Communication
The aim of the protection of market competition is primarily to create benefits for consumers and equal conditions for all entrepreneurs on the market, who, acting in accordance with the existing rules and competing on the market with the quality, price and innovation of their products and services, contribute to the overall development of the economy.
Financing of Croatian News Agency (HINA)
The financing of Croatian News Agency (HINA) should be brought in compliance with the State aid rules contained in Articles 106, 107 and 108 of the Treaty on the Functioning of the European Union. This was the opinion of the Croatian Competition Agency (CCA), who in its reply to the query of the Ministry of Culture on compliance of the financing of the national news agency, carried out the analysis of the Croatian News Agency Act entrusting HINA with special rights within the meaning of competition and State aid rules.
The Croatian News Agency Act defines HINA as an independent legal person with a status of a public institution who for the discharge of tis public service, in this case a vaguely defined provision of a service of general economic interest, is financed by its founder and a hundred per cent owner – the Republic of Croatia. However, it is evident from the provisions of the Croatian News Agency Act that HINA gets a share of its revenue also from other, commercial activities generating its revenue “on the basis of the agreement with its founder, on the basis of the contracts with the users of its services, on the basis of other activities that it performs within its line of business and on the basis of grants”.
Within the meaning of State aid rules provided in Articles 106, 107 and 108 of the Treaty Establishing the European Union (TFEU) and the EU legislative framework in the area of State aid in the form of public service compensation granted to undertakings entrusted with the operation of services of general economic interest it has been established that the Croatian News Agency Act in force does not provide for a precise definition of a service of general economic interest, it fails to include a well-defined list of specified services which may be considered services of general economic interest, more precisely, it does not separate such list from purely commercial activities or services which are carried out by the same provider under the market conditions. Consequently, it casts a shadow of doubt and uncertainty on its financing, the revenues and potential profits from either types of activities due to the fact that it does not provide the safeguards for possible overcompensation.
After having explained the general definition of State aid (“transfer of State resources”, “economic advantage”, “selectivity”, “ effect on competition and trade”) in its advocacy opinion the CCA listed the issues that have to be clarified and defined in order for the public service compensation to be considered free from State aid owing to the absence of advantage. Specifically, it proposed the provisions that should be included in the Croatian News Agency Act now in force so as to bring it in compliance with State aid rules and avoid any possible investigations, concretely, provisions which would define compensation that falls outside the area of State aid under the current legislative framework regulating the provision of services of general economic interest, and particularly the landmark Altmark jurisprudence . Thus, advocacy opinion provides a list of conditions set by the Court of Justice under which compensation for the provision of a public service falls outside Article 107(1) TFEU as it grants no advantage to the service provider. As a matter of principle, it is first, the existence of SGEI and an entrustment act clearly defining the obligations to carry out an SGEI. Second, the existence of an objective and transparent compensation mechanism, for calculating the compensation set out in advance. Third, to avoid any overcompensation the compensation cannot exceed the net costs and reasonable profit. Fourth, it is the selection of the provider either through a public procurement procedure that provides the service “at the least cost to the community”, or determining the level of compensation on the analysis of costs of an average “well-run” undertaking in the sector concerned.
In that sense, the Croatian News Agency Act must explicitly specify a list of activities (services) provided by HINA falling under the scope of a service of general economic interest and a separate list of activities (services) that HINA performs as commercial activities, under the market conditions. Furthermore, this entrustment act must clearly state that HINA properly separates its commercial activities from the activities included in the obligation to discharge a service of general economic interest under the entrustment act.
The funds received by HINA from its founder – the Republic of Croatia, may constitute State aid that must be used in line with State aid rules in effect. In this particular case the entrustment act should contain provisions explicitly allowing the financing from the State resources exclusively of the activities falling under the scope of a well-defined service of general economic interest, in other words, requiring HINA to maintain separate accounts because it receives public service compensation for such service and at the same time carries out other activities.
The arrangements for overcompensation control must be introduced ensuring that the undertaking concerned does not receive compensation exceeding the amount determined beforehand, in other words, what is necessary to cover the net costs incurred in discharging the public service obligation, including a reasonable profit .
The rationale expressed in the opinion on the financing of the national news agency was reinforced by the EU comparative practice in the area concerned. It is a common practice of the CCA, where assessing the compliance of the national legislation with EU State aid rules, to analyse the best practices in the sector in question across the EU. In this particular case an inquiry was made in the regulatory regimes of several Member States comparable to Croatia. The results of this cross section inquiry indicated certain common features of the regulatory environment in the area of several national news agencies. Some of the countries, like for instance the Czech Republic, left its national news agency to the market forces and opened it to competition where the government is not responsible for the agency’s obligations and where the agency is not subsidized by the State. Others, like Hungary or Poland, on their way to re-regulation fulfil their public interest obligation and are controlled by the State. However, in some, like Slovakia or Slovenia, whose financing model is most comparable with that of Croatia, although the State news agencies perform a service of public interest, the respective legislative framework includes the above discussed key principles in the provision of a service of general economic interest, which makes them compliant with the EU State aid rules.