Article 5
This Decision is addressed to the Italian Republic. Done at Brussels, 5 June 2002. For the Commission Mario Monti Member of the Commission (1) OJ C 220, 31.7.1999, p. 14. (2) See footnote 1. (3) Judgment of the Court of First Instance in Joined Cases T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to 607/97, T-1/98, T-3/98 to T-6/98 and T-23/98 [2000] ECR II-2319. (4) Normally through a separate administrative accounting entity known as a municipal undertaking (azienda municipalizzata). (5) Although, under Article 5(1) of Decree No 902 of 4 October 1986, a municipality may, with the agreement of other interested municipalities, widen the territorial scope of its undertaking to the territories of those municipalities. However, Italian case-law has imposed strict conditions on this possibility: see, for instance, Council of State No 1291, Session IV of 29 September 1988, No 1159, Session V of 3 August 1995, No 1374, Session V of 14 November 1996. (6) See for instance Court of Cassation, Sezioni unite, No 4989, 6.5.1995. (7) As converted and amended by Law No 80 of 15 March 1991. (8) Converted into Law No 427 of 29 October 1993. (9) The provisions stipulate that the same tax regime applicable to a local authority controlling joint stock companies set up under Law No 142/90 applies to the joint stock company itself for three years after incorporation. As a result, the latter qualifies for the three-year income tax exemption. (10) Comments from the Italian authorities of 28 October 1999 and 21 December 2001. (11) AEM and ACEA comments of 21 January 2000, paragraph 28. (12) AMGA comments of 11 April 2000, paragraph 23. It is not clear whether the comments refer to the same tender mentioned by AEM and ACEA in their comments of 21 January 2000. (13) OJ L 83, 27.3.1989, p. 1. (14) See footnote 3. (15) Case C 45/93 (N 663/93) (OJ C 100, 9.4.1994, p. 9). (16) Case N 199/99 (Dutch local public transport services) (OJ C 379, 31.12.1999, p. 11.) (17) Italian authorities' observations of 2 August 1999, p. 10. (18) See Decree-law No 284 of 1 September 1999. (19) See section 3. (20) In its decision, the Commission had reserved the right to investigate individual grants of aid made under the scheme (section 3). (21) Judgment in Case 248/84 Germany v Commission [1987] ECR 4013, paragraphs 17 and 18; Judgment in Case C-47/91 Italy v Commission [1994] ECR I-4635, paragraphs 20 and 21; Judgment in Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph 48; Judgment in Joined Cases C-15/98 and C-105/99 Italy and Sardegna Lines v Commission [2000] ECR I-8855, paragraph 51. (22) In their letter of 2 August 1999, the Italian authorities stated that some 100 joint stock companies were incorporated pursuant to Law No 142/90. In their letter of March 2000, they provided a list of 31 joint stock companies that benefited from the tax measures under examination. As the tax measures at issue are applicable to any joint stock company at the moment of incorporation, it is not even clear how many beneficiaries are involved. (23) Case C-6/97 Italian Republic v Commission [1999] ECR I-2981, paragraph 16. (24) Case C-305/89 Italy v Commission [1991] ECR I-1603, paragraph 13. (25) Decree-law No 284/1999. (26) See Case C-83/98 P France v Ladbroke Racing and Commission [2000] ECR I-3271, paragraph 50, and Case C-482/99 France v Commission, judgment of 16 May 2002, not yet reported, paragraph 37. See also Case T-358/94 Air France v Commission [1996] ECR II-2109, paragraphs 65 to 68. (27) See Case C-482/99 France v Commission, op cit., paragraphs 55 and 56. (28) Judgment in Case C-387/92 Banco Exterior [1994] ECR I-877, paragraph 13. (29) See Case C-387/92 Banco Exterior, op cit. (30) Italian authorities' comments of 2 August 1999, p. 4. (31) Case C-142/87 Belgium v Commission [1986] ECR 231. (32) Case T-16/96 Citiflyer [1998] ECR II-0757. (33) Reference rate for the monitoring of State aid as defined by the Commission notice on the method for setting the reference and discount rates (OJ C 273, 9.9.1997, p. 3), as amended by Commission notice (OJ C 241, 26.8.1999, p. 9). (34) See Case 730/79 Philip Morris [1980] ECR 2671, paragraph 11 and the opinion of the Advocate General; see also Case 259/85 [1987] ECR 4393, paragraph 24. See also the opinion of the Advocate General in Case C-280/00 Altmark not yet published, paragraph 103, where he notes that this requirement is very easy to fulfil since it can be assumed that any State aid distorts or threatens to distort competition. (35) This risk of distortion of competition is real. It is well known and there is confirmation from information in the Commission's possession that some joint stock companies have entered other markets which do not fall within the definition of local public services given by the Italian authorities. (36) See Case 730/79, paragraph 11, and Case 259/85, paragraph 11 (see footnote 34). (37) Case C-75/97 Maribel bis/ter [1999] ECR I-3671. (38) Case C-310/99 Italy v Commission, judgment of 7 March 2002, not yet reported. (39) This, however, does not apply to all the sectors that have been indicated by Italy as the main sectors for the joint stock companies. For instance, it does not apply to the retail sale of pharmaceutical products and services relating to waste. (40) Section 3(3). (41) It should be borne in mind that the award of a concession to a third undertaking is one of the possibilities under Law No 142/90 that is available to municipalities in organising the provision of local public services. (42) See Commission interpretative communication on concessions under Community law (OJ C 121, 29.4.2000, p. 2). (43) See Commission Decision of 14 October 1998 Société Marseillaise de crédit (OJ L 198, 30.7.1999, p. 1), Case C-475/99 Ambulanz Glockner [2001] ECR I-8089, paragraph 49, and the opinion of the Advocate General in the same case, paragraph 170. (44) The Commission does not need to base its appraisal of the effect on trade on evidence of the real effect of the aid on competition or trade between Member States (see Joined Cases T-204/97 and T-270/97 EPAC [2000] ECR II-2267, paragraph 85, Joined Cases T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to 607/97, T-1/98, T-3/98 to T-6/98 and T-23/98 Alzetta Mauro [2000] ECR II-2319, paragraph 76. (45) Joined Cases T-132/96 and T-143/96 Volkswagen [1999] ECR II-3663, paragraph 211; Joined Cases T-447/93, T-448/93 and T-449/93 Associazione Italiana Tecnico Economica del Cemento, British Cement Association, Blue Circle Industries plc, Castle Cement Ltd, The Rugby Group plc and Titan Cement Company SA v Commission [1995] ECR II-1971, paragraphs 139 and 140. (46) Infringement proceedings No 1999/2184, letter of formal notice dated 8 November 2000. (47) Case C-142/87 Tubemeuse [1990] ECR I-959, paragraphs 42 and 43; Case C-310/99 Italy v Commission, judgment of 7 March 2002, not yet reported, paragraph 86. (48) Case C-142/87 Kingdom of Belgium v Commission [1990] ECR I-959, paragraph 35; Case 102/87 French Republic v Commission [1988] ECR 4067, paragraph 19; Case C-75/97 Kingdom of Belgium v Commission (Maribel bis/ter scheme) [1999] ECR I-3671, paragraph 49; Joined Cases T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to 607/97, T-1/98, T-3/98 to T-6/98 and T-23/98 Alzetta Mauro [2000] ECR II-2319, paragraph 91; Case T-55/99 CETM [2000] ECR II-3207, paragraph 86. (49) See the Community guidelines on State aid for small and medium-sized enterprises (OJ C 213, 19.8.1992, p. 2); the Commission notice on the de minimis rule for State aid (OJ C 68, 6.3.1996, p. 9 and Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid (OJ L 010, 13.1.2001, p. 30). (50) For example, ACEA and AEM entered the telecommunications market; AMGA has declared that it is also involved in the supply of network management software and specialised services to other undertakings, e.g. in the water distribution sector. (51) In so far as it could be argued that the measures in question are not State aid because they offset the net cost of a service of general economic interest, see the reasoning below concerning compatibility within the meaning of Article 86(2). (52) Case 173/73 Italy v Commission [1974] ECR 709. Commission notice on the application of the State aid rules to measures relating to direct business taxation (OJ C 384, 10.12.1998, p. 3, point 12). (53) Parliamentary acts of the XIIth Legislature, Senate of the Republic, p. 18, No 2157. (54) Essentially, the choice facing the municipality is whether to limit the operation of its undertaking to the provision of local public services within its own territory or to set up a company that is entitled to operate in different economic sectors and wherever it can seize business opportunities. (55) See footnote 3. (56) Italian authorities' observations of 2 August 1999, p. 10. At the same time, the Italian authorities suggested that the joint stock companies also engage in activities open to competition. In addition, AMGA, one of the firms that submitted comments, after denying the existence of any competition, acknowledges that, in reality, there was some competition. Indeed, in point 35 of its observations of 11 April 2000, it argued the three-year income tax exemption was aimed at removing a distortion of competition. (57) Case C-44/93 [1994] ECR I-3829. (58) Op. cit., paragraphs 23 and 24. (59) Parliamentary acts of the XIIth Legislature, Senate of the Republic, p. 18, No 2157. The relevant part reads as follows: "on the ground that 'new' subjects would not have benefited from the not inconsiderable tax concessions granted to the local bodies (exemption from income tax (IRPEG) and local income tax (ILOR)) (...) a 'moratorium' is provided for (...) which is intended to remove the disincentives connected with the sudden loss of all tax concessions". (60) AMGA, ACEA and AEM, by acknowledging that the measure constitutes existing aid, recognise that, in the absence of the new legislation, the simple conversion of municipal undertakings would have entailed the application of income tax to the joint stock companies (see AMGA observations of 11 April 2000, paragraph 11, and ACEA and AEM observations of 21 January 2000, point 7). (61) As the Italian Court of Cassation (meeting in plenary session) has stated, "Le SpA a prevalente capitale pubblico locale sono da considerarsi a tutti gli effetti soggetti societari privati ..." (joint stock companies with public majority shareholding must be regarded as private companies for all purposes); judgment of 6 May 1995, No 4989. Indeed, joint stock companies set up under Law No 142/90 were and are operating outside the territory of the controlling municipality even outside Italy or have entered markets that are not markets in local public services. (62) See AEM and ACEA comments of 21 January 2000, point 42. (63) OJ C 288, 9.10.1999, p. 2. The previous Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 368, 23.12.1994, p. 12) and the rules set out in 1979 in the Eighth Competition Report (points 177, 227 and 228) apply to aid granted before publication of the new guidelines in the Official Journal. For the purposes of this case, the content of all these rules is identical and the application of any set of rules has no impact on the assessment. (64) See comments of 21 January 2000, recital 6. (65) See recital 26. (66) See footnote 16. (67) OJ C 17, 19.1.2001, p. 4. (68) Point 22 of the Communication. (69) Case C-159/94 GDF [1997] ECR I-5815, paragraphs 94 and 101. (70) Case C-156/98 Germany v Commission [2000] ECR I-6857, paragraph 78.