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State aid granted by the municipality of Furesø to a supermarket restricts competition

21. december 2011

The Danish Competition Council decided on 21st of December 2011 that State aid granted by the municipality of Furesø to a supermarket by renting out land on favourable terms restricts competition.

In 1979 a supermarket (Irma) leased a piece of land in Værløse Bymidte (Værløse centre) from the municipality of Værløse (now the municipality of Furesø, Zealand).

The lease contract contains a provision whereby from 1987 onwards the rental fee of the land is made dependent of the turnover of the supermarket and makes it possible for the supermarket to get a lease refund by the end of each year.

Due to this provision in the contract the supermarket has received a lease refund every year since 1987. As a consequence, except for one year (1991) the supermarket has paid an annual rental fee of 0 DKK. The land lease contract contains a clause which obliges the supermarket to use the building as a supermarket for a period of 45 years. The contract is irrevocable until 2025 and it does not provide a legal right for any of the parties to renegotiate the terms of the contract during this period.

In the course of the case the Danish Competition and Consumer Authority hired two independent realtors to assess the lease contract in question. The independent realtors concluded, that the municipality had granted the supermarket more favourable lease terms than the terms usually applied on the marked in 1979.

On this basis, the Danish Competition Council decided that the municipality of Furesø has granted State aid restricting competition to the supermarket by renting out the land on more favourable terms than the terms usually applied on the marked in 1979.

The Danish Competition Council cannot order the termination or repayment of the State aid. This is due to the fact that the parties entered into the contract before the provisions in the Danish Competition Act concerning State aid entered into force in 2000.