Legal Assessment of State Aid Incompatible with the Internal Market
Total Page:16
File Type:pdf, Size:1020Kb
Legal assessment of State aid incompatible with the internal market Funding for online learning services and video-on-demand (“VOD”) to the Finnish public service broadcaster Yleisradio Oy (“Yle”) Before the European Commission 23 April 2021 Table of Contents I. Introduction ............................................................................................................................ 4 II. Factual background ............................................................................................................... 8 A. Overview of Sanoma ................................................................................................ 8 B. Overview of Yleisradio Oy and its activities .......................................................... 9 1. Yle’s public service remit .................................................................................. 10 2. Yle’s corporate governance and supervisory structure ..................................... 13 3. Yle’s financing .................................................................................................. 15 4. Yle’s broadcasting offering ............................................................................... 18 5. Yle’s non-broadcasting online activities ........................................................... 20 5.1. Yle’s expansion into online learning services ....................................... 22 5.2. Yle’s expansion into VOD .................................................................... 23 III. Legal assessment .................................................................................................................. 26 A. Description of the relevant markets ...................................................................... 26 1. The market for online learning services ............................................................ 26 2. The market for audiovisual content (and the VOD segment) ........................... 28 3. The market for the licensing / acquisition of audiovisual content .................... 34 B. Overview of the legal framework .......................................................................... 36 C. Assessment of State funding for Yle’s provision of online learning services and VOD .................................................................................................................. 39 1. The public funding of Yle’s provision of online learning services and VOD satisfies the conditions of Article 107(1) TFEU ............................................... 39 1.1. Yle’s funding has been granted by the State or through State resources ................................................................................................ 39 1.2. The aid grants a selective economic advantage to Yle .......................... 40 1.2.1. Yle’s public service obligations are not clearly defined ........... 42 1.2.2. The parameters of calculation of Yle’s compensation are not established in advance in an objective and transparent manner ...................................................................................... 43 1.2.3. Yle’s compensation exceeds what is necessary to cover the costs incurred in the discharge of its public service obligations ....... 44 1.2.4. The level of compensation is not benchmarked against the costs of a typical, well-run and adequately-resourced undertaking .. 44 1.3. Yle’s funding affects trade between Member States ............................. 46 1.4. Yle’s public funding distorts competition in the relevant markets ........ 47 1.4.1. Yle’s public funding distorts competition in the market for online learning services ............................................................ 48 1.4.2. Yle’s public funding distorts competition in the VOD segment ..................................................................................... 50 2. The public funding of Yle’s provision of online learning services and VOD cannot be exempted from the prohibition of Article 107(1) TFEU .................. 58 2 2.1. Inapplicability of the exemptions provided in the TFEU and secondary legislation ............................................................................. 58 2.2. The public funding of Yle’s online learning services and VOD cannot be exempted under the Article 106(2) TFEU derogation for SGEI ...... 61 2.2.1. Yle’s provision of online learning services and VOD should be assessed under the general SGEI regime of Article 106(2) TFEU ........................................................................................ 61 2.2.2. Yle’s public funding for its online learning services and VOD cannot be exempted under the Article 106(2) TFEU derogation for SGEI .................................................................................... 63 2.3. The public funding of Yle’s VOD offering cannot be exempted under the Article 106(2) TFEU derogation and the Broadcasting Communication frameworK ................................................................... 71 2.3.1. Yle’s public service remit has not been clearly defined ............ 71 2.3.2. Yle has not been properly entrusted with the offering of VOD .......................................................................................... 75 2.3.3. Yle’s VOD offering fails the proportionality assessment .......... 76 D. The public funding of Yle’s provision of online learning services and VOD constitutes new aid ................................................................................................. 77 IV. Conclusion ............................................................................................................................ 81 3 I. Introduction 1. The present complaint (the “Complaint”) explains how Yle, Finland’s public service broadcaster, exploits the public funding it receives from the Finnish State as a compensation for its public service activities to engage in activities that fall outside its public service remit, namely the provision of online learning services and video on-demand (“VOD”) services, thereby distorting competition in the relevant marKets. The State funding for these activities constitutes aid incompatible with the internal market. 2. Yle is vested with the task of providing a “versatile and comprehensive television and radio programming with the related additional and extra services for all citizens under equal conditions.”1 Yle is to provide such public service programming and “other content services related to public service” in “public communications networks nationally and regionally.”2 To this end, Yle offers a variety of free-to-air (“FTA”) TV channels, radio channels, as well as online platforms that are free for Finns to use, are provided without advertising, and which offer content that is, to a large extent, similar to what commercial operators offer. Such a broad definition of Yle’s public service remit has its roots at a time where the volume of commercial TV content supply was clearly more limited and where the available media provided logical boundaries: FTA TV and FM radio used to be the channels through which the public service broadcaster would discard its public service obligations, and the “related additional and extra services” comprised mainly the provision of teletext. However, in recent years, with the media transformation and the increasing reliance on the internet as a channel to reach viewers, such a broad definition allows Yle (according to its own view) to do anything and everything. 3. Since 2013, Yle is financed by the Finnish State through the Yle tax – an annual broadcasting tax (Yle-vero) paid by any natural person aged 18 or more living in Finland, as well as any legal person engaged in business operations, vocational practice or agriculture in Finland.3 The average household pays €346 of Yle tax per year (which is significantly higher than the €160 per year spent on newspaper subscriptions and the €94 per year on commercial SVOD services).4 The revenue produced by the Yle tax is transferred from the State Budget to an extra-budgetary “State Television and Radio Fund” (the “Fund”) managed by the Finnish Transport and Communications Agency (“Traficom”) that reports to the Ministry of Transport and Communications. Assets from the Fund are then transferred to Yle based on a budget of €500 million yearly set in 2013, which can be reviewed (i.e., increased) annually on the basis of an index taking into account the general cost of living and cost of labour.5 Yle is then free to allocate the money it receives by the Finnish State internally as it deems fit to finance its activities. 1 Act on the Finnish Broadcasting Company 1380/1998 (“Yle Act”), Section 7 (Annex 1). 2 Ibid. 3 Before 2013, Yle’s activities were financed through license fees. 4 Source: TNS Mind 2020 database. 5 See Act on the State Television and Radio Fund (Laki valtion televisio- ja radiorahastosta, 745/1998, as amended) (Annex 2). For a detailed discussion on Yle’s financing, see Section II.B.3 below. 4. Yle has been following an expansive strategy, broadening its operations to cover new activities over the years, moving away from the traditional FTA TV and FM radio channels offered by the public broadcaster in carrying out its public service mission. Instrumental in this regard has been the expansion of Yle’s online presence and diversification of its portfolio. The unclear definition of Yle’s public service remit, which refers to “comprehensive” programming, has been used as a justification by Yle for the expansion of its offering to cover services