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State aid: Commission prohibits planned €9.56 million aid to IBIDEN Hungary

The European Commission has prohibited, under EC Treaty state aid rules a Hungarian regional investment aid of €9.56 million in favour of IBIDEN Hungary Gyártó Kft. IBIDEN produces substrates for diesel particulate filters. A Commission in-depth investigation, launched in July 2007 (see IP/07/1071), revealed that the project was not in line with the requirements of the EU rules on regional aid and in particular with the 2002 Multisectoral Framework on regional aid (see IP/02/242). Notably, IBIDEN's market share was found to exceed the relevant 25% threshold. As the aid has not yet been granted, it was not necessary to order its recovery.
Competition Commissioner Neelie Kroes said “I am determined to take a restrictive line on aid for large investment projects which distorts competition in favour of a significant market player and is liable to cause a considerable distortion of trade between Member States."
IBIDEN Hungary Gyártó Kft., a Hungarian subsidiary of IBIDEN Co. Ltd., which has its headquarters in Japan, produces ceramic substrates for Diesel Particulate Filters (DPFs) in Dunavarsány, Hungary. DPFs, which are used for treating soot and other insoluble particulate matter in exhaust emissions, are one key part of the exhaust gas treatment system of diesel passenger cars and light duty trucks. The other key part is Diesel Oxidation Catalysts (DOC), which treat gases (i.e. Carbon Oxides and Hydrocarbons) and to a certain extent the soluble organic fraction (SOF) of particulate matter.
On 10 July 2007 the Commission opened a formal state aid investigation procedure (see IP/07/1071), as it had doubts as to the compatibility of the aid with the Single Market. In particular, the Commission investigated whether the DPF market could be considered as separate from the DOC market. Indeed, to comply with the Commission's 2002 Multisectoral Framework on regional aid for large investment projects or MSF (see IP/02/242), IBIDEN's market share on the relevant market could not exceed 25%.
The MSF 2002 sets out the conditions for granting aid for very large regional investment projects. Besides a general reduction of aid intensities for large investments with regard to the general regional aid ceiling, the MSF 2002 restricts the amount of aid that can be given to companies with a market share of over 25% because of concerns that aid in these circumstances would reinforce the market power of the beneficiary at the expense of its competitors.
During the investigation the Commission received comments from the Hungarian authorities and four interested parties, including the aid beneficiary. The comments confirmed the Commission's initial doubts. The Commission therefore concluded that the relevant product market covers only substrates for Diesel Particulate Filters to be fitted in the exhaust systems of diesel passenger cars and light duty trucks. The Commission also established that the market share of IBIDEN in the DPF market in Europe substantially exceeds the 25% threshold both before and after the investment.
The high market share of IBIDEN reflects the prevailing position of the company in the DPF market: it is one of the two major filter substrate manufacturers in the world. The aid would have strengthened even more IBIDEN's leading position in this market, making it more difficult for new competitors to enter the market and for new entrants to consolidate their position on this market.
In line with the rules on regional aid (see IP/97/1137), IBIDEN had already received aid worth €29.73 million in the form of a direct grant and a corporate income tax allowance on the basis of existing regional aid schemes. The €9.56 million aid concerned by this decision was intended as an additional support.
The non-confidential version of the decision will be made available under the case number C 21/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.