The European Court of Justice (ECJ) threw out an appeal from Italian media group Mediaset today (June 15), ordering that the illegal state aid must be recovered. The case was brought about by Sky Italia and Europa 7 amongst others, claiming the subsidy for digital terrestrial receivers was unfair against satellite broadcasters. The Court confirmed the aid was not technology neutral.
In 2004, the Italian government decided to give a subsidy of €150 for every buyer or renter of a DVB-T receiver. In 2005, that aid was refinanced, and the subsidy was reduced to €70. The spending limit of the subsidy for each year was €110 million.
Following complaints filed by satellite broadcasters (including Centro Europa 7 Srl and Sky Italia Srl), the Commission initiated a formal investigation procedure and, in 2007, found that the subsidy constituted State aid to digital terrestrial broadcasters offering pay-TV services – in particular, pay-per-view services – and digital cable pay-TV operators.
The Commission took the view that, even though the transition from analogue to digital TV broadcasting was a common interest objective, the subsidy was disproportionate and did not prevent unnecessary distortions of competition: since the measure at issue did not apply to digital satellite decoders, it was not technologically neutral. The decision ordered Italy to recover the aid from the beneficiaries, together with interest.
Silvio Berlusconi’s Mediaset brought the present action seeking to have that decision annulled. In its judgment, the Court dismissed the action in its entirety. First, the Court confirmed that the measure enabled cable operators and digital terrestrial broadcasters, such as Mediaset, to benefit, as compared with satellite broadcasters, from an advantage. People opting for a satellite receiver did not benefit from the subsidy.
Secondly, the Court held that the measure, of which the direct beneficiaries were the final consumers, constituted an indirect advantage for operators on the digital TV market, such as Mediaset.
Thirdly, the Court held that the selective nature of the measure resulted in a distortion of competition between digital terrestrial broadcasters and satellite broadcasters. Even though all the satellite broadcasters could have benefited from the measure by offering ‘hybrid’ decoders (which are both terrestrial and satellite), that would have exposed them to extra costs to pass on to consumers in the selling price.
Mediaset claimed that the aim of the subsidy was to address a market failure where, owing to a problem of coordination between operators, there was a barrier to the development of digital broadcasting. In that regard, the Court considered that, by driving incumbent broadcasters to develop new commercial strategies, the mandatory nature of the date laid down for switchover was enough to resolve that problem and the subsidy was therefore unnecessary. In any event, even if the measure had been necessary and proportionate to the objective of addressing the market failures, the fact remains that such a factor could not have justified the exclusion of satellite broadcasters from the benefit of that measure.
Furthermore, Mediaset maintained that it legitimately believed that the measure was consistent with the Commission’s policy of promoting the digital broadcasting system. The Court said that a diligent business operator should have known not only that the measure at issue was not technologically neutral, but also that it had not been notified to or authorised by the Commission.
The Court left it to the affected companies and the Italian government to set the amount that must be repaid, saying the Commission wasn’t required to do so.