European Commission investigates funding of Spain’s RTVE

The European Commission has opened a formal investigation under the EU state aid rules into the new tax based funding system for the Spanish public broadcaster RTVE. Spain is planning to modify the public broadcasting system by abolishing advertising and other commercial activities of RTVE and replacing this source of income by newly introduced taxes on TV and telecommunications operators.

In a press release, the Commission said it does not object to the modification of the funding system as such, but has doubts concerning the compatibility of the new tax with EU law. In particular, the Commission doubts whether the new taxes are in line with EU rules on electronic communications networks and services. The opening of a formal investigation allows the Commission to examine the measures more closely and gives interested third parties the possibility to submit comments. It does not prejudge the outcome of the procedure.

Competition Commissioner Neelie Kroes said in a statement: “Spain’s choice to place greater emphasis on RTVE’s public service mission as part of the reform of public service broadcasters is in line with the policy of media plurality which the European Union supports and has the advantage of significantly reducing the risk of anticompetitive spill-overs between public and commercial activities. The Commission has therefore no problem with abolishing commercials in public TV, but we have to look into the way this reform is financed.”

The new Spanish law of September 1, 2009 provides that advertising, teleshopping, merchandising and pay per view services at RTVE will be discontinued with immediate effect. Spain intends to compensate RTVE for the abolition of these revenues with specifically dedicated income, generated from two new fiscal measures and one existing measure, in addition to the existing state financing of RTVE: a new tax of 3% of the revenues of free to air commercial broadcasters and of 1.5% of pay-TV broadcasters; and a tax of 0.9% of revenues of operators of electronic communications. In addition, a share of 80% of the already existing levy on radio spectrum use, up to a maximum amount of €330 million.

The Commission assessed the measures on the basis of its rules on state aid to public service broadcasting of 200, applicable to this case. These rules leave Member States a wide discretion on the way they finance the services of public broadcasting, provided there is no unfair discrimination between operators and no over-compensation.

As Spain did not notify the RTVE financing reform, the Commission was unable to assess it before it was put into effect. Spain has however actively cooperated with the Commission in the investigation leading to the present decision. The Commission has now to ascertain that the new mechanism of financing RTVE excludes the possibility of overcompensation and that the newly created taxes, which form an integral part of the aid scheme, are compatible with EU law, and in particular with the rules on electronic communications networks and services.