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The county of Funen supported internet portal illegally

27. september 2006

4/0120-0100-0002SEK/DRP - The Council meeting 27 September 2006

The Danish Competition Council has established that the public authority, Funen County, has granted aid, which has distorted competition between companies on the market of horizontal Internet portals. This is a principal decision, because it is the first time that the Council orders a company to repay illegal and competition distorting aid.

The aid in question was granted to a company – Portal Fyn ApS – which was commissioned by Funen County to create and develop a regional Internet Portal with relevant information about Funen. The county did, however, not act to ensure conformity with the rules for public procurement and, furthermore, the county did not act to ensure that Portal Fyn was not overcompensated. Therefore, the public aid was found to be inconsistent with provision 11a of the Danish Competition Act. This provision enables the competition authorities to take measures against aid that is harmful to competition, but which falls outside the scope of European rules.

Hence, the Danish measures aim to control the granting of aid, to ensure that companies operate on a level playing field. Accordingly, there are three conditions that must be met before the authority can issue an order for the termination or repayment of aid. First, the aid must be from public funds, to the benefit of a specific business activity. Second, it must be shown that the aid directly or indirectly causes or has as its object the distortion of competition. And third, the aid must not be legitimate under public regulations: competition law cannot take precedence over a political decision that is made under a regulation.

The aid in question did fulfil all three conditions. First of all, Funen County has granted aid to Portal Fyn both direct through subsidies and indirect by marketing the portal and by giving Portal Fyn the right to use the domain, fyn.dk, free of charge. Secondly, it was established that Portal Fyn had been overcompensated by 46.542 dkr. The Competition Authority applied the net additional cost test to show that the compensation exceeded Portal Fyn’s net cost including a reasonable profit. Thirdly, the authority controlling the county deemed the aid illegal, because Funen County had not ensured that a clear delineation between commercial and non-commercial activities was made. Accordingly, the county had not made sufficient effort to ensure that aid was not used to establish and develop commercial parts of the portal. On that basis, the Competition Council issued an order for a repayment of the illegal and competition distorting aid granted by Funen County.