DECISION of the COMPETITION COUNCIL No. 203 of 03.11.2005 Regarding the State Aid to Be Granted to S.C. UZINA MECANICA MARSA S
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DECISION OF THE COMPETITION COUNCIL no. 203 of 03.11.2005 regarding the state aid to be granted to S.C. UZINA MECANICA MARSA S.A. THE COMPETITION COUNCIL, With regard to the provisions of the European Agreement establishing an association between Romania, on one hand, and the European Communities and their Member States, on the other hand, ratified by Law no. 20/1993, published in the Romanian Official Gazette no. 73, Part I, of 12.04.1993, With regard to the provisions of the Competition Law no. 21/1996, republished in the Official Gazette, Part I, no. 742 from 16.08.2005, With regard to the provisions of the Statea Aid Law no. 143/1999, republished in the Official Gazette, Part I, no. 744 from 16.08.2005, With regard to the provisions of the Regulation on State aid for rescue and restructuring firms in difficulty, published in the Official Gazette, Part I, no. 1215, from 17.12.2004, With regard to the provisions of the Decree no. 57/2004 on the appointment of the Competition Council’s members, 1 Based on the following reasons, 1. THE PROCEDURE (1) By address no. 156624/14.07.2005, filed with the Competition Council with no. RS- AS 66/14.07.2005, the Ministry of Economy and Trade notified based on art. 15 from the State aid Law no. 143/1999, republished, the individual State aid for the restructuring of SC UZINA MECANICA MARSA SA (SCUMM), within the privatization process. (2) The Competition Council requested the Ministry of Economy and Trade supplementary information by addresses RG/5262/22.07.2005, DAAS/866/01.08.2005, DAAS/905/09.08.2005, DAAS 1976/23.08.2005 to which the Ministry of Economy and Trade replied by addresses filed with the Competition Council with no. DAAS 866/01.08.2005, DAAS 875/02.08.2005, DAAS/928/15.08.2005 and DAAS 987/26.08.2005. Also, discussions were held with the representatives of the Ministry of Economy and Trade and of SCUMM on 17.08.2005. Due to the fact that information submitted by the Ministry of Economy and Trade did not answer all requests of the Competition Council, the notification was considered unsuported and therefore withdrawn. By address no. 125911/DA/05.09.2005, filed with the Competition Council with no. RS-AS/82/05.09.2005, the Ministry of Economy and Trade has resubmitted the notification regarding the state aid for the restructuring of SCUMM, within the privatization process. The Competition Council has again requested supplementary information replied by addresses filed with the Competition Council with no. DAAS/1067/13.09.2005, DAAS/1068/13.09.2005, DAAS/1072/14.09.2005, DAAS/1073/15.09.2005, DAAS/1081/20.09.2005, DAAS/1082/21.09.2005, DAAS/1085/21.09.2005 and DAAS/1086/21.09.2005. (3) The notification became effective when information was accurate and complete, respectively on 21.09.2005. 2. DESCRIPTION OF THE AID MEASURE 2.1. Legal base of the aid measure (4) The Ministry of Economy and Trade has notified the financial support measures granted to SCUMM based on the following acts: • Law no. 137/2002 on the acceleration of privatisation; • Government Ordinance (GO) no.36/2004 for amending and completing the Law no.137/2002, approved by Law no.191/2004; • Art. 281 of the Government Decision (GD) no. 577/2002 on the approval of the Methodological Norms for the enforcement of the Emergency Government Ordinance (EGO) no. 88/1997 on the privatisation of commercial companies, with the subsequent amendmends and completions; 2 • EGO no. 26/2004 on some measures for the completion of APAPS portfolio companies’ privatisation and the consolidation of some privatisation, approved with amendmends and completions by Law no.442/2004; • Government Decision no. 101/2004 regarding the approval of the extension of the payment facilities provided at art. 18 from the Law no. 137/2002 on the acceleration of the privatization, with the subsequent amendmends and completions, for certain companies from the portfolio of the Ministery of Economy and Trade – The Office of State Portfolio and Privatization in Industry (OPSPI); • Government Decision no. 2377/2004 regarding the approval of the List of commercial companies within the portfolio of the Ministry of Economy and Trade benefiting, at privatization, from restructuring measures of the companies’ debts to the budgetary creditors and APAPS, according to the provisions of art. 50 from GEO no. 26/2004; • Draft Joint Order of the Ministry of Economy and Trade and the Ministry of Public Finance, regarding the granting of facilities to the payment of due and non paid budgetary obligations of SCUMM. 2.2. Financial incentives provided for SCUMM (5) The measures of financial support notified by the Ministry of Economy and Trade are granted in the context of privatization of SCUMM, the company is to benefit from facilities provided in Law no. 137/2000, i.e. write-off and rescheduling of some pastdue obligations to the state budget as of 31.12.2003. (6) Facilities concerning payment of pastdue obligations to the state budget to be granted to SCUMM at privatization, in total amount of ROL 66,500 million consisting of exemptions from payment in amount of ROL 55,162 million and payment reschedulings in amount of ROL 11,337 million, as follows: Tabel no. 1 Facilities that SCUMM benefits from No. Facility Amount granted Legal basis (ROL) 1. Exemption up to 95% from the payment of 17,805,666,432 GEO 26/2004 pastdue budgetary obligations as of 31.12.2003 according to art. 26 (1) (a) 2. Rescheduling of up to 5% from the payment of 937,140,337 GEO 26/2004 pastdue budgetary obligations as of 31.12.2003 according to art. 26 (1) (d) 3. Rescheduling for the payment of pastdue 10,399,888,170 GEO 26/2004 budgetary obligations as of 31.12.2003, according to art. 26 (3) (a) and art. (4) (a) 4. Exemption from the payment of interest and 37,356,901,295 GEO 26/2004 penalties of any kind related to pastdue 3 budgetary obligations, according to art. 26 (1) (e), (3) (b) and (4) (b) Total 66,499,596,234 Source: Notification form 3. BENEFICIARY OF THE AID MEASURES (7) SCUMM is a joint-stock company. When the share sale-purchase agreement was signed the company had shareholders equity of ROL 41,082,500,000 divided in 1,643,300 shares with a face value of ROL 25,000. (8) The current SCUMM initially belonged to Intreprinderea Mecanica Marsa, a machine building company comprising commercial sectors (the actual SC MECANICA SA Marsa - SCM) and special sectors for military production (the actual SC UZINA MECANICA MARSA SA - SCUMM). In 1981, within Intreprinderea Mecanica Marsa, a Special Products Factory was established with capacities designed for the manufacture of military products. Subsequently, in 1991, this factory became a branch of RATMIL Bucuresti – UZINA MECANICA MARSA, and in 1998, UZINA MECANICA MARSA was under the Special Department of the Ministry of Industry and Trade (at present Ministry of Economy and Trade) and was incorporated with the Registry of Trade under no. J32/1036/1998. (9) SCUMM was privatized in 2004, by signing the share sale-purchase agreement no. 2/06.04.2004, concluded between the Ministry of Economy and Trade – The Office of the State Portfolio and Privatization in Industry (OPSPI) and the only bidder was the Employees Shares Program Association – Uzina Mecanica Marsa (PAS-UMM). Following the conclusion of the agreement PAS-UMM has become the only shareholder of SCUMM. The shareholders structure after privatisation is as follows: Table no. 2 Shareholders structure after privatisation at SCUMM EQUITY HOLDINGS SHAREHOLDERS Number of shares Percentage of equity held PAS - UMM 1,643,300 100,00 Source: Supplementary information (10)1 (11)2 (12) The production of SCUMM is focused on the following elements: 1 Confidential data 2 Confidential data 4 - vehicle bodies – a wide range of bodies, tailored on the customers request for vehicles, trucks, buses, vans with various compartments and destinations, respectively passenger or cargo transport; - equipped containers - metallic containers of standard sizes and required accesories to be used as cargo warehouses or on construction sites, as living amenities; - trailers and semi-trailers – with loadds between 300 Kg and 11,000 Kg, for cargo or passenger transport, as well as agricultural trailers and dumper trailers, which could be pulled by various vehicles; - welded metallic constructions – standardized metallic confections (euroboxpalets), as well as tailor made metallic constructions according to customers technical specificiations, designed for mining works, drilling or construction works; - parts and accesorries for manufactured products as well as geared wheels. (13) The shift to civilian production from military production process required considerable effort to adapt to this new manufacturing profile. This led to serious financial difficulties for the company. (14)3 (15)4 (16) In 2004, SCUMM employed 220 persons, compared to 1991 when it had 1,741 persons. Because the company has a turnover under EURO 50 million and employees below 250 persons the company meets the criteria of a medium enterprise. (17)5 3.1. RELEVANT MARKETS (18) SCUMM operates on the markets for producing and trading car bodies, equipped containers, trailers and semi-trailers, metallic welded constructions, parts and accessories6. From these, the highest proportion in the turnover is held by the sales of equipped containers (60% of the turnover in 2004), followed by the metallic welded constructions (20%) and parts and accessories (10%). The sales of car- bodies and trailers 3 Confidential data 4 Confidential data 5 Confidential data 6 The equipped containers, used as storehouses for merchandises or in the organization of the yard, as inhabited areas, are generally manufactured at the demand of important clients, periodically ordering.