German gov't scraps illegal pubcaster aid

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BRUSSELS -- The German government has been forced to scrap its aid for public broadcasters ARD and ZDF after it was threatened with court action and fines from the European Commission.

The EC -- the European Union's regulating authority -- said Tuesday that it was satisfied with Berlin's response and was ending its investigation into the state subsidies.

The German government agreed to set precise conditions on what public money may fund. It also will set clear rules on such issues as Internet support, cross-subsidization, the respect of market principles in commercial activities, and transparency in the sublicensing of sports rights.

The resolution comes five years after the EC first received complaints that the subsidies for ARD and ZDF were illegal and damaging to rivals.

"I am pleased that the cooperation between Germany and the commission has finally resulted in an agreement on a future financing regime which ensures compliance with EU state aid rules," EU competition commissioner Neelie Kroes said.

"The new regime will allow broadcasters to fulfill their public service mission in the new media environment, while at the same time limiting public funding to what is really necessary and avoiding adverse effects on competition," she added. Germany now has two years to implement its commitments.

The announcement follows persistent clashes between the EC and the German authorities, in particular over whether ZDF and ARD could use license fees for commercial activities, such as funding of their Web sites.

The EC investigation was originally prompted by complaints from German commercial broadcasters RTL and ProSiebenSat 1, who argued that online services were not part of the public broadcasters' legal mandate and should not receive public money. The commercial networks also alleged that public broadcasters were refusing to re-license football broadcasting rights for new media that they did not always use themselves.

The EC agreed, arguing that funding received by public service broadcasters should be limited to fulfilling the public service remit and that commercial activities such as online services should not benefit from any state aid.

The new funding rules also make clear under what terms broadcasters can license sports rights to others. They say that unused sports rights which are not part of the public service remit should normally be offered to third parties for sublicensing.

EU treaty rules allow state financing of public broadcasters through subsidies or license fees, but only if the aid is strictly limited to clear public service activities, and there is no "overcompensation."

EU governments are entitled to decide for themselves how public service broadcasters should be organized and financed so long as they meet these conditions and do not undermine legitimate commercial competitors.
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