2005/262/EC: Commission Decision of 20 April 2004 on the aid implemented by France in favour of the Coopérative d'exportation du livre français (CELF) (notified under document number C(2004) 1361)Text with EEA relevance.


Published: 2004-04-20

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L_2005085EN.01002701.xml

2.4.2005   

EN

Official Journal of the European Union

L 85/27

COMMISSION DECISION

of 20 April 2004
on the aid implemented by France in favour of the Coopérative d'exportation du livre français (CELF)
(notified under document number C(2004) 1361)
(Only the French text is authentic)
(Text with EEA relevance)
(2005/262/EC)
THE COMMISSION OF THE EUROPEAN COMMUNTIES,
Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,
Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,
Having called on interested parties to submit their comments in accordance with the above Articles (1), and having regard to those comments,
Whereas:
I.   PROCEDURE

(1)

By judgment of 28 February 2002 (2), the Court of First Instance of the European Communities annulled the last sentence of the Article 1 of Commission Decision 1999/133/EC of 10 June 1998 concerning State aid in favour of the Coopérative d'exportation du livre français (CELF) (3), which stated that:
‘The aid granted to CELF for the handling of small orders of books in the French language constitutes aid within the meaning of Article 92(1) of the EC Treaty. As the French Government failed to notify the aid to the Commission prior to its implementation, the aid has been granted unlawfully. It is, however, compatible aid as it satisfies the conditions for derogation under Article 92(3)(d) of the Treaty’ (4).

(2)

The judgment followed a long procedure, the principle stages of which are set out below.
A.   FIRST STAGE OF THE PROCEDURE

(3)

By letter dated 20 March 1992, the Société internationale de diffusion et d'édition (SIDE), which presented itself as ‘a French firm that exports books and has to compete with a publishers' cooperative receiving State aid’ (5), drew the Commission's attention to aid measures for promotion, transport and marketing granted by the French authorities to CELF, which aid had not been notified to the Commission's services in advance in breach of Article 93(3) (now Article 88(3)) of the Treaty.

(4)

By letter dated 2 April 1992, the Commission pointed out to the French authorities that any plans to grant or alter aid must be notified in advance to its services and asked the said authorities to inform it about the nature and purpose of the aid measures referred to by SIDE.

(5)

By letter dated 29 June 1992, the French authorities confirmed to the Commission the existence of grants to CELF. They explained that the measures were designed to make French literature and language known in non-French-speaking countries and that Celf had been asked to manage three schemes of ad hoc aid designed to facilitate access by readers in far-off places to French books.

(6)

By letter dated 7 August 1992, the Commission confirmed to SIDE the existence of aid to CELF, explained its purpose and informed the company that the measures in question had not been notified. It stated, however, that the disputed aid did not seem likely to adversely affect trade between Member States. SIDE was accordingly asked to submit its comments.

(7)

By letter dated 7 September 1992, SIDE informed the Commission that it intended to object to the discriminatory nature (6) of the measures and the consequences for intra-Community trade, without however disputing the cultural objective of the Ministry of Culture, which was to see the spread of the French language and French literature.

(8)

Having assessed the disputed measures, the Commission did not endorse SIDE's objections and considered, by Decision dated 18 May 1993 (7), that, given the special nature of competition in the book trade and the cultural purpose of the aid schemes in question, the derogation provided for in Article 92(3)(c) (now Article 87(3)(d)) of the Treaty applied to them.

(9)

SIDE, by application dated 2 August 1993, filed an action for annulment of the Decision with the Court. By judgment of 18 September 1995 (8), the Court partially granted SIDE's request, annulling the Commission Decision of 18 May 1993 but only as regards certain measures in favour of small orders.

(10)

The Court also upheld the following three aid schemes administered by CELF on behalf of the State:
(a)

subsidies for air freight or airmail;

(b)

the Page à page programme (9) (aid for the dissemination of French-language books in the countries of central and eastern Europe);

(c)

Programme Plus (university textbooks in French for students in sub-Saharan Africa).

(11)

The Court held that the Commission had obtained sufficient information on the three schemes to justify the finding that the impact of their operation on the rules of competition was negligible. The Court pointed out in particular that it was possible for any operator meeting the specific conditions of the schemes to apply to CELF for a grant. It stated that SIDE had not provided any evidence to show that the granting of aid under the three schemes was likely to affect trade between Member States.

(12)

The Court concluded that the Commission was able to adopt a favourable decision concerning the three aid schemes administered by CELF and that it could therefore reject SIDE's arguments as unfounded.

(13)

The Court stated that ‘as regards the cultural purpose of the aids at issue, it is common ground that the aim of the French Government is the spread of the French language and French literature’. The Court also found that the information available to the Commission when it adopted its Decision of 18 May 1993, including the facts contained in the letter from SIDE's board, dated 7 September 1992, was capable of supporting its assessment that that aim was a real and proper one. Accordingly, it felt bound to conclude that determining the cultural aim of the aid at issue did not pose any particular difficulties for the Commission and that it was not necessary for it to obtain further information in order to accept that their purpose was cultural.

(14)

As regards the compensation granted exclusively to CELF for small orders, the Court found, however, that the Commission should have thoroughly examined the conditions of competition in the sector concerned before expressing an opinion on the compatibility of the measures with the common market.

(15)

It concluded (paragraph 76 of the judgment) that the Commission should have initiated the inter partes procedure provided for by Article 93(2) (now Article 87(2)) of the Treaty and that the Commission Decision of 18 May 1993 should be dissolved, ‘in so far as it concerns the aid granted exclusively to CELF for the purpose of offsetting the extra cost involved in handling small orders of French-language books placed by booksellers established abroad’.
B.   SECOND STAGE OF THE PROCEDURE

(16)

By Decision dated 30 July 1996, the Commission decided, in accordance with the Court's judgment of 18 September 1995, to initiate a formal investigation into the aid in question. The decision to initiate was published in the Official Journal of the European Communities
 (10). Interested third parties were invited to submit their comments, and these were received in December 1996 and January 1997.

(17)

Following this examination, the Commission adopted a new, positive Decision: Decision 1999/133/EC.

(18)

On 28 September 1998, SIDE applied to the Court to annul the last sentence of Article 1 of the Decision 1999/133/EC.

(19)

The seven grounds of annulment cited by SIDE were as follows:
(a)

procedural defect;

(b)

inadequate reasoning;

(c)

factual error;

(d)

manifest error of assessment;

(e)

breach of the principle of non-discrimination;

(f)

breach of former Article 92(3)(d) (now Article 87(3)(d)) of the Treaty;

(g)

the disputed Decision is inconsistent with former Articles 85 and 86 (now Articles 81 and 82) of the Treaty.

(20)

By judgment dated 28 February 2002, the Court annulled the last sentence of Article 1 of the said Decision on the basis of the ‘manifest error of assessment’, without considering it necessary to examine the other grounds cited in the action.

(21)

Having stressed the principles stemming from Community case-law on the degree of product interchangeability, the Court considered that the Commission should have carried out the necessary checks to obtain the relevant data to enable it to distinguish the export agency market from that for the export of French-language books in general.

(22)

The Court found that by failing to carry out such a check the Commission committed a manifest error of assessment in selecting the export market for French-language books in general as the reference market, when it was established that the contested aid was intended only for export agencies.

(23)

The Court concluded that under these conditions the Commission was not able to assess appropriately the effects of the contested aid on the relevant market and therefore annuls the last sentence of Article 1 of Decision 1999/133/EC on this basis.

(24)

The French authorities applied to the Court of Justice of the European Communities on 8 September 1998 for Decision 1999/133/EC to be annulled, since it had set aside the application in the case in point of Article 90(2) (now Article 86(2)) of the Treaty. According to France, the disputed aid was intended to offset the costs of a service of general economic interest which had been assigned to CELF by the Ministry of Culture.

(25)

The French Government argued that under Article 92 and Article 93(2) and (3) (now Article 87 and Article 88(2) and (3)) of the Treaty, contrary to an existing aid, a new aid cannot be implemented before it has been declared compatible with the common market, except where the eligible undertaking qualifies for the derogations provided for in Article 90(2). France defended the view that the obligation of suspension was ‘necessarily’ inapplicable in the case of aid allocated to an undertaking responsible for administering a service of general economic interest.

(26)

The Court, in its judgment of 22 June 2000 (11), rejected the French claim without going into the substance of the case, having stressed the importance of the safeguard mechanism introduced by the last sentence of Article 93(3) (now Article 88(3)) of the Treaty. It stated that the fact that a Member State considers an aid to be compatible with the common market does not entitle it ‘to defy the clear provisions of Article 93 of the Treaty’.

(27)

Consequently, the Court rejected the French action and confirmed that the obligation of prior notification and the suspensive effect attaching to it are applied in an inseparable manner, since the fact that an aid may be covered by Article 86 of the EC Treaty has no bearing on the obligation to notify.

(28)

Lastly, SIDE lodged a complaint on 5 October 1999 with the Commission against CELF for restrictive practice and abuse of a dominant position under Articles 81 and 82 of the Treaty. SIDE also mentioned France as responsible under Article 10 of the Treaty, since it had encouraged the said anti-competitive practices.

(29)

This matter is being treated separately by the competent services of the Commission.
C.   THIRD STAGE OF THE PROCEDURE

(30)

Following the partial annulment of Decision 1999/133/EC, the Commission asked the French authorities and SIDE by letters dated 14 June 2002 to give their views on the reasons for the annulment of the decision and, in particular, on the aspects relating to the relevant market.

(31)

The French authorities were asked to comment in particular on the special features of the CELF offer compared with those of other market operators, including SIDE.

(32)

SIDE was asked to comment in particular on the notion of small orders and to indicate any special feature its offer might have compared with CELF's and those of the other market operators.

(33)

By letter dated 8 July 2002, SIDE asked for an extension in which to reply, which it was granted by letter dated 25 July 2002. The French authorities, which were to meet the Commission's services on 17 July 2002, also asked for an extension for their reply by letter dated 10 July 2002. This was granted by letter dated 1 August 2002.

(34)

SIDE sent its reply to the Commission by letter dated 12 August 2002. The French authorities sent their reply by letter dated 17 September 2002.

(35)

Having asked SIDE, by letter dated 19 September 2002, to say whether its reply contained confidential information, and having obtained a negative reply on 30 September 2002, the Commission, by letter dated 17 October 2002, sent SIDE's reply together with its annexes to the French authorities for comment. It also asked them some further questions on this occasion.

(36)

By letter dated 30 October 2002, the Commission also asked SIDE some further questions, to which the company replied by letters dated 31 October 2002 and 9 December 2002. SIDE informed the Commission, by letter dated 23 December 2002, following the Commission's request of 16 December 2002, that its replies contained no confidential information and could be sent to the French authorities for comment.

(37)

In the meantime, since the French authorities had not replied within the time limit, the Commission was obliged to send them a reminder by letter dated 27 November 2002. By letter dated 19 December 2002, the French authorities again requested the Commission for an extension.

(38)

On 9 January 2003, the Commission sent SIDE's reply of 23 December 2002 to the French authorities for comment. By letter dated 17 January 2003, the French authorities replied to the Commission's questions of 17 October 2002.

(39)

By letter dated 4 February 2003, the French authorities asked the Commission for a further extension (concerning the request for comments on SIDE's second reply, dated 23 December 2002). By letter dated 11 February 2003, the Commission granted the requested extension in part. By letter dated 11 March 2003, the French authorities sent their reply to the Commission.

(40)

In the meantime, SIDE was received by the Commission's services at its request and was able to explain its view of the case from the beginning at a meeting held on 4 March 2003.
II.   DESCRIPTION OF THE MEASURES IN QUESTION: AID AIMED AT MAINTAINING A PARTLY NON-PROFITABLE ACTIVITY

(41)

The Ministry of Culture decided in 1980, in accordance with the general policy guidelines of the French Government on promoting books and literature in French, to grant aid to export agencies accepting any type of order, irrespective of the amount and whether it was profitable. The measures were introduced to alleviate the effects of market failure and to foster the ‘small non-profitable orders’ activity in the export agency market.

(42)

The French authorities explain that small bookshops, established in basically non-French-speaking areas, and sometimes difficult of access and/or remote, were experiencing serious supply difficulties, since their orders could not be met by the traditional distribution channels when the quantities of books ordered were insufficient or when the unit price of the books ordered was not high enough to make the service profitable.

(43)

The operating grants in question were intended to encourage firms to approach such customers (bookshops, not final consumers), whom it had not been possible to serve under a ‘normal’ commercial relationship based solely on profit.

(44)

The aid in question was designed therefore to allow export agencies to meet all orders from booksellers established abroad in basically non-French-speaking areas, irrespective of amount, profitability and destination. The aim was to ensure, as part of France's policy of supporting cultural diversity, the optimum distribution of books in the French language, thus promoting the dissemination of French literature throughout the world.

(45)

The aid mechanism chosen by the French authorities, the Small Orders programme, consisted in an operating grant intended to offset the extra cost of handling small orders of FRF 500 (i.e. approximately EUR 76) or less.

(46)

Two other funding systems, direct aid to booksellers and direct aid to publishers, had been considered but had finally been rejected, as they were thought by the French authorities to be less efficient and more costly. The system challenged by SIDE had seemed the most rational economically and the safest as regards the use of public funds.

(47)

Under the Small Orders programme, the undertaking receiving the grants had to promise to provide the Book and Reading Directorate in the Ministry of Culture with all information concerning the general activity of the firm (overall turnover, financial accounts, provisional budgets, copies of the proceedings validating these figures, the auditor's report where appropriate, and a summary salary scale), and any documents relating to the activity to be subsidised, in particular the grant utilisation account, substantiating that the services giving rise to the grant awarded the previous year had been carried out.

(48)

In practice, only one firm, CELF, had qualified under the Small Orders programme. Every year it had to justify the extra costs incurred by the small orders service in support of its application for a grant for the following year (12).

(49)

Specifically, one quarter of the grant awarded the previous year was paid at the start of the year, the balance being awarded in the autumn, after the authorities had examined the provisional budget of the recipient firm and the changes recorded in the first part of the financial year.

(50)

It was agreed that if the amount of aid was not fully utilised, the balance would be deducted from the planned grants for the following year.

(51)

It should be explained that the aid was abolished in 2002 (see Annex I, table showing the trend of aid granted since 1980, in euro).
III.   COMMENTS FROM SIDE AND INTERESTED THIRD PARTIES
A.   REASONS FOR SIDE'S INTERVENTION

(52)

The object of SIDE (13), under Article 2 of its articles of association, is: ‘the sale in France and abroad of books, newspapers and magazines and all cultural products, publishing, the setting-up or acquisition and running of any similar business and, more generally, any industrial, commercial or financial operation, whether in movable or immovable assets, that can be linked directly or indirectly to the object of the company or is likely to facilitate its expansion or development’.

(53)

By letter dated 20 March 1992, SIDE lodged a complaint (14) with the Commission, following a refusal by the Ministry of Culture to grant it the aid described in Part II.

(54)

Basically, SIDE is asking the Commission to take a decision putting an end to the distortions of competition which it is suffering from on the market for the export of French-language books, the disturbances complained of being caused by the aid granted exclusively to CELF.

(55)

SIDE states that it refused to be granted the disputed aid, which it had been offered by the Ministry of Culture at a meeting held on 26 September 1996. It explains that it could not accept this late offer, which was made suddenly after the judgment of the Court of First Instance on 18 September 1995. It did not wish to benefit from a programme whose compatibility with Community law might be questioned by the Commission. It also explained that the offer had been made simply to get it to undertake to terminate the proceedings which it had itself initiated.

(56)

SIDE also says it was convinced that the activity of export agent did not require any aid. It therefore challenges the need for the Small Orders programme. However, it no longer rules out all possibility of using it in future, ‘so that its business can be run on a level playing field’, but only assuming that a mechanism which is clearly compatible with the Treaty rules is adopted by the French authorities.

(57)

SIDE states that ‘on the export agency market, operators whose turnover is basically generated by intermediaries such as bookshops and not end-users are regarded as “general” exporters’. The only general agencies, in its view, are CELF and SIDE. It also explains that there are exporting booksellers, who sell direct to end-users.

(58)

At a meeting on 4 March 2003, SIDE informed the Commission that it operates basically in western Europe. It also operates in the markets of eastern Europe, but not widely on account of the programme A l'est de l'Europe
 (15), from which CELF benefits. It also operates in North America and South-East Asia. It used to operate in Argentina, before the current crisis hit that country. It explained that it did not want to operate in Africa, since there are few interested customers in those territories, particularly in sub-Saharan Africa. It does not operate either in countries not covered by Coface (16).

(59)

SIDE disputes the French authorities' argument that large orders are profitable, whereas ‘small orders’ are not, which is the reason why they have to be subsidised in order to be met. It even adds, lastly, that small orders overall are more profitable to process than larger ones.

(60)

The notions ‘small orders’ and ‘profitability thresholds’, it explains, are arguments put forward by the French Government to try and justify the aid granted specifically for the operation of CELF under the cover of aid for processing small orders of French books for abroad, when in fact it is just a simple operating aid.

(61)

SIDE maintains there is no profitability threshold for the type of activity concerned. Economies of scale can of course be achieved when several copies of the same title are ordered at once. This is why its scale of discounts provides for an additional discount of 5 % for each order of 10 copies or more.

(62)

It states that the processing cost and profitability for all orders are the same, since only the number of order lines entered by one person in one day and the quantity of books for each line are significant. The total amount of the invoice issued has no influence on costing the service. A person entering 1 000 lines in one day takes exactly the same time as an order from a customer containing two or 100 lines, the only difference being that the customer has to be identified for each order from a different customer, which only takes a few seconds. The amount of turnover generated during a given period does not depend, therefore, on the number of customers but only on the number of lines entered during that period.

(63)

SIDE also states that, just like CELF, it accepts all orders sent to it whatever their amount, the solvency of the customer being its only selection criterion.

(64)

Some orders, however, may contain requests for works that are not listed and consequently require special searches; this type of order accounts for about 4,5 % of its business.

(65)

SIDE therefore considers that the aid granted to CELF for processing small orders enables that organisation to offer customers particularly attractive discounts, which SIDE cannot do itself.

(66)

Apart from challenging the principle that there are extra costs which justify the aid in question, SIDE highlights certain errors in the data from CELF's cost accounts, produced by the French authorities and used by the Commission in support of Decision 1999/133/EC. Thus it rejects the idea that there are extra costs associated with the tele-transmission of small orders, as identified in Decision 1999/133/EC. It also points out that some of the data taken from CELF's cost accounting, relating to social security contributions, are different to those pertaining to the same item in the firm's financial accounts, and that therefore the CELF accounting data notified by the French authorities are not relevant.

(67)

SIDE explains that it chose to include in its public listings only those publishers which offer the most attractive discounts. It adds that its list of publishers is much more restricted than CELF's, because it is not able to offer attractive discounts for all publishers, unlike CELF, which can do so as a result of the aid it receives and the special relations it maintains with publishers.

(68)

SIDE points out that it suffered a loss, since some of its customers switched from its services to CELF, which, on account of the aid it receives and the accommodating attitude of the publishers, offers particularly attractive discounts (17). It considers that by this means CELF acquired a dominant position on the export agency market.

(69)

It explains that it is now suffering another kind of loss resulting from the changes to the pricing policy of CELF, which it has been applying ‘for at least two years terms that discourage small accounts’ (18), (19). Now that CELF only receives a symbolic part of the disputed grants, and especially since they were completely abolished in 2002, small accounts are requesting SIDE's services. This new demand causes further loss for the company, ‘since the most interesting customers are also those who have a large volume of orders’.

(70)

SIDE concludes that ‘the policy thus being conducted by CELF is obviously in total contradiction with its statement that its supposed public service task, which in its view and that of the French Government justifies the aid it receives, obliges it to treat all orders and all customers the same’.

(71)

In support of its claims, SIDE produces two external reports from 1996, the first by the Fondation nationale des sciences politiques and the second by the Cour des comptes (Court of Auditors).

(72)

The report of the Fondation nationale des sciences politiques, entitled ‘La diffusion assistée du livre scientifique et universitaire français’ (Assisted marketing of French scientific and academic books) and published in November 1996, concerns a particular segment of the market. According to SIDE, although outside the scope of the present proceedings, the document contains particularly significant information, which should have been taken into account by the Commission in Decision 1999/133/EC when assessing the legality of the aid in question.

(73)

SIDE also produces a report by the Cour des comptes, published in October 1996, criticising generally the policy of the Ministry of Culture on grants and focusing more specifically on certain programmes financed by the Ministry, including programme Page à page, administered by CELF.

(74)

SIDE raises other, more specific questions. It objects to a recapitalisation of CELF by the Government in 1980, which it considers tantamount to rescue aid. It believes that CELF was recapitalised a second time in 1993, also a State aid, through the Association pour le développement de l'édition française (ADEF). Finally, it mentions the advantages to CELF of being entrusted with the ‘management of public programmes’, and a whole set of specific advantages linked to the firm's special relations with the public authorities.
B.   COMMENTS FROM INTERESTED THIRD PARTIES

(75)

Following publication in the Official Journal of the European Communities
 (20) of the initiation decision of 30 July 1996, and even before then, several interested third parties made their views known (21).

(76)

Mr Van Ginneken (22), in his comments of December 1996, explains in his capacity as a wholesale exporter of French books to non-French-speaking countries that ‘CELF had already set itself the task (23) of becoming a profitable exporting wholesaler itself, which conflicted with the object of its foundation, namely as a service organisation’.

(77)

He also mentions the problems of a possible agreement between CELF and the publishers, the latter in part being members of CELF (24). He objects to a ‘manifestly unjust’ situation, in which private initiative as represented by wholesale exporters is harmed.

(78)

Hexalivre, a company exporting French books (25), submitted comments on 23 December 1996, also signed by Mr Van Ginneken, its chairman, as a bookseller whose customers are ‘institutions’ established abroad. It stated that CELF's business, whose object was to supply booksellers abroad, should not in principle interfere with its own. It argues that ultimately the grant in question benefits ‘a private company supported by the government and tending as far as possible towards a monopoly’.

(79)

Mr Fenouil, for Lavoisier Tec et Doc, a former collaborator of CELF, publisher and exporting bookseller specialising in scientific and technical works, does not dispute, in comments dated 7 January 1997, the appositeness of the aid granted to CELF from 1980, and even mentions ‘unconditional support up to 1994 (26)’. However, he does take issue with CELF's diversification (27), which he says was financed by means of the disputed grants. He also states that 50 % of the orders handled by his company are small orders of less than FFR 500. Lastly, Mr Fenouil ‘calls for a return to normal conditions of competition in exports, involving the abolition of aid not based on a genuine public service mission or an indisputable cultural objective which cannot be achieved by existing means’.

(80)

Mr de la Rochefoucauld, for ‘Aux amateurs de livres international’, submitted comments dated 2 January 1997. He objects to, and regrets, the fact that CELF can serve foreign libraries and/or institutional customers while receiving grants for meeting the needs of another market. He would like CELF to limit its sales to foreign booksellers only, ignoring all other customers. He considers that the compensatory grant enabled CELF to give its customers an extra discount of three percentage points. For him ‘the aid is a hypocrisy’, he is ‘astonished that the aid can be more than 60 % of the amount of the orders in question’. He concludes that the aid serves to expand CELF's commercial activities, and considers therefore that it should be divided ‘between the bookshops concerned in proportion to their turnover in third countries’ and that CELF should be prohibited from supplying customers other than booksellers established abroad.

(81)

The Syndicat national des importateurs et exportateurs de livres (SNIEL) points out in its comments of 31 December 1996 that SIDE's remarks about CELF were not considered sufficiently credible for it to join its court action initially. It does object, however, to the fact that CELF, from 1996, was able to operate in ‘areas where it was not originally planned that it should operate’ (28), and considers that it developed these activities as a result of the compensatory grants received, which it regards as too high.

(82)

Similarly, SIDE, in its comments of 6 January 1997, stated that ‘(…) even supposing that small orders are commercially significant, it has become apparent very quickly that CELF has not confined itself to this allegedly non-profitable activity’.

(83)

CELF, which likewise submitted comments as a third party, disputes the complainant's allegations and produces several letters from publishers expressing satisfaction with its services.
IV.   COMMENTS FROM THE FRENCH AUTHORITIES


(84)

The French authorities state that for a long time small orders were handled by the companies Hachette and Messageries du Livre. These firms acted as distributors for numerous publishing houses which did not have suitable distribution structures for ad hoc small orders and/or did not want to develop them.

(85)

CELF, bringing together various operators in the publishing world, was set up in 1977, initially in the form of an open-end cooperative, to offset the perceived failure of the export agency market at a time when Hachette and Messageries du livre had decided to abandon that activity as unprofitable (29). Its capital, initially FRF 50 000, was increased subsequently to FRF 80 500. From 1979, CELF encountered substantial financial difficulties, which were expected however, since the two companies which previously administered the activity had preferred to withdraw from a market they considered unprofitable. The profession, publishers, the Syndicat national de l'édition (SNE) and the public authorities considered that CELF's activity should be maintained in any event, to ensure the optimum marketing of French-language books abroad. Since no other operator seemed prepared to provide the service, it was decided in 1980 that CELF would be restructured and recapitalised.

(86)

The French authorities state that, in the circumstances, CELF was transformed into a closed-end cooperative society in public limited company form. Its capital was increased from FRF 80 500 to FRF 1 280 500. One half of the recapitalisation was provided by the shareholders, and the other by ADEF (30), an association financed by the State. ADEF was dissolved in 1994; its shares were assigned free of charge to SNE, itself a collaborator of CELF.

(87)

France states that CELF has remained, to this day, a cooperative society in public limited company form, which operates using its own funds. It is a structure that has always been open to all, there being no nationality requirement in order to become a shareholder. The only obligation has always been to have ‘an activity somehow linked to the export of French books’. Thus publishers of French-language works established in another Member State can join the cooperative without any problem and benefit from its action (31).

(88)

CELF's object, under Article 3 of its articles of association, is to ‘process directly orders for abroad (32) and the overseas territories and departments of books, brochures and any communication media and, more generally, to perform any operations aimed in particular at increasing the promotion of French culture throughout the world, using the above media. To this end, the cooperative will carry out all industrial, commercial or financial operations to achieve its object. Given the particular object of the cooperative, no natural or legal person may become or remain a shareholder, if they do not carry on a business somehow linked to the abovementioned export operations’.

(89)

The French authorities explain that, at 6 November 2002, CELF had 76 cooperative shareholders, who are mainly, though not entirely, publishers. Each shareholder has one vote at the general meeting, irrespective of the size of its stake. The interprofessional nature of the company has provided a guarantee of transparency, concern for the collective interest and the sound administration of the grant awarded.

(90)

The main players in the marketing of books are as follows:
(a)

publishers, which ‘produce’ the books;

(b)

marketers, whether integrated into publishing houses or not, which ensure the commercial promotion of books to retailers or certain large institutional users;

(c)

distributors, whether integrated or not into publishing houses, which ensure the logistics of the publishers' marketing; they receive their orders from booksellers, certain large institutional users or diversified intermediaries and obtain their supplies from publishers;

(d)

wholesalers, which are not always involved in the distribution channels and who are intermediaries between distributors and retailers or certain large institutional users;

(e)

export agencies, which deal only with retailers and not the end-user.

(91)

France explains that on-line bookshops must now be included among the players present on the market and must also be considered as potential competitors of the export agencies. It is, however, unable to supply data on the market shares held by these new entrants (33).

(92)

The French authorities explain that the variety of the players present on the market must make it possible to market and promote books to all types of public, irrespective in principle of their geographic location, since the Small Orders programme has provided an appropriate remedy for the deficiencies of the complex mechanism for marketing books.

(93)

The French authorities transmitted certain information on the global market for the export of French-language books. This illustrates CELF's commercial policy, which gives preference, in line with its articles of association and the commitments given to the French authorities, to those areas where publishers are not very present.

(94)

Thus Table 1 shows that CELF is not very active in those areas where publishers are very active and that, conversely, it is active in those areas where publishers are not very active.
Table 1
Comparative geographic distribution of the turnover of French language publishing and CELF, and CELF's share of the global market for the export of French language books

Regions concerned

Publishing

CELF

CELF's share

European Community

38,2 %

20,23 %

0,97 %

North America

17,4 %

6,03 %

0,64 %

Non-Community Europe

16 %

1,11 %

0,13 %

Overseas departments and territories

8,4 %

0,87 %

0,19 %

Asia

3,7 %

19,9 %

9,95 %

French-speaking Africa

5,5 %

11,58 %

3,85 %

Maghreb

4,4 %

28,43 %

11,84 %

Near and Middle East

2,3 %

1,09 %

0,87 %

Eastern Europe

2 %

2,21 %

2,03 %

Latin America

1,5 %

7,6 %

9 %

West Indies

0,32 %

0,7 %

4,27 %

Non-French-speaking Africa

0,16 %

0,21 %

2,47 %

 

100 %

100 %

 

(95)

The French authorities point out that the Small Orders programme was not designed as an aid specifically for CELF, but as a scheme of support for the marketing of French-language books, it being possible to use the channels of other operators that might respond to the same type of order.

(96)

They explain that the structural change to CELF, which occurred in 1980, was accompanied by a decision to grant aid under the Small Orders programme. They confirm that, in practice, CELF was the only general operator to receive the grants in question (34), since no other operator (apart from SIDE, 12 years after the launch of the programme) applied, even when the programme was known to the profession.

(97)

France does not dispute that the Ministry of Culture refused to grant the aid to SIDE (35) in 1991, since the firm did not meet the conditions of transparency required to qualify for the said aid and refused to be bound by the constraints inherent in their award. Furthermore, France points out that the Ministry of Culture approached SIDE in 1996 to offer it the aid, but the company refused it.

(98)

The French authorities point out that one of the objectives of French cultural policy is to ensure the marketing of French-language works throughout the world. This objective must be understood as a public service task. Which is why the French authorities maintain that the Commission should analyse the measures in question under Article 86(2) of the Treaty.

(99)

France points out that CELF was set up, and then allocated the disputed grants, at a time when the economic operators responsible for this activity had decided to withdraw from the market. If the disputed measures had not been put into effect, the marketing of French-language books to small bookshops established in often remote areas, where demand is slight in terms of turnover and volume, would have clearly been penalised.

(100)

The French authorities consequently decided to implement the disputed programme, so that all orders can be met, including non-profitable orders for French-language works, under the same conditions as for larger orders.

(101)

France asserts that the Ministry of Culture provided ‘its assistance for the operational costs of CELF's public service associated with small orders’ and that consequently CELF was entrusted with a genuine public service task.

(102)

In support of their claim, the French authorities sent the Commission several instruments:
(a)

Decree No 82-394 of 10 May 1982 on the organisation of the Ministry of Culture stresses its role in the ‘influence of French culture and French art in the free dialogue of world cultures’;

(b)

Decree No 93-797 of 16 April 1993 on the powers of the Minister for Culture and the French-speaking World, which provides that ‘the Minister for Culture and the French-speaking world (…) shall implement, jointly with the other Ministers concerned, the measures introduced by the Government to ensure the influence of French culture and the French language in the world’;

(c)

the orders on the organisation of the Book and Reading Directorate, the latest of which dates from 1996, based on the said decrees, which set out the tasks of the Ministry of Culture in relation to the export of books.

(103)

The French authorities state that it is on the basis of these instruments that the Book and Reading Directorate concluded annual agreements with the partners responsible for implementing measures arising out of the Government's cultural policy. The agreements define the aims of the collaboration between the Ministry and the bodies it subsidises, and the obligations of the parties.

(104)

The French authorities explain that, every year, the Ministry of Culture concluded with CELF (36) an agreement entrusting it with the performance of a public service task which consisted in ‘meeting any order for French-language works from foreign bookshops, irrespective of the amount’.

(105)

The French authorities also explain that, however the reference market is defined, SIDE and CELF are not in competition for low-volume orders.

(106)

In particular they highlight the contradiction in SIDE's case: while claiming to work with the same type of customers as CELF and that it treats all its customers in the same way ‘irrespective of the amount of their orders’, SIDE gives a discount of less than five percentage points on orders of less than 10 copies.

(107)

They consider that the significant ‘penalty’ which SIDE applies to low-volume orders of less than 10 copies is evidence that small orders are not a priority target for the company, unlike orders which allow it to achieve considerable economies of scale, such as those placed by institutional customers.

(108)

The fundamental difference in commercial strategy is clear in particular from the average number of books per line and per invoice, which is much higher for SIDE than for CELF.

(109)

The French authorities state that CELF must be able to offer its customers a comprehensive list of publishers in return for the aid granted to it, even if this is not compensated as such by the aid from the Small Orders programme, since the policy objective of the Ministry of Culture is to market books in French as widely as possible. They point out that hundreds of publishers on CELF's list are in fact very small publishers, associations or miscellaneous bodies which are almost unheard of (37) and whose publishing activity is not likely to generate large, profitable orders. By offering such an expanded list of publishers, CELF is promoting diversity. It must accordingly be sourced from a very large number of suppliers for amounts which are often very small, which in turn forces it to manage numerous small publisher accounts without this being compensated by aid of any sort.

(110)

Small publisher accounts are economically less profitable, since unlike large publishers they don't offer very favourable terms. For its part, SIDE applies a commercial policy that gives priority to the more popular publishers, which are likely to generate large orders. The French authorities explain that, consequently, a distinction should be drawn between ‘small accounts’ and ‘small orders’. The notion ‘small orders’ suits the description of the disputed ‘programme’ of course, but it does not sufficiently capture the counterpart of ‘small customer accounts’, namely ‘small supplier accounts’.

(111)

The award of grants is of course based on the extra costs generated by small orders, but the beneficiary operator is also subject to obligations which are not, properly speaking, ‘compensated’.

(112)

The French authorities state that compensatory aid was allocated to CELF to offset the additional expenses generated by small orders, the threshold for which had been set empirically at FRF 500. The threshold was a reference figure which did not mean that each order between FRF 0 and 500 had to be at the breakeven point. Some orders of FRF 500 might be profitable, others not. It all depended on the number of titles and books included, the nature of the books, the reliability of the order placed, depending on whether the customer was eligible or not for the Coface guarantee, and the means of and time required for payment.

(113)

The French authorities explain that what was certain, however, was that the FRF 0 to 500 order market was not profitable overall and would not, in principle, have been covered by an operator which had taken only economic criteria into account. They base this argument on a cost analysis for the reference year 1994.

(114)

As tables 2a and 2b show, the French authorities explain that in recent years, and in particular since they started to run down their financial commitment in 1996 to 1997, CELF has been forced to diversify by developing a profitable customer base made up of large bookshop accounts and institutional customers such as libraries, universities and cultural centres. At the same time, while ‘small account’ turnover and the number of customers have declined, there has been an increase in CELF's turnover overall. The French authorities confirm consequently that processing small orders has acted as a brake on CELF's business.
Composition of CELF's turnover
Table 2a — Example of Germany
GERMANY
3,4 % of CELF's turnover represents 27,2 % of active small customer accounts

 

1999

2000

2001

Turnover

FRF 2 331 713

FRF 2 548 430

FRF 2 906 533

Number of customers

593

561

444

Turnover