State aid: Commission launches in-depth investigation into financing of retirement pensions of state employees working for France Télécom

  • France
  • 05/20/2008

The European Commission has decided under the state aid rules of the EC Treaty to launch an in-depth investigation into the reform of the arrangements for financing the retirement pensions of state employees working for France Télécom which were introduced in 1997 at the time of the liberalisation of the telecommunications sector. It will look in particular into whether the reduction in the charges borne by France Télécom following the reform constitutes state aid that is compatible with EC Treaty rules. The in-depth investigation will give third parties the opportunity to comment on the measure. The opening of an investigation in no way prejudges its outcome.

Competition Commissioner Neelie Kroessaid “Whilst we welcome structural reforms designed to assist incumbent monopolists in adapting to a liberalised market we must ensure that these reforms do not distort competition between operators to an extent contrary to the common interest.”

In 1997 the French authorities amended the arrangements for financing the retirement pensions of state employees working for France Télécom. By way of derogation from the normal pension scheme, the company had previously been obliged to ensure the financial equilibrium of the retirement scheme for such employees, something which had imposed a growing financial burden on it. According to the French authorities, this burden became excessive at a time when the company was having to cope with the comprehensive opening up of the telecommunications sector to competition and when its capital was being partially privatised.

Under the 1997 reform, this obligation was taken on by the French State, with France Télécom then simply paying a contribution in full discharge of its liabilities, like all companies established under common law. The rate of the contribution is calculated to align France Télécom’s social security contributions with those payable by competitors with the same level of total wages and salaries. However, the French authorities exempted France Télécom from payment of social security contributions related to the risk of unemployment since this risk does not affect state employees.

The Commission’s investigation is in response to a complaint from a competing telecommunications operator alleging that the reduction in France Télécom’s retirement costs and the exemption from social security contributions constitute incompatible state aid. The French authorities argue that the reform simply removed a structural disadvantage for France Télécom which obliged them to finance the retirement cost of its state employees and that, as such, it does not constitute state aid.

As part of the in-depth investigation, the Commission will have to determine whether this reform effectively constitutes state aid under EC Treaty rules and, if so, whether it is compatible with the Single Market.

The non-confidential version of the decision will be published under the case number C 25/2008 in the state aid register on the DG Competition website once all the confidentiality issues have been resolved. The electronic information bulletin State Aid Weekly e-News lists the recent state aid decisions published in the Official Journal and on the Internet.