned aid will not enable the recipient to restore its long-term viability. It is of the opinion that substantial industrial reorganisation is needed if the company is to survive. It believes FagorBrandt will have insufficient means with which to finance the necessary investment. Nor will the aid enable FagorBrandt to attain the size needed to improve its position in negotiations with the major distributors, which prefer suppliers with a larger presence in the European Union.

(22)

Secondly, it considers that the aid is not limited to the necessary minimum, inasmuch as FagorBrandt could obtain the financing needed for its restructuring from its shareholder and from the cooperative to which its shareholder belongs (MCC, of which the bank Caja Laboral forms part).

(23)

Thirdly, it considers that the aid is likely to affect competition and trade between Member States. Most companies in the sector have their manufacturing base in Europe and can therefore be considered European. Asian and Turkish competitors have a significant presence only in certain product areas. FagorBrandt is the fifth largest operator at European level, with a strong position in the French, Spanish and Polish markets. The competitor considers, therefore, that in the absence of compensatory measures the Commission cannot declare the aid compatible.

(24)

Fourthly, the granting of unlawful aid by France and Italy in the past leads to two conclusions: firstly, FagorBrandt‘檚 difficulties are recurring, raising the question of its viability; and secondly, the notified aid will probably be used to reimburse unlawful aid, thereby circumventing the reimbursement obligation.

(25)

FagorBrandt‘檚 comments are similar to those of the French authorities, which are summarised below.

(26)

Regarding a possible circumvention of the prohibition on restructuring aid to newly created firms, the French authorities do not contest that, in accordance with point 12 of the restructuring aid guidelines, FagorBrandt was to be considered ‘榓 newly created firm‘�during the three years following its formation. They point out, however, that the question of the possibility of restructuring aid to FagorBrandt started to be posed only in 2006, following the difficulties first encountered in 2004 and the company‘檚 worsening financial situation in 2005, that is to say during the fifth year of its existence. In other words, the company had no reason to seek restructuring aid before being in a situation calling for such aid, a situation which came about in 2006. The question of a possible circumvention of the ‘three year‘�rule therefore simply does not arise.

(27)

Regarding the possibility that the notified aid deprives the reimbursement obligation of its effectiveness, France states that the company‘檚 difficulties are not caused only by the reimbursement of the aid. The financial difficulties began in 2004 and the situation grew much worse in 2005 and 2006. As the Commission concluded in the opening decision, the company is indeed ‘榠n difficulty‘�within the meaning of the restructuring aid guidelines. France concludes from this that the company is eligible on this score for restructuring aid if the other conditions for such aid are otherwise met. The question whether the company might survive beyond 2007 or 2008 if it did not have to reimburse the aid is irrelevant, as the reimbursement of the aid is obligatory and has been so since the Commission‘檚 negative decision on the Article 44 septies scheme in 2003. It is therefore in point of fact the accumulation of financial difficulties that justifies the request for aid, these difficulties being the result of the restructuring costs already borne by the company, the ongoing state of the restructuring process and all the other costs the company has to take into account, among which is the aid reimbursement.

(28)

Regarding the restoration of long-term viability and the two corresponding doubts raised in the opening decision, the French authorities make a number of comments. The forecast 20 % growth in turnover in 2007 compared with 2006 is due primarily to the change in scope of FagorBrandt‘檚 activities in 2006. As for the failure to take into account the reimbursement of the unlawful aid received by the Italian subsidiary (against the background of the takeover by Brandt Italia of the electrical household appliance business of Ocean SpA), this reimbursement should not affect the company‘檚 viability, given that the amount ultimately borne by Brandt Italia should be less than EUR 200 000, the balance being borne by the vendor of the business in question.

(29)

Regarding the absence of compensatory measures, France points out that in 2004 the company sold Brandt Components (Nevers plant). The company has also reduced its production capacity by ceasing manufacture of chest freezers and freestanding microwave ovens. France maintains that the aid has caused very little distortion and that this reduces the need for compensatory measures. FagorBrandt has a [0-5] % (13) share of the European market, which is very little compared with its main competitors. The French authorities consider, moreover, that the company‘檚 presence in the market helps to prevent oligopoly situations from arising. During the formal investigation procedure, the French authorities offered to take additional compensatory measures.

(30)

Regarding the Commission‘檚 doubts about the limitation of the aid to the minimum and the recipient‘檚 own contribution, the French authorities make the following comments. On the failure to take the reimbursement of the aid into account in the costs of restructuring, they point out that the reimbursement of incompatible aid cannot, prima facie, be counted as a restructuring cost. As for the ‘榬ecipient‘檚 own share‘� as it is called in the notification (effort propre du bénéficiaire), the French authorities explain that this consists of bank loans.

(31)

In response to Electrolux‘檚 comments, France states that the restructuring measures taken by Electrolux and other competitors were aimed not at remedying a difficult economic situation but at bolstering positions in the large electrical household appliance market. France accordingly considers that there is no comparison between the situations of FagorBrandt and its competitors, which in any case have far greater financial resources at their disposal owing to their much bigger size.

(32)

In response to the comments concerning FagorBrandt‘檚 long-term viability put forward by the company requesting anonymity, the French authorities state, firstly, that FagorBrandt has taken measures aimed initially at stemming losses and strengthening margins so as to be able ultimately to attain a better position in the market, notably by developing [‘.

(33)

Concerning, secondly, the assertion that the aid is not limited to the minimum, inasmuch as FagorBrandt could obtain financing from its shareholders, the French authorities point out that MCC is a cooperative movement, not a holding company. In this cooperative movement, each cooperative, including Fagor and the bank Caja Laboral, is autonomous, and depends on the decisions of its own worker-cooperators, who are its owners. FagorBrandt can therefore count on the financial support only of Fagor, to the extent of the latter‘檚 existing capabilities. The acquisition of FagorBrandt has reduced the amount of cash available to Fagor, and Fagor cannot now provide any financing above a certain threshold.

(34)

Thirdly, in answer to the supposed negative impact on competition, the French authorities point to contradictions in the comments from the interested party requesting anonymity. On the one hand, that party asserts that the aid would affect competition in the European market, while on the other it states that FagorBrandt is too small compared with the majors and that this threatens its viability. Moreover, as regards the absence of compensatory measures, the French authorities indicate that they have already taken meaningful compensatory measures and that they propose to take further such measures.

(35)

Fourthly, in answer to the statements based on the earlier award of unlawful aid by France and Italy, France points out that those unlawful aid measures were directed, not at a restructuring programme for the company, but at a scheme to promote the maintenance of employment in France. It stresses, moreover, that, on the basis of the information FagorBrandt provided to the Commission on 17 December 2007, there is no actual relationship between the amount of aid granted (approximately EUR 20 million net after tax) and the amount of incompatible aid (approximately EUR 27,3 million including interest). Furthermore, the restructuring costs are estimated at EUR 62,5 million and hence are significantly higher than the amount of restructuring aid sought. Finally, France points to the fungible nature of the expenditure.

(36)

As regards the comments submitted to the Commission by FagorBrandt, the French authorities state that they cannot but agree with these clarifications, all the more so since they complement their own observations.

(37)

The Commission considers that the measure constitutes state aid within the meaning of Article 107(1) of the TFEU. It takes the form of a grant given by the French Government, and is consequently financed out of state resources and is imputable to the State. It is aimed solely at FagorBrandt, and is thus a selective measure. The grant favours FagorBrandt by providing it with additional resources and preventing it from having to cease trading. It therefore threatens to distort competition between manufacturers of large electrical household appliances. In the market for large electrical household appliances there is extensive trade between Member States. The Commission concludes that the notified measure constitutes state aid. France does not dispute that conclusion.

(38)

Article 107(1) of the TFEU imposes a general ban on state aid, and Article 107(2) and (3) provide for exceptions. The exceptions in Article 107(2) of the Treaty are clearly not applicable here.

(39)

As for the exceptions in Article 107(3), the Commission would point out that the objective of the aid is not regional, and the exception in point (b) is clearly not applicable, so that only the exception in point (c) can apply. This provides for the authorisation of state aid granted to facilitate the development of certain economic activities, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. It is common ground that the aid at issue was granted with a view to restoring the long-term viability of a firm in difficulty. How the Commission assesses the compatibility of such aid is explained in the restructuring aid guidelines. It is therefore those guidelines that will serve as the legal basis for the assessment. The Commission considers that no other Community rules could apply in the present case. France has, moreover, invoked no other exception provided for in the TFEU. Nor has any of the interested parties criticised this choice of legal basis, which was already announced in the opening decision.

(40)

The General Court has held that when one of its decisions is annulled the Commission is required to base its new analysis solely on information which was available to it at the time it adopted the decision (14), which in this case is 21 October 2008.

(41)

No account is to be taken of events that may have taken place after 21 October 2008. Changes that may have taken place in the market or in the situation of the recipient of the aid must be excluded from the analysis. Nor will the Commission consider the period of implementation of the restructuring plan from October 2008 onward (15).

(42)

In the same way, the Commission is not under an obligation to start the investigation of the case afresh or even to supplement it by resorting to new technical expertise (16). The annulment of an act concluding an administrative proceeding which comprises several stages does not necessarily entail the annulment of the entire procedure prior to the adoption of the contested act. In cases, such as the present one, where, in spite of the fact that investigation measures have been taken allowing an exhaustive analysis to be made of the compatibility of the aid, the analysis carried out by the Commission is incomplete, thus making the decision unlawful, the procedure for replacing that decision can be resumed at that point by means of a fresh analysis of the investigation measures taken previously (17).

(43)

Since the Commission is required to base its new analysis solely on information which was available to it in October 2008, information in respect of which both the French authorities and FagorBrandt have already defined their position, it is unnecessary to consult them afresh (18). Finally, the right of interested parties to submit their comments was ensured when the opening decision was published in the Official Journal (19), and there is no provision in Regulation No 659/1999 requiring that that opportunity be made available to them again where the original plan has been amended during the investigation procedure (20).

(44)

The present decision is accordingly based solely on the information available on 21 October 2008.

(45)

In order to be eligible for restructuring aid, the company must first qualify as a firm in difficulty as defined in section 2.1 of the restructuring aid guidelines.

(46)

In paragraph 24 of the opening decision, the Commission indicated that the company appeared to be in difficulty within the meaning of point 11 of the restructuring aid guidelines. In paragraph 27 of the opening decision, the Commission also indicated that, in line with the scenario in point 13 of the restructuring aid guidelines, the company‘檚 difficulties had become too serious to be dealt with by its Spanish shareholder. Disagreeing with this preliminary assessment, the competitor requesting anonymity took the view that FagorBrandt could obtain from Fagor and MCC whatever financial support it needed to overcome its difficulties. It must therefore be considered whether the preliminary assessment contained in the opening decision needs to be modified. The Commission would observe that the competitor bases its assertion on a press article (21) which seems to indicate that Fagor can easily raise funds on the financial markets. It should be noted, however, that the article in question dates from April 2005 and that Fagor‘檚 financial situation deteriorated markedly thereafter. The French authorities point out in this connection that Fagor‘檚 financial debts (not including those of FagorBrandt) trebled in 2005, following the acquisition of all of FagorBrandt‘檚 shares and heavy industrial investment by Fagor. Moreover, Fagor injected EUR 26,9 million of capital into FagorBrandt in 2006. All of this almost exhausted the debt-servicing capacity of the cooperative, the indebtedness ratios of which greatly exceeded the generally permitted limits.

(47)

The French authorities have also explained that the FagorBrandt group‘檚 sole shareholder, Fagor, is a cooperative society incorporated under Spanish law. Fagor‘檚 capital is divided among approximately 3 500 members, all of them worker-cooperators; no member may hold more than 25 % of the capital.

(48)

As a result of this legal form Fagor is unable to launch increases in capital open to outside subscribers. In order to increase its capital it would have to rely on its own members, whose financial capacity is limited to their own personal savings. To finance its development the only courses open to it are to borrow from banks or to issue bonds.

(49)

MCC is a grouping of cooperatives of which Fagor forms part. Each cooperative in the grouping retains its legal and financial autonomy. In other words, there are no capital links between Fagor and MCC. MCC is a cooperative movement, not a holding company. In this grouping each cooperative, including Fagor and the bank Caja Laboral, is autonomous, and depends on the decisions of its own worker-cooperators, who are its owners. The relations between MCC and its members are not those of a conventional capital-based group.

(50)

As a result of its legal form, MCC could not raise funds as a public limited company might, and cannot be considered a parent company for purposes of point 13 of the restructuring aid guidelines. FagorBrandt could therefore count on the support only of its parent association Fagor, to the extent that its capacity to contribute permitted.

(51)

The Commission considers, therefore, that there is no need to revise the assessment contained in the opening decision as regards the company‘檚 eligibility under points 11 and 13 of the restructuring aid guidelines.

(52)

Regarding the company‘檚 eligibility under the conditions set out in section 2.1 of the restructuring aid guidelines, the opening decision raises only one concern, namely the possible circumvention of the prohibition on restructuring aid to newly created firms (see section 3 above, ‘楪rounds for initiating the procedure‘�.

(53)

The Commission has analysed the company‘檚 financial situation, which is illustrated by Table 1 below. Clearly, during the first three years of its existence, the company ‘�even if it had reimbursed the Article 44 septies aid ‘�did not satisfy the tests of points 10 and 11 of the restructuring aid guidelines for being considered in difficulty As regards point 10 of the restructuring aid guidelines, even if the company had reimbursed the EUR 22,5 million of aid in 2004 (that is to say, in the months following the Commission‘檚 final negative decision), it would still not have lost half of its capital in 2004. As regards point 11 of the restructuring aid guidelines, even if the company had reimbursed the EUR 22,5 million of aid in 2004, it would have posted only one loss-making year (2004), which is insufficient for it to be considered in difficulty under that point. It was from 2005 onwards that the financial difficulties of the FagorBrandt group increased, with the result that the company might be considered a firm in difficulty within the meaning of the restructuring aid guidelines (that is to say, a firm which is unable to stem losses ‘榳hich, without outside intervention by the public authorities, will almost certainly condemn it to going out of business in the short or medium term‘�, starting possibly from the following year (bearing in mind the obligation to reimburse the Article 44 septies aid), but definitely from 2007.

Table 1

(54)

The Commission also notes that in the first quarter of 2005 the Fagor group decided to buy 90 % of the company‘檚 shares at a cost of EUR [150‘�00] million. This would indicate that the market did not consider the company to be in difficulty within the meaning of the restructuring aid guidelines, that is to say to be a company which, without outside intervention by the public authorities, was almost certainly condemned to go out of business in the short or medium term.

(55)

On the basis of the above, the Commission considers that the company, which was established in January 2002, could not be deemed to be in difficulty during its first three years of existence even if it had reimbursed the Article 44 septies aid immediately. Consequently, it considers that the fact that France had not yet recovered the Article 44 septies aid in January 2005 ‘�three years after the creation of FagorBrandt ‘�did not have the effect of artificially keeping afloat a company which would otherwise have exited the market. It also considers that, during that period, the company had no reason to seek restructuring aid. The Commission accordingly takes the view that the fact that in January 2005 France had not yet recovered the Article 44 septies aid does not constitute a circumvention of the prohibition on restructuring aid in favour of newly created firms within the meaning of point 12 of the restructuring aid guidelines.

(56)

In conclusion, the doubts about the company‘檚 eligibility have been removed and the Commission considers that the conditions laid down in section 2.1 of the restructuring aid guidelines are fulfilled.

(57)

On the basis of point 23 of the restructuring aid guidelines and the fact that the notified aid was prima facie aimed mainly at financing the reimbursement of the Article 44 septies aid, the Commission stated in paragraph 30 of the opening decision that it had misgivings about whether the notified aid constituted a circumvention of the reimbursement obligation and rendered that obligation meaningless and redundant.

(58)

In assessing this question, the Commission has taken into account the following factors.

(59)

Firstly, according to settled case-law, the reimbursement of incompatible aid with interest makes it possible to re-establish the situation which existed before the aid was granted and hence to eliminate the resulting distortion of competition. Consequently, in the present case, the reimbursement of the Article 44 septies aid with interest ‘�which is a precondition for the payment of the new aid ‘�is intended to re-establish the situation which existed before the aid was granted.

(60)

Secondly, the company is eligible for restructuring aid. First of all, its financial difficulties do not stem primarily from the reimbursement of the incompatible aid. They stem from other sources, which are at the root of the losses incurred since 2004 (see Table 1 above). The future reimbursement of the incompatible aid will merely worsen these difficulties to a point where the company can no longer face up to them without state aid. Secondly, a business restructuring plan costing EUR 62,5 million has been implemented. This shows that the operational restructuring needed to re-establish business profitability is engendering very substantial costs ‘�more substantial than the reimbursement of the Article 44 septies aid, which comes to EUR 22,5 million, not including interest. These elements indicate that FagorBrandt is a firm in difficulty whose existence is in danger. It can, therefore, like any company in such a situation, receive restructuring aid if it satisfies the other conditions laid down in the restructuring aid guidelines.

(61)

Thirdly, in its 1991 decision in the Deggendorf case, the Commission, observing that ‘楾he cumulative effect of the illegal aid which Deggendorf has been refusing to repay since 1986 and the present new ‘�aid would give it an excessive and undue advantage which would adversely affect trading conditions to an extent contrary to the common interest‘� considered the new aid compatible on condition that ‘楾he ‘�authorities ‘�suspend payment to Deggendorf of the aid ‘�until such time as they have recovered the incompatible aids‘�a href="#ntr22-L_2013166EN.01000101-E0022" id="ntc22-L_2013166EN.01000101-E0022" shape="rect"> (22)