Order of the Court (Fourth Chamber) of 25 March 1998. – Fédération française des sociétés d'assurances, Union des sociétés étrangères d'assurances, Groupe des assurances mutuelles agricoles, Fédération nationale des syndicats d'agents généraux d'assurances, Fédération française des courtiers d'assurances et de réassurances and Bureau international des producteurs d'assurances et de réassurances v Commission of the European Communities.

‘97.The applicants do not contest that additional costs are generated by the public-service obligations of La Poste. All they seek to do, however, is to show that the Commission manifestly overestimated these additional costs of La Poste by using the wrong methods of calculation.

98.In examining the merits of the submissions supporting this plea, it must be borne in mind that it is clear from Article 90(3) and from the entire scheme of that article that the Commission's power of supervision vis-à-vis Member States liable for infringing the rules of the Treaty, and particularly those relating to competition, necessarily entails the exercise of a discretion on that institution's part.

99.That discretion is notably wider in relation to compliance by Member States with the competition rules because, in the first place, Article 90(2) requires the Commission to take account, in exercising that discretion, of the demands inherent in the particular tasks of the undertakings concerned and, secondly, because the authorities of the Member States may in some instances have a sufficient degree of latitude in regulating certain matters, such as, in the present case, the organisation of public services in the postal sector (judgment of the Court of First Instance in Case T-32/93 Ladbroke Racing v Commission [1994] ECR II-1015, paragraph 37).

100.Since the present case involves an assessment of complex economic facts, the discretion exercised in evaluating additional public service costs is all the more wide, since it is comparable to that exercised by the Commission when applying Article 92(3) of the Treaty (judgments of the Court of Justice in Case C-301/87 France v Commùsion [1990] ECR I-307, paragraph 49, in Case C-142/87 Belgium v Commission [1990] ECR I-959, paragraph 56, and in Case C-303/88 Italy v Commission [1991] ECR I-1433, paragraph 34).

101.Furthermore, as the case-law makes clear, the Community court's function in an action for annulment is solely to determine whether the contested decision is vitiated by one of the grounds of illegality set out in Article 173 of the Treaty; it cannot substitute its own assessment of the facts for that of the deciding authority especially in the economic sphere (judgment of the Court of Justice in Case C-225/91 Matra v Commission [1993] ECR I-3203, paragraph 23). It follows that the review which this Court is called upon to perform in the present case in relation to the Commission's assessment must be confined to verifying the accuracy of the facts found and establishing that there is no manifest error of assessment.

102.It appears from the documents before the Court that in order to calculate La Poste's additional costs produced by its public service obligations, the Commission carried out a complex economic analysis on the basis of two studies carried out by La Poste itself and by outside consultants.’

‘106.... in basing its assessment on such an analysis of the facts, the Commission established with sufficient certainty that La Poste has additional costs amounting to — at least — FF 1.32 billion. Those additional costs, generated primarily by its maintenance of an unprofitable presence in rural areas, are linked to performance of services of general economic interest within the meaning of Article 90(2) of the Treaty, which La Poste is required to provide, namely the obligations of having to serve the entire national territory and to participate in regional development. In employing the methods of calculation explained above, the Commission's approach was to compare the costs generated by unprofitable offices situated in rural areas with the average costs of French post offices.

107.The Court finds that the applicants' submissions alleging defects in the methods of calculation are not such as to disturb the Commission's evaluation.

...

112.Nor have the applicants demonstrated that an alternative, more accurate method for calculating the additional costs on the basis of the information available at the time could have been used.

113.Since the applicants contest the assessments made by the Commission in a general way only and without producing any specific evidence or arguments to call those assessments into question, it must be concluded, in view of the foregoing considerations, that the applicants have not demonstrated that the Commission based its decision on factually incorrect data or exceeded its power of assessment in the matter when evaluating the additional public service costs.

114.It is not contested that the tax concession in question enjoyed by La Poste under Article 21 of the 1990 Law, namely the 85% reduction in the basis of assessment to local taxation, amounted in 1994 to FF 1.196 billion. The Court therefore finds that the Commission was correct to consider that the amount of that tax concession did not exceed the additional public service costs, even if the minimum estimate was taken into account, that is to say additional costs of FF 1.32 billion (see paragraph 106 above).

115.As regards the claim for an order pursuant to Articles 66 and 70 of the Rules of Procedure directing that an expert's report be obtained in order to determine whether the method used by the Commission and the evaluations made were appropriate, the applicants have produced no evidence or arguments to suggest that the Commission might have committed manifest errors of assessment in determining the additional costs in question. In those circumstances, and given that in challenging the assessment of economic facts carried out by the Commission in the exercise of its power of assessment the burden of proof rests on the applicant, there are no grounds for ordering that an expert's report be obtained.’

‘134.... the applicants contend that when adopting its decision the Commission was not in a position to satisfy itself that there was no cross-subsidy for La Poste's competitive activities. In their view, the very principle of the method of comparison used by the Commission, that of investigating whether or not the amount of tax advantage enjoyed by La Poste exceeds its additional public service costs, is open to challenge. There are two main aspects to this argument.

135.First, in the absence of any analytical accounts at La Poste, it is impossible to assert, as does the Commission, that the tax concession does no more than balance the additional public service costs: it benefits the undertaking “La Poste”, that is to say all the activities of La Poste including activities it also pursues in the insurance sector, something which is contrary to the competition rules. In this regard, the applicants point out that the same offices and staff are simultaneously assigned to the public interest services and competitive services. They also point out that the Court of Justice has held that aid granted to an undertaking like La Poste in order to offset additional public service costs enables it to release other resources for competitive activities or, at least, to promote the development of those activities at less cost (judgment of the Court of Justice in Case C-303/88 Italy v Commission, cited above, paragraph 14).

136.Still on this aspect, the applicants assert that the aid in question is not strictly targeted at public service activities as Community law requires because, according to Article 21 of the 1990 Law, the 85% reduction in the bases for assessing La Poste to local taxation includes La Poste's total costs and turnover, including the proportion represented by competitive activities.

137.Furthermore, the data compared by the Commission is not genuinely comparable because post offices are maintained in rural areas not out of concern for profitability but owing to the need to maintain an “administrative base” in rural areas as part of regional planning. Consequently, the cost of a public service depends only on political decisions and is nothing other than the cost which the public at large wishes to devote to it.’

‘163.Faced with this plea in law, the Court's task is to examine the applicants' submissions concerning (i) the basis of the Commission's finding that, upon application of Article 90(2) of the Treaty, the tax concession in question granted to La Poste, being less than its additional public service costs, does not constitute State aid within the meaning of Article 92(1) of the Treaty, (ii) the question whether the aid is necessary for the performance of La Poste's particular tasks and, finally, (iii) the question as to whether the Commission, in proceeding on the assumption that the tax concession was less than the additional public service costs, could reasonably arrive at the view that there were no grounds for concluding that a transfer of State resources to La Poste's competitive activities was involved.

164.Article 92(1) of the Treaty provides: “Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.”

165.It is clear from Article 90 of the Treaty that, save only for the reservation in Article 90(2), Article 92 covers all undertakings, private or public, and all their production (judgment in Case 78/76 Steinike & Weinlig [[1977] ECR 595], paragraph 18). Thus, the Commission's power, under Article 93 of the Treaty, to assess the compatibility of aid with the common market also extends to State aid granted to the undertakings referred to in Article 90(2), in particular those which the Member States have entrusted with the management of services of general economic interest (judgment in Case C-387/92 Banco Exterior de Espana [[1994] ECR I-877], paragraph 17). Furthermore, the Court of Justice has held that the rules of competition also apply to the postal sector (judgments in Joined Cases C-48/90 and C-66/90 Netherlands and Others v Commission [1992] ECR I-565 and in Case C-320/91 Corbeau [[1993] ECR I-2533]).

166.As stated in paragraph 114 above, it is not disputed that the tax concession enjoyed by La Poste amounted to FF 1.196 billion for 1994.

167.In principle, that tax concession constitutes State aid within the meaning of Article 92(1) since, although not taking the form of a transfer of State resources, it places La Poste in a more favourable financial situation than other taxpayers, including the companies represented by the applicants (judgment in Case C-387/92 Banco Exterior de España, cited above, paragraph 14).

168.It has been consistently held that aid within the meaning of Article 92(1) of the Treaty covers advantages granted by the public authorities which, in various forms, mitigate the charges normally included in an undertaking's budget (judgments of the Court of Justice in Case C-241/94 France v Commission [1996] I-4551, paragraph 34, in Case C-39/94 SFEI and others [1996] I-3547, paragraph 58, and in Case C-387/92 Banco Exterior de España, cited above, paragraph 13).

169.In so far as aid is capable of affecting trade between Member States and distorting competition, it is incompatible with the common market, save where otherwise provided for by the Treaty (judgment in Case C-387/92 Banco Exterior de España, cited above, paragraph 15).

170.Article 90(2) of the Treaty provides for such a derogation where the aid involved is granted to an undertaking entrusted with the operation of a service of general economic interest (see paragraphs 66 to 72 above).

171.Article 90(2) provides: “Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.”

172.It follows from the wording of that provision, in particular from the words “in so far as the application of such rules [which are those contained in Article 92 of the Treaty] does not obstruct the performance ... of the particular tasks”, that, where Article 90(2) may be relied upon, a State measure caught by Article 92(1) may nevertheless be considered to be compatible with the common market (judgment in Case C-387/92 Banco Exterior de España, cited above, paragraphs 14 and 15, and see, to the same effect, the Opinion of Advocate General Lenz in that case, ECR [1994] I-879, paragraph 66). Although the aid involved is still State aid within the meaning of the latter provision, the effect of the competition rules may nevertheless be curtailed in such a case (judgment of the Court of Justice in Case 66/86 Ahmed Saeed Flugreisen and Others [1989] ECR 803, paragraph 56), so that a prohibition on giving effect to new aid, inferred from Articles 92 and 93(2) and (3) read together, may be declared inapplicable.

173.Because Article 90(2) of the Treaty lays down a derogating rule, it must be interpreted restrictively. So, in order that the derogation from the application of the rules of the Treaty provided for by that provision may apply, it is not sufficient that the undertaking in question has been entrusted by the public authorities with the operation of a service of general economic interest: the application of the rules of the Treaty, specifically those of Article 92, must also obstruct the performance of the particular tasks assigned to the undertaking and the interests of the Community must not be affected (judgment of the Court of Justice in Case C-179/90 Merci Convenzionali Porto di Genova [1991] ECR I-5889, paragraph 26).

174.In examining the question whether Community law precludes a Member State from granting State aid to offset the additional costs assumed by an undertaking entrusted with the operation of a service of general economic interest within the meaning of Article 90(2) of the Treaty where those additional costs arise from performance of the particular task assigned to it, reference must be made to the case-law on the combined application of Articles 85 and 86 and Article 90(2) of the Treaty.

175.In its judgment in Case C-393/92 Almelo [1994] ECR I-1477, paragraph 46, the Court of Justice held that restrictions on competition from other economic operators may be permissible pursuant to Article 90(2) in so far as they are necessary to enable the undertaking to perform a task of general interest assigned to it. In particular, the Court held in this regard that “it is necessary to take into consideration the economic conditions in which the undertaking operates, in particular the costs which it has to bear and the legislation, particularly concerning the environment to which it is subject” (paragraph 49). In that case, the Court thus found that the application of an exclusive purchasing clause could escape the prohibitions laid down in Articles 85 and 86 to the extent that the restriction on competition entailed by the clause was necessary in order to enable the undertaking in question to perform its task of general interest.

176.In its judgment in Case C-320/91 Corbeau, cited above, the Court similarly held that the grant of exclusive rights as regards the collection, carriage, and distribution of mail to the Belgian Régie des Postes, which were capable of entailing restrictions on competition, could be justified to the extent that those restrictions were necessary to ensure performance of the particular task assigned to that undertaking.

177.In that case, the Court examined the question as to whether the exclusion of competition was necessary in order to provide the holder of the exclusive rights with economically acceptable conditions. It considered that the starting point for such an examination must be “the premiss that the obligation ... to perform [the] services in conditions of economic equilibrium presupposes that it will be possible to offset less profitable sectors against the profitable sectors ...” (paragraph 17). According to the Court of Justice, this is possible only if one accepts that competition by private undertakings in the economically profitable sectors can be curtailed (paragraphs 17 and 18).

178.This Court considers that that case-law on the application of Articles 85 and 86, can be applied, mutatis mutandis, to the field of State aid, so that the grant of State aid may, under Article 90(2) of the Treaty, escape the prohibition laid down in Article 92 of that Treaty provided that the sole purpose of the aid in question is to offset the additional costs incurred in performing the particular task assigned to the undertaking entrusted with the operation of a service of general economic interest and that the grant of the aid is necessary in order for that undertaking to be able to perform its public service obligations under conditions of economic equilibrium (Corbeau, paragraphs 17 to 19). Determining whether the aid is necessary entails a general assessment of the economic conditions in which the undertaking in question performs the activities in the reserved sector, without taking account of any benefits it may draw from the sectors open to competition.

179.It is clear from the written evidence and from the oral argument presented to the Court that on average over the first three years following the adoption of the 1990 Law, La Poste has achieved a broadly breakeven position on an after-tax basis only, that is to say, only after the tax concession in question has been taken into account.

180.In those circumstances, even though the financial results from those years cover all La Poste's activities, there being no analytical accounts permitting La Poste's performance in its different sectors of activity to be distinguished, the Court considers that the Commission was entitled to take the view, without breaching the limits of its power of assessment, that in the present case the tax concession in question was not greater than was necessary to ensure that the tasks of public interest assigned to La Poste are performed, namely in particular the obligation to maintain a postal presence in rural areas, as it can be assumed that the resulting additional costs correspond to equivalent losses for La Poste. The fact of having authorised State aid which stayed below those additional costs cannot therefore render Article 90(2) of the Treaty inapplicable in this case and, accordingly, it cannot constitute an infringement of Article 92 of the Treaty.

181.The Court also considers that the applicants have not produced any evidence or arguments to support their assertion that the aid in question is not necessary for the performance of the public service obligations assigned to La Poste. The submission challenging the necessity for the aid in question must therefore be dismissed.

182.The applicants' submissions to the effect that the methods used by the Commission were inappropriate must now be examined. According to them, because La Poste has no analytical accounts, it is impossible to say that the tax concession in question does not, contrary to Community law, benefit its competitive activities.

183.The Court must therefore examine whether the method of comparison used, consisting in assessing the amount of the State aid (FF 1.196 billion) in relation to the amount of La Poste's additional costs (FF 1.32 billion, according to the minimum estimate — see paragraphs 105 and 106 above), is an appropriate method capable of reasonably ensuring that the grant of that aid does not involve any cross-subsidy for La Poste's competitive activities. As the Commission rightly points out in the contested decision, Community law requires that the State aid in question should not benefit the public operator's competitive activities.

184.The documents before the Court show that, when it adopted the contested decision, La Poste did not maintain, in its internal accounting system, separate accounts for services falling within the reserved sector and for non-reserved services. This in fact is the reason why the additional public service costs were calculated in the contested decision on the basis of all postal activities (see paragraph 105 above).

185.It is undeniable that if La Poste had established such an analytical accounts system at the time, the Commission would have had a surer basis for satisfying itself that there was no cross-subsidy.

186.However, there is as yet no Community legislation providing for the introduction of an analytical accounts system for undertakings which, whilst entrusted with public service tasks, engage in activities in competitive sectors.

187.Secondly, the actual application of the competition rules in circumstances such as those existing in the present case necessarily involves complex economic and legal assessments which must be made within a Community context (see, for example, the judgment of the Court of Justice in Case C-303/88 Italy v Commission, cited above, paragraph 34). Consequently, the Commission must be allowed a certain discretion in deciding on the most appropriate method for making sure that the competitive activities do not receive any cross-subsidy.

188.Whilst it is true that the grant of State aid to an undertaking may allow the undertaking to release other resources for other activities (judgment in Case C-303/88 Italy v Commission), the Court nevertheless considers that where the aid concerned is granted to an undertaking of the kind contemplated in Article 90(2) of the Treaty, the possibility of a cross-subsidy taking place is excluded to the extent to which the aid in question remains lower than the additional costs generated by the particular task referred to in that provision.

189.Moreover, as was held in paragraph 178 above, Community law does not preclude a Member State from granting State aid to an undertaking entrusted with the management of a service of general economic interest in order to offset the additional costs of the particular task assigned to it, provided that the aid is necessary in order for that undertaking to be able to perform its public service obligations under conditions of economic equilibrium. Consequently, unless Article 90(2) of the Treaty is to be rendered entirely ineffective, the Court considers that it must be acknowledged that the method of comparison used by the Commission in the present case was appropriate for making reasonably sure that the grant of State aid in question involved no cross-subsidy contrary to Community law.

190.On the question of the appropriate method, the applicants have not attempted to show that, given both the information available at the time and the state of Community law, there was an alternative, more suitable method for making sure that La Poste's tax advantage did not benefit its competitive activities. Nor have they produced any evidence or arguments to show that the Commission exceeded the bounds of its discretion in the matter.

191.The applicants' complaint concerning the basis of the tax abatement in question must be regarded as unfounded since they do not dispute the total amount entailed by the concession.

192.As regards the applicants' arguments that the cost of a public service is nothing other than the cost which the public at large is willing to devote to it and that it would have been preferable to apply the 1982 Law, it suffices to observe that, as stated in paragraph 108 above, in the absence of Community rules governing the matter, the Commission has no power to take a position on the organisation and scale of the public service tasks assigned to a public undertaking or on the expediency of political choices made in this regard by the competent national authorities, provided that the aid in question does not benefit the activities pursued in competitive sectors or exceed what is necessary to enable the undertaking concerned to perform the particular task assigned to it.

193.Contrary to what the applicants maintain, the fact that the Commission has urged the French Government to ensure that La Poste's accounting system is improved in the future provides no ground for inferring that in adopting the contested decision the Commission recognised that a cross-subsidy existed. Even if La Poste's accounting system may be improved in the future so as to afford greater transparency in the breakdown of costs, the Commission was nevertheless entitled, as held in paragraphs 183 to 189 above, to find, on the basis of the information available at the time, that the grant of the tax concession in question entailed no risk of a cross-subsidy.’