EC Could Force More Transparency on Using Public Funds for Internet
German public service broadcasters (PSBs) are under scrutiny by the European Commission (EC) over how their TV license fees are used. Last week, Competition Comr. Neelie Kroes told ARD and ZDF to expect a legal opinion from the Competition Directorate-Gen. setting out its views on whether the 2 PSBs are wrongfully using the fees to fund new services such as Internet sites, an ARD spokeswoman said.
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While the EC probably won’t make a finding of misuse, it’s likely to order the PSBs to set up a better system of checks and balances to ensure public funds aren’t used to compete with commercial broadcasters, the spokeswoman said. The EC didn’t respond by deadline.
At issue is the concept of “state aid,” said Michael Schmittmann, a German lawyer who represents private broadcasters and telecom providers but who’s not connected with this case. About 2 years ago, he said, commercial broadcasters complained to the EC that ARD and ZDF were using the public license fee to fund such things as online services, giving themselves a competitive leg up on the commercial operators.
The complaints centered on several issues, the ARD spokeswoman said. Commercial operators said some of the PSBs’ offerings amounted to e-commerce services, which ARD and ZDF aren’t allowed to offer. Broadcasters claimed the PSBs were paid for putting links to other sites on their Web sites, a charge ARD and ZDF deny.
Private broadcasters also argued that some games on the PSBs’ sites weren’t public service oriented but commercial, the ARD spokeswoman said. But the PSBs countered that just because they use games and chat rooms to fulfill their public service mandate doesn’t mean the content involves e-commerce, she said.
This isn’t the first time the EC has looked at questions on PSB use of license fees, Schmittmann said. However, he said, these inquiries focus on possible anticompetitive behavior -- how a PSB uses the public’s money -- and not on the PSB’s fee structure. European Court of Justice (ECJ) decisions have consistently upheld the right of member states to grant privileges to PSBs, he said, and have often sided with states in challenges to fee use from the EC. Still, Schmittmann said, any EC decision on Germany’s PSBs could affect broadcasters in similar situations in other countries.
The EC could take one of 3 positions, the ARD spokeswoman said. It could agree with Germany that the way ARD organizes its broadcast financing doesn’t amount to state aid, though the EC has always considered all PSB public funds to be state aid. The split of opinion won’t be resolved without a final decision from the ECJ, she said.
Alternatively, the EC could find that the license fees do constitute state aid, but that because it has existed since Germany joined the European Economic Community, the PSBs had no obligation to seek permission from the EC to use it for the activities it’s funding. If the license fees are considered existing, rather than new, aid, the EC can’t force the PSBs to repay any overcompensation, the ARD spokeswoman said.
The most likely scenario is that the EC will say Germany’s existing PSB funding scheme no longer complies with European state aid law, the ARD spokeswoman said. If that happens, the EC will propose measures to remedy the situation. Germany must then respond with its counterproposal, and if a compromise is reached, Germany will have to decide how to amend its laws to bring them into alignment.
Along those lines, the PSBs expect the EC to require Germany to revamp its PSB laws to provide more transparency in the way it handles public funds. Whenever the PSBs act outside their public service mandate -- for example, when they sell ads -- they must ensure that no license fees are used, the ARD spokeswoman said. They already do so, she said, but the EC will probably order them to put more checks and balances in place to prevent cross-subsidization.
The BBC is also funded by TV license fees. However, a spokesman said the govt. has given “full approval to the BBC to use the license fee to fund the BBC’s Internet activities, and any changes to the license fee would be a matter for the government.”