Brussels, 20/06/2002 (Agence Europe) - On Wednesday the European Commission decided to call on Germany to reform its grain brandy (Kornbranntwein) monopoly. This was the first step to be taken before the Commission launches its official investigation procedure. The Commission is effectively calling on the German authorities to take appropriate measures so that agricultural producers and industrial producers of grain brandy will no longer be entitled to operating aid from the German authorities. Similarly, these producers should no longer be authorised to receive aid of any kind to compensate for their early exit from the monopoly. The changes should be made to the legislation as soon as possible starting with the 2002/03 production year and should be in force by no later than 1 January 2004. According to the Commission the arrangements constitute aid to German producers which is not available to producers from the other Member States and can no longer be justified since 1989, when a Community regulation stipulated that grain brandy was to be considered an industrial product.
This case was prompted by a complaint from six German industrial producers of grain brandy that their rivals, agricultural producers, were to continue to receive state aid that was incompatible with the European Union Treaty. The complaint was lodged following the entry into force of the German act of 22 December 1999 (Haushaltssanierungsgezetz), which adjusted the German spirits monopoly with the result that the industrial brandy manufacturers would be entirely ineligible from 2006 onwards. The Commission's analysis of the case revealed that the aid in question had already been notified in 1976 on the basis of the rules applicable to agricultural products. It was notified at the time because Germany had changed its spirits import monopoly into a marketing monopoly. Under the new arrangements the monopoly bought grain brandy at prices well above the market retail price. The Commission raised no objections at the time. Since then, however, it has been accepted, in particular in a 1989 Community ruling, that grain brandy is not an agricultural product for the purposes of the Treaty, but an industrial product. The measures in question must therefore be analysed by reference to the Community competition rules. The Commission considers that the measures clearly constitute an existing aid scheme, which is not compatible with the Treaty.