French aid to fruit and vegetable growers under investigation

July 22, 2005, as reported by France’s subsidy program is under investigation by the European Commission for alleged competition thwarting aid packages awarded to its fruit and vegetable growers.

The EC has opened a formal investigation into potentially illegal state aid granted by France between 1991 and 2002 in the fruit and vegetable sector.

The aid was granted by means of yearly ‘contingency plans’, the commission said. It included measures designed to counter the oversupply of French fruit and vegetables on the internal market by means of price support, support for temporary stockage, destruction of products or support for processing. Subsidies may also have been paid to favor sales of French products outside the EU at times of crisis. Support would seem to have been as high as €50m (US$61m) per year.

The commission doubts that such measures may be considered compatible with competition rules, as they would seem to interfere with the good functioning of the common market organization for fruit and vegetables. The commission is in possession of documents showing that there was awareness that the support measures violated common market rules, and that the aid should be kept confidential.

The commission decision to open the procedure on this aid will be published in the Official Journal of the European Union. France must, however, directly inform the beneficiaries that a formal investigation has been opened on these measures. Third parties may submit their comments within one month of publication of the opening decision.

The commission intends to take a final decision within 18 months. If the aids are confirmed to be incompatible with state aid rules, they will have to be clawed back from the beneficiaries. Reimbursement would have to include interest from the day of receiving the aid.

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