Commission Decision (EU) 2020/391 of 20 September 2019 on the measure SA.34402 – 2015/C (ex 2015/NN) implemented by Germany for Hochschul-Informations-System GmbH (notified under document C(2019) 6836)Text with EEA relevance.

Judgment of the General Court in Gibraltar v Commission of 30 April 2002, T-195/01 and T-207/01, ECLI:EU:T:2002:111, paragraph 111.

, an alteration qualifies as significant if it affects the essence of the scheme, such as the basic conditions of eligibility, the legal basis

Judgment of the Court of Justice of 9 August 1994 in Namur Les Assurances du Crédit SA, C-44/93 ECLI:EU:C:1994:311, paragraph 28.

or the range of beneficiaries.

4.2.2.1.

Nature of financing

(88) Germany points out that an increase in the financing does not affect the essence of the scheme if the increase is commensurate with an increase in corresponding costs of carrying out the same activity, as a number of Commission decisions in the broadcasting sector showed

Commission Decision C(2007) 1761 final of 24 April 2007, SA.18957 (E 3/2005 (ex- CP 2/2003, CP 232/2002, CP 43/2003, CP 243/2004 und CP 195/2004) – Germany – Financing of public service broadcasters in Germany (OJ C 185, 8.8.2007, p. 1) http://ec.europa.eu/competition/state_aid/cases/198395/198395_678609_35_1.pdf, recital 206.

.

(89) Germany reiterates that the amount of direct State financing nominally hardly increased (from DM 2527000 in 1976 to DM 6981000 in 2001 and to EUR 4230000 in 2013) and the changing amounts were the result of the nature of deficit financing which was linked to increasing student numbers and in which inflation also played a role.

4.2.2.2.

Source and manner of financing, legal basis

(90) Germany states that the source of State financing remained the same throughout the time-period: the budget of the federal State and the Länder. Germany agrees with recital 89 of the Opening Decision that the possibility of obtaining financing other than the direct grants was included in the Satzung from the beginning. Germany disagrees, however, with the characterisation in the Opening Decision that the question is whether the additional financing is still as low in proportion [to the overall measure] as not to change the overall character of the financing (see recital 90 of the Opening Decision.) Germany is of the view that a significant increase in the co-financing of HIS’ activities by the universities (their payment for HIS’ IT services increased from 35,7 %in 2002 to 74,1 % in 2013) cannot be interpreted as a significant alteration to the scheme resulting in the loss of the measures’ status as existing aid.

(91) Germany also contradicted the complainant’s assertion that the measure in fact consisted of a series of direct aid grants and it states that there is no specific requirement for the definition of an aid scheme beyond the wording of Article 1(d) of Regulation (EU) 2015/1589

An aid scheme means any act on the basis of which, without further implementing measures being required, individual aid awards may be made to undertakings defined within the act in a general and abstract manner and any act on the basis of which aid which is not linked to a specific project may be awarded to one or several undertakings for an indefinite period of time and/or for an indefinite amount Judgment of the Court of Justice of 9 August 1994 in Namur Les Assurances du Crédit SA, C-44/93 ECLI:EU:C:1994:311, paragraph 28. [emphasis added].

.

(92) Germany also explains that procedures relating to existing aid do not aim at protecting the interests of private individuals, but the legitimate expectations of aid beneficiaries. Therefore, there is no particular transparency obligation vis-à-vis private individuals that would allow them to assert their legal rights.

4.2.2.3.

Objectives and products/services

(93) Germany further argues that HIS’ objective and its activities also remained the same. Germany also contradicted the complainant’s assertion that HIS’ purpose, according to the Satzung, was phrased in a very broad and vague manner (see recital 51). The objective, as the Opening Decision itself established in recital 82, remained unchanged as the original objective was phrased in a broad manner. The comments received by interested parties other than the complainant and the two Italian undertakings also confirmed Germany’s position that the objective of HIS in the university data processing field essentially remained unchanged for forty years: the support of universities in the

field of electronic data processing/information technology

EDP (electronic data processing), an infrequently used term for what is today usually called IS (information services or systems) or MIS (management information services or systems), is the processing of data by a computer and its programs in an environment involving electronic communication. See https://whatis.techtarget.com/definition/EDP-electronic-data-processing

. Germany reiterates that the language of the Satzung relating to the objectives had to be broad enough to permit an adaptation of the services to the changing requirements. The formulation, at the same time, was not unlimited, as the task of developing procedures for the rationalisation of higher education administration and cooperating in the introduction and application thereof is tailored to the automatisation of university management through electronic data processing. The formulation is clearly not broad enough to have allowed HIS to engage in activities other than the provision of software products and services to universities in the electronic data processing/IT field.

(94) With regard to HIS’ information technology products and services over the years, Germany argues an overview demonstrates that they functionally remained the same, although specific modules had to be updated to conform to changed technical and organisational frameworks and developing automatisation. These developments did not change the focus and the content of these services and products. As to the argument that HIS products and services had nothing in common with its products and services in the 1990s (that is to say that there was no continuous product range), Germany states that as early as in 1976, HIS already provided the first, and partially the second generation of segments included in today’s university software products. The SOS product was in 1976 already provided as HIS-SOS II. Germany in fact submitted the following table to show the range of products on offer in the various fields of university management between 1976 and 2013, to demonstrate the continuity of the product portfolio. The product names sometimes changed but their core functions remained the same. The annual work programmes specifically articulated that the range of software offers remains the same but will be remodelled to meet the latest technological standards. (See Work Programme/Business Plan 1995, page 18.)

Table 2

Product portfolio of HIS-IT from the foundation in 1976 until 2013

For different hardware/operating system versions.

The HISinOne product is an integrated, web-based JAVA application. The campus management product areas APP, STU, EXA and ALU are operated on the basis of a core segment, consisting of product areas SYS (System Management), PSV (Personalized Services and Directories), COM (Community) and BIA (Business Intelligence), which include the basic functions for operation of HISinOne.

ProcessesHIS products and technologies19761986199520052013TechnologiesMainframes, batch processing, magnetic disks, COBOL, FORTRANMicrocomputer systems, interactive processing on the screen, databases, Siemens BS/2000, Nixdorf8860, UNIX, 4GL, DOS, Clipper

Personal computers, relational databases (Informix), UNIX, Informix 4GL (UNIX Generation)

Client-server technology with graphic user interfaces, DOS, Windows 3.1, Visual Basic, Clipper (GX-Generation)

Client-server technology with graphic user interfaces (Windows clients, database server), relational databases (Informix, Postgres), Visual Basic, C++ (GX-Generation)

Internet technologies, open source libraries, self-service functions, Java Applets, Java Servlets, Java (QIS Generation)

Client-server technology (Windows clients, database server), Visual Basic, C++ (GX-Generation)

Open source libraries, relational databases (Informix, Postgres), internet technologies, self-service functions, open source libraries, Java Servlets, three-level architecture, Java (QIS Generation and HISinOne Generation)

Application and admissionZUL 8860HISZUL-UNIXZUL-GX, QISZULZUL-GX, QISZUL, HISconnect, HISinOne APPStudent administrationHIS-SOS IIHISSOSHISSOS-UNIX, HISSOS-GXSOS-GX, QISSOSSOS-GX, QISSOS, HISinOne STUAlumni administrationHISinOne ALU

Exam administrationHIS-POSHISPOS, HISPOS-UNIXHISPOS-UNIX, HISPOS-GXPOS-GX, QISPOSPOS-GX, QISPOS, HISinOne EXACourse administrationHIS-LVS, HIS higher education timetableHIS-LVS, HIS higher education timetable

HIS-LVS (extension to

HISSOS)

HIS-LSFHIS-LSF, HISinOne EXAPersonnel and jobs administrationHIS-PVS IIHISPVS II, HISPSAHISSVA-Unix, HISSBSSVA, RKA, ZEBSVA-GX, QIS-SVA, RKA, QIS-RKA, ZEB, QIS-ZEBBudgetary and cash system, cost accountingHISKAM, HIS cost accounting modelHISMBS

HISMBS-

UNIX, HIS-MBS, HIS-

KBS-UNIX,

HISBES, HIS-RKA, HISBES-

UNIX

FSV-GX (BES,

MBS, WebMBS-3T, Fibu, IVS,

MAT, KBS,), COB-

GX, QIS-COB

FSV-GX (BES,

MBS,QISFSV-3T,

Fibu, IVS, MAT, KBS,), COB-GX,

QIS-COB

Device management, inventory, systems and maintenance administration

HISIVS, HIS-

ANL, HISINT

HISIVS-UNIX,

HISIVS-GX,

HISINT

Materials managementHISMATHISMAT, HISBEL-PCConstruction, room and building managementHIS room file including building fileHISBAU II, HIS-BAU DIAHISBAU-PC, HISRVL-PCHIS-BAU-GXHIS-BAU-GX

4.3.

The measures constitute compatible SGEI compensation

(95) Germany is of the opinion that the provision of education and research is a properly recognised SGEI objective, and even an obligation. Contrary to the conclusion of the Opening Decision, the provision of personnel, financial and organisational means was necessary for the fulfilment of the State’s obligation in the higher education field. There was also a market failure that continues possibly even today, as no provider can offer the entire range of software services that universities need.

(96) In addition, the Satzung and work programme provides sufficient detail for an entrustment. The work programme clearly states that HIS’ objective is to provide universities with software products. In the Satzung, it is specified that HIS’ objective is to develop procedures for rationalising university administration and advisory support for their introduction and application which is tailored specifically to the automation of business processes of universities through electronic data processing. Germany believes that the Commission’s requirements regarding the specificity of an entrustment act (as specified in recital 65 of the Opening Decision) is too strict.

(97) Germany concludes that based on these elements, the compensation of HIS took place in accordance with rules applicable to SGEI.

4.4.

Financing of HIS eG/Market foreclosure effect of financing of HIS IT

(98) Germany first pointed out that the Opening Decision did not express doubts relating to HIS eG, into which HIS was transformed in January 2014. Therefore, the complainant’s comments on this subject were irrelevant. Germany also informed the Commission that since a dialogue with the Commission regarding the complaint had started, in November 2012, HIS had not been actively present on the market and had not participated in public procurement procedures.

(99) Germany found the complainant’s argumentation relating to HIS’ price policy contradictory: while the complainant sometimes considered HIS’ prices to amount to market distortion (see, for example, page 6 of the complainant’s comments of 18 December 2013), at other times, it alleged that HIS concluded contracts with prices above the market level (see page 4 of the complainant’s comments of 18 December 2013).

(100) As regards the argument that the financing of HIS led to market foreclosure, Germany expresses agreement with the position of several interested parties that no such foreclosure has taken place and that the service provision was necessary as there was a massive market failure in the field

Several interested parties also pointed out that HIS’ activities did not have a market foreclosing effect: it is undisputed that suppliers of at least parts of the university management applications have been in existence since the 1990s and colleges have been free to select one or more other suppliers. In addition, the open source nature of HIS’ software has in fact a competition fostering effect. Competition, as several interested parties pointed out, would rather be weakened through the disappearance of HIS (which would result from a recovery of the support it enjoyed).

.

1. ASSESSMENT OF THE MEASURES

(101) The Commission assessed the direct grants and the Corporation Tax and Trade Tax exemptions provided to HIS that benefitted HIS’ supply of information technology services to German public universities and partially to German private and foreign universities.

(102) The Opening Decision included in its scope the examination of the State aid nature and the compatibility of the alleged measures in the time-period between 1976 and 2013 (see recital 103 of the Opening Decision). The Commission therefore focuses on the examination of the measures provided in this time-period.

5.1.

Presence of State aid within the meaning of Article 107(1) of the Treaty

(103) Article 107(1) of the Treaty provides that 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 internal market.

(104) For a measure to be regarded as State aid within the meaning of Article 107(1) of the Treaty, it must fulfil the following cumulative conditions: (a) it must involve State resources and must be imputable to the State; (b) it must result in an economic advantage to an undertaking; (c) the advantage must be selective; and (d) it must distort or threaten to distort competition in so far as it affects trade between Member States. If any one of these criteria is not fulfilled the measure does not constitute State aid.

5.1.1.

State aid nature of the direct grants

5.1.1.1.

State resources and imputability

(105) It is undisputed that the support for HIS constituted imputable State resources. The measures were provided by the Bund and the Länder and entailed a use of State resources because the grants were provided from budgetary resources and the tax exemptions reduced the State’s fiscal revenue.

(106) Since the decision to provide the funding lies in the hands of the Bund and the Länder, the measure would clearly be imputable to the State.

5.1.1.2.

Economic nature of services provided by HIS

5.1.1.3.

Services provided to German public universities

(107) According to Article 107(1) of the Treaty, in order for State aid to be present, an economic advantage has to be provided to an undertaking.

(108) According to settled case law, the concept of undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed

Judgment of the Court of Justice 12 September 2000 in Joined Cases Pavlov and Others, C-180/98 to C-184/98, ECLI:EU:C:2000:428, paragraph 74.

. Any activity consisting in offering goods or services on a given market is an economic activity

Judgment of the Court of Justice of 23 April 1991 in Höfner and Elser, C-41/90, ECLI:EU:C:1991:161, paragraph 21; Judgment of the Court of Justice of 13 July 1962 in Mannesman AG v High Authority of the ECSC, C-19/61, ECLI:EU:C:1962:31, paragraph 371, and Judgment of the Court of Justice of 13 July 1962 in joined cases Klöckner-Werke AG and Hoesch AG v High Authority of the ECSC, C-17/61 and C-20/61, ECLI:EU:C:1962:30, paragraph 341.

.

(109) Germany argues that HIS was not an undertaking because it was not engaged in an economic activity and it did not operate for the purpose of profit. According to Germany, HIS’ aim, as specified in the Satzung, was the support of German public universities and their administrations in order to ensure the rational and economical performance of their scientific and educational tasks. Germany argues that this aim was in line with the State’s duty of providing education, which includes the duty of providing universities with human, financial and organizational resources. As such, Germany concludes, HIS supplied its services for non-economic purposes and therefore did not engage in an economic activity.

(110) The Court of Justice has held that the State by establishing and maintaining a system of public education, normally financed from the public purse and not by pupils or their parents, does not intend to become involved in activities for remuneration, but carries out its tasks towards its citizens in the social, cultural, and educational areas

Judgment of the Court of Justice of 11 September 2007, Commission v Germany, C-318/05, ECLI:EU:C:2007:495, paragraph 68.

.

(111) Accordingly, activities of public universities and research organisations linked to their educational objective constitute a non-economic activity and thus fall outside the ambit of the State aid rules.

(112) According to the case law of the Union courts, activities that are intrinsically connected with the exercise of public tasks are considered to be of non-economic nature

Judgment of the Court of Justice of 12 July 2012, CompassDatenbank v Austria, C-138/11, ECLI:EU:C:2012:449, paragraph 41.

.

(113) Examples of such activities include, as it was explained in the Opening Decision (see recital 29 of that decision), the collection of data to be used for public purposes on the basis of a statutory obligation imposed on the undertakings concerned to disclose such data.

(114) The Commission considers that IT services provided by HIS to German public universities are sufficiently similar to the services at issue in the Compass-Datenbank judgement, and that HIS’ services constituted an essential part of the State’s task in German public tertiary education system for the following reasons.

(115) In the Compass-Datenbank judgment, the Court concluded that service in question, consisting in the maintenance and disclosure of the data, could not be separated from the collection of the data, as the collection of the data would have been useless without maintaining the data for consultation with the public (paragraph 41 of that judgment).

(116) The Opening Decision referred to this judgment and to the SAT-Fluggesellschaft mbH judgement for the proposition that in order to show that the provision of software services had been closely connected with carrying out State’s public task in the field of public tertiary education, HIS’ activities must be related to these tasks

Recitals 28 and 29 of the Opening Decision citing the Judgment of the Court of Justice of 12 July 2012, CompassDatenbank v Austria, C-138/11, ECLI:EU:C:2012:449, paragraph 41.

by [their] nature, their aim and the rules to which [they are] subject

Recital 28 of the Opening Decision citing the Judgment of the Court of Justice of 19 January 1994 SAT Fluggesellschaft mbH v Eurocontrol, C-364/92, ECLI:EU:C:1994:7, paragraph 30.

.

(117) The activities of HIS in question, more specifically the provision of tailor-made college software products and related services, satisfy the requirement of being connected, by their nature, their aim and the rules to which they were subject, to carrying out the State’s non-economic activity in the public tertiary education field in a way analogous to the relevant case law.

(118) First, the nature of the services provided by HIS are closely related to the State’s role to provide public higher education, as universities cannot be managed without efficient software. The provision of the software services was therefore necessary for the educational tasks of the universities, i.e. the provision of free higher education to the public, which has been an explicit aim of HIS’ creation and operation.

(119) The comments submitted by several interested parties during the formal investigation also supported the argument that HIS’ products and services were used to execute essential, university specific business processes, that their functionality is a prerequisite for the overall functionality of German public universities and are therefore indispensable for the fulfilment of their educational mandate. (See recitals 35, 36, 37 and 39 of this Decision.)

(120) The provision of these software services to German public universities was not a mere general service (such as renting real estate property, obtaining legal advice from outside parties, for example) but a service that had to be tailored and adjusted to the universities’ specialised needs (see recital 36 and footnote 7 of this Decision). This circumstance also supports the realistic assumption that in the absence of HIS’ services, the German public universities or the Länder themselves would have needed to take care of university software development needs. The way HIS was set up and operated was a method of collectively meeting these essential functional needs of the German public universities through the pooling of experience and expertise. The example of Microsoft raised by the complainant (see recital 44 of this Decision), does not undermine this assumption because Microsoft charges (presumably) market prices for its software and its position as a globally active group vis-à-vis the German public universities is entirely different from that of HIS’.

(121) Second, it is not necessary, pursuant to the case law of Union courts to show that HIS itself pursued a public task. None of the analogous cases articulated such a requirement

The Compasss-Datenbank judgment refers to statutory obligation on undertakings using the service (the arguably non-economic activity) and not on the entity that is engaged in the non-economic activity (paragraph 40 of that judgment).

. What is relevant, by contrast, is that the activity to which HIS’ activities are intrinsically linked, constitutes an exercise of the State’s task in the public tertiary education system.

(122) The requirement that the activity should be connected to carrying out the State’s non-economic activity in the public tertiary education field by the rules to which it is subject, as specified by the relevant case law

See, for example, Judgment of the General Court of 28 September 2017, Case T-138/15, Aanbestedingskalender and Others v Commission, ECLI:EU:T:2017:675, paragraph 38, recital 29 of the Commission Decision ZVD Portal; Commission Decision C(2013) 2361 final of 2 May 2013, SA.25745 (2013/NN) (ex- CP 11/2008) – Germany – National Website for auctions in insolvency proceedings (ZVD Portal) (OJ C 167, 13.6.2013, p. 1). http://ec.europa.eu/competition/state_aid/cases/247954/247954_1433360_92_2.pdf;

, is also satisfied. The operation of HIS, in its entirety, was not expressly subject to the same range of rules and laws that govern the carrying out of the Länders’ non-economic activity in the public tertiary education field. However, the necessary connection to the exercise of the public task follows from the most important elements of the rules that governed HIS. The purpose of the private legal form (GmbH) was necessary for formal legal reasons, as the Bund and the Länder were not able to set up HIS together in any other public legal form

Germany argued that only through a GmbH was it possible to comply with the constitutional prohibition of universities’ co-management between the Bund and the Länder.

. Further, HIS’ operation and management

See recitals 8, 9 and 11 of this Decision.

showed that it was governed as a quasi-State entity and its operation was entirely void of any profit making aspect (and, in that respect, not essentially different from that of the universities themselves). Finally, section 2 of the Satzung, which governs the operation of HIS, clearly states that the purpose of the company is to support higher education institutions and competent administrative bodies in their efforts to perform higher education tasks in a rational and cost effective manner. On this basis, the Commission considers that the requirement of HIS’ being connected to the exercise of public tasks or, by analogy, to carrying out a non-economic public task through the rules to which it was subject is satisfied in the current case.

(123) The case at hand is similar to the TenderNed

Commission Decision C(2014) 9548 final of 18 December 2014, SA.34646 (2014/NN) (ex 2012/CP) – The Netherlands – E-procurement platform TenderNed (OJ C 422, 8.12.2017, p. 1) http://ec.europa.eu/competition/state_aid/cases/255396/255396_1614207_95_2.pdf and Judgment of the General Court of 28 September 2017, T-138/15, Aanbestedingskalender and Others v Commission, ECLI:EU:T:2017:675, currently under appeal.

case law where the General Court held that for the issue of whether TenderNed’s activities form part of the exercise of public tasks, the question was also articulated as whether the activities, by their nature, aim and the rules to which they were subject, were connected with the exercise of public tasks.

(124) In terms of the aim and nature of TenderNed’s activities, the General Court found that the Commission was correct in considering that TenderNed’s activities constituted means by which public authorities could fulfil their legal (statutory) obligation to comply with European and national public procurement legislation.

(125) The TenderNed judgment provides further elements that indicate that HIS’ supply of software/IT to the German public universities have not been of an economic nature.

(126) The TenderNed judgment established inseparability between the service TenderNed provided and the public task at issue in that case even though there were indications that the e-procurement in question merely contribute[d] to the effective operation of the [service] that was connect[ed] with the exercise of public power (see recital 90 of the judgment). Similarly to the TenderNed judgment, in the present case there have also been market operators that offered parts of the service that HIS offered. However, as the General Court explained in the TenderNed judgment, the authorities could best manage the entire public procurement process with TenderNed’s services (recital 90 of the judgment) and that existing commercial platforms did not offer the conditions relating to price, objective

quality characteristics, continuity and access to the services provided that would be necessary to fulfil the objectives of the authorities (recital 107 of the TenderNed judgment). This reasoning can be fully applied to the case at hand. As argued by a number of interested parties, no other provider of university software offered the entire range of services that HIS offered. The complainant itself admits that private providers only offer parts of the services required in the college software field

For example, in its submission of 4 April 2016, on pages 9-10, the complainant says that Universities in need of more closely fitting IT solutions beyond the standard processes can buy additional capacities from HIS. However, other providers are also available for this purpose.

.

(127) To conclude, HIS’ provision of university software/IT services to German public universities were intrinsically linked to carrying out the non-economic activity of providing public university education, and was therefore not economic.

5.1.1.4.

Services provided to German private and foreign universities

(128) According to case law, a legal entity can be regarded as an undertaking with respect to only part of its activities, if those activities must be classified as economic activities

Judgment of the Court of Justice of 12 July 2012, CompassDatenbank v Austria, C-138/11, EU:C:2012:449, paragraph 37.

.

(129) As it was explained above (see recital 72), Germany argued that HIS’ activity of selling software to private and foreign universities did not constitute State aid, as

(a) it fit into the R&D Framework’s concept of ancillary economic activity;

(b) these beneficiaries of HIS’ activities are overwhelmingly non-economic actors; and

(c) the accounts relating to this activity are kept separated from the accounts relating to HIS’ supply of software to German public universities.

(130) In addition, Germany argued that in case these activities constituted economic activities, the State aid part that can conceivably be linked to such activities fall under the de minimis threshold established by Regulation (EU) No 1407/2013.

(131) The Commission disagrees with the argument that these small-scale sales to private and foreign universities were ancillary and, on that basis, any State financing that could have conceivably supported these activities should not be regarded as State aid, for the following reasons.

(132) Germany did not sufficiently demonstrate why the concept of ancillary economic activities from the R&D Framework is applicable to the case at hand. Germany did not demonstrate, for example, that the small-scale sales constituted an activity which is directly related to and necessary for the operation of the research organisation or research infrastructure or intrinsically linked to its main non-economic use within the meaning of Point 20 of the R&D Framework (see in recital 72(f) and footnote 43).

(133) As to the relevance of separation of accounts, it is true that the Court of Justice held that a single establishment may carry on a number of activities, both economic and non-economic provided that it keeps separate accounts for the different funds that it receives so as to exclude any risk of cross-subsidisation of its economic activities by means of public funds received for its non-economic activities

Judgement of the Court of Justice of 27 June 2017, Escuelas Pías, C-74/16, ECLI:EU:C:2017:496, paragraph 51.

. However, in the present case, unlike in the case of Escuelas Pías, the public financing related to the entirety of the beneficiary, HIS’ activities. Therefore the fact that separate accounts were maintained for HIS’ sales to German private and foreign universities does not eliminate the economic nature of these sales activities.

5.1.2.

Selective advantage, distortion of competition and effect on trade with respect to the grants

(134) As explained in recital 127, the Commission considers that HIS did not act as an undertaking insofar as it provided software services to German public universities. However, as regards the other criteria of the definition of State aid, the Commission considers that the direct grants provided between 1976 and 2013 could have constituted a selective advantage to HIS. In addition, given that IT services could in principle be provided in other Member States or by undertakings from other Member States, the measures would, if HIS had acted as an undertaking, had the potential to distort competition to the extent that it could have affected trade between Member States.

(135) Given that HIS was an undertaking engaged in an economic activity with respect to the sales to German private and foreign universities, the measure benefitting these activities provided a selective economic advantage to the undertaking as other undertakings that provided similar services did not benefit from these measures. In addition, the State financing of HIS’ supply of public universities relieved HIS from the necessity of operating for profit, hence it enabled HIS to offer the services on a cost-coverage basis only. Finally, given that this is a service that could in principle be provided in other Member States or by undertakings from other Member States, the measures had the potential to distort competition to the extent that it could have affected trade between Member States.

(136) Therefore, the direct grants that could have benefitted the sale of university software services by HIS to private German and foreign universities constituted State aid.

5.1.3.

State aid nature of the tax exemption measures

(137) The Commission notes that in the formal investigation phase, the complainant did not submit any argument with respect to the tax exemptions enjoyed by HIS until 31 December 2013. In fact, the complainant did not at all address the tax exemptions in its comments on the Opening Decision. Arguments relating to the tax exemptions, as a distinct element of the complaint, were submitted only with respect to the status of HIS following its transformation in 2014

The complainant’s submission of 18 December 2013.

. Possible State aid measures for the benefit of HIS eG, however, is not the subject matter of this Decision, as it was not within the scope of the Opening Decision.

(138) In the Opening Decision, the Commission could not exclude that a selective advantage may have been granted to HIS, and pointed out that the assessment of a selective advantage is contingent upon the question of whether or not HIS was an undertaking (see recitals 52-53 of the Opening Decision). As the Commission concludes that HIS carried out an economic activity with respect to the sales to German private and foreign universities (see recital 133), it is not possible to exclude that the tax measures in question were selective.

(139) In addition, given that this is a service that could in principle be provided in other Member States or by undertakings from other Member States, the measures had the potential to distort competition to the extent that it could have affected trade between Member States. Therefore, the tax measures benefitting HIS could have constituted State aid.

5.2.

Existing aid

(140) To the extent that the direct grants to HIS between 1976 and 2013 constituted State aid, the Commission considers that they constituted existing aid for the reasons explained below. Should the tax measures in question have also constituted State aid (see recital 139), the Commission considers that these measures also constituted existing aid

Although the Opening Decision raised the question of whether the tax measures, should they constitute State aid, would constitute incompatible operating aid, (see recital 106 of the Opening Decision), the Commission’s decisional practice has evolved and concluded that exemption from corporation tax and trade tax for public benefit purpose organisations under German law constituted existing aid. (See Commission Decision C(2015) 7225 final of 26 October 2015, SA.33206 (2015/NN) – Alleged unlawful State aid to German Youth Hostel Association (Deutsches Jugendherbergswerk) – Tax measures (OJ C 387, 20.11.2015, p. 1). http://ec.europa.eu/competition/state_aid/cases/260436/260436_1698296_81_2.pdf

for the following reasons.

(141) Pursuant to Article 1(b)(v) of Regulation (EU) 2015/1589

[E]xisting aid means (…) v) aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the internal market and without having been altered by the Member State. Where certain measures become aid following the liberalisation of an activity by Union law, such measures shall not be considered as existing aid after the date fixed for liberalization.

, an aid measure is existing aid if it can be established that at the time when it was put into effect, it did not constitute State aid, but due to the evolution of the internal market, it has become State aid but was not altered by the Member State.

(142) Existing aid measures enjoy legal protection until the Commission has not established their incompatibility with the internal market

Judgment of the General Court of 15 June 2000, Alzetta v Commission, T-298/97, ECLI:EU:T:2000:151, paragraph 148.

and ordered future oriented appropriate measures (see Article 108(1) of the Treaty

See footnote 54.

and Article 22 of Regulation (EU) 2015/1589

See footnote 55.

).

(143) In order to establish that the measures (as described in recital 13) in question constitute existing aid pursuant to sentence 1 of Article 1(b)(v) of Regulation (EU) 2015/1589, it must be established first that there was no market for the products and services in question when the State started providing funding to HIS.

(144) In light of the above considerations, following the examination of whether there was a market for university electronic data processing (university software), when the measures entered into force in 1976, the Commission examines whether possible subsequent changes might have affected the actual substance of the original measure. Such changes might pertain to the nature of the advantage or the source of financing, the purpose or legal basis of the aid, the beneficiaries or the scope of activities of the beneficiaries) in a way that the existing aid as a whole is transformed into a new aid.

5.2.1.

There was no market for university software in 1976

(145) The Commission considers that the complainant was not able to prove that a market for HIS’ products, more specifically, electronic data processing/IT products and services

EDP (electronic data processing), an infrequently used term for what is today usually called IS (information services or systems) or MIS (management information services or systems), is the processing of data by a computer and its programs in an environment involving electronic communication. See https://whatis.techtarget.com/definition/EDP-electronic-data-processing

for university management existed at the time the measures in question, including the tax measures, started in 1976. A large majority of the comments from the universities supported the argument advanced by Germany that the market for university management software developed about 12-14 years ago, and that the earliest point in time when a market could have been in existence was in 1993. Several interested parties noted that although suppliers of at least parts of the university management applications had been in existence for some time, even today there is no full-blown market, in the field of electronic data processing/IT products and services for university management. According to them, apart from HIS, there is not a single supplier that can provide the full scope of products and services that HIS offers (see recital 38).

(146) The statements from the complainant in 2012 that before 2000 only the HIS-GX software existed

See page 25 of the complaint (15 March 2012).

, that developments in the past seven [emphasis added] years show that private providers are in the position to supply interested universities with integrated campus management software

See the submission of the complainant of 20 November 2013, Annex 2, page 6.

coupled with the complainant’s speculative statements that undertakings in Germany and abroad existed that were or could have been [emphasis added] active in the 1970s in the university management software market

See recital 50.

(see page 4 of the complainant’s comments of 4 April 2016 and recital 53), proved to the Commission that no university software market existed in Germany in 1976. Therefore, the Commission’s doubts regarding the question of whether such a market was in existence in 1976 have been eliminated.

(147) The Commission considers that the developments in the field of electronic data processing/IT products and services for university management for the German tertiary education sector does amount to the evolution of the internal market within the meaning of Article 1(b)(v) of the Procedural Regulation (see recital 91 of the Opening Decision). This conclusion is supported by a number of comments (including Germany’s) to the Opening Decision that a relevant market has developed at some point during the past one to three decades for at least some partial areas within the field of software services to universities in Germany (see recitals 38 and 65).

5.2.2.

No significant alteration of the measures took place

(148) Should the measures have indeed become State aid at some point between 1976 and 2013, it must be examined whether they have undergone any significant alteration that affected their actual substance that gave rise to new aid.

(149) According to the judgment Government of Gibraltar v Commission, not every alteration to existing aid should be regarded as changing existing aid into new aid. According to this case, it is only where the alteration affects the actual substance of the original scheme that the latter is transformed into a new aid scheme

Judgment of the General Court of 30 April 2002, Government of Gibraltar v Commission, T-195/01 and T-207/01, ECLI:EU:T:2002:111, recital 111.

. The changes to a scheme are significant if any of its main elements, such as the nature of the financing, its source, its legal basis, the objective pursued or the beneficiaries have changed

Judgment of the Court of Justice of 13 December 2018, Südwestrundfunk, C-492/17, ECLI:EU:C:2018:1019, paragraphs 54 and 66; Commission Decision C(2008) 725 final of 27 February 2008, SA.21395 E8/2006 (ex CP 110/2004 et CP 126/2004) – Belgique Financement du radiodiffuseur public VRT (OJ C 143, 10.6.2008, p. 7). http://ec.europa.eu/competition/state_aid/cases/215958/215958_825339_70_2.pdf, recital 121.

.

(150) The Commission considers that its doubts regarding the question of whether there were significant changes to the financing of HIS between 1976 and 2013 (see recitals 90, 92 and 93 of the Opening Decision) have been eliminated. The nature of the measures, the source of financing, the legal basis, the objectives of the financing and the range of beneficiaries did not change since the measures had been put into effect for the reasons below.

5.2.2.1.

Nature of financing

(151) The Court has clarified in the judgment Namur-Les Assurances du Crédit SA that … the emergence of new aid or the alteration of existing aid cannot be assessed according to the scale of the aid or, in particular, its amount in financial terms at any moment in the life of the undertaking if the aid is provided under earlier statutory provisions which remain unaltered

Judgment of the Court of Justice of 9 August 1994 in Namur Les Assurances du Crédit SA, C-44/93 ECLI:EU:C:1994:311, paragraph 28.

.The Commission considers that an increase in the financing does not affect the essence of the scheme if the increase is commensurate with an increase in corresponding costs of carrying out the same activity, as a number of Commission decisions in the broadcasting sector showed

Commission Decision C(2007) 1761 final of 24 April 2007, SA.18957 (E 3/2005 (ex- CP 2/2003, CP 232/2002, CP 43/2003, CP 243/2004 und CP 195/2004) – Germany – Financing of public service broadcasters in Germany (OJ C 185, 8.8.2007, p. 1). http://ec.europa.eu/competition/state_aid/cases/198395/198395_678609_35_1.pdf, recital 206.

.

(152) Germany reiterates that the amount of direct State financing nominally hardly increased (from DM 2527000 in 1976 to DM 6981000 in 2001 and to EUR 4230000 in 2013) and the changing amounts were the result of the nature of deficit financing which was linked to increasing student numbers and in which inflation also played a role.

(153) The Commission considers that the nature of the financing did not change significantly. First, the form of financing remained unchanged: direct grants and exemptions from the Corporation Tax Act and the Trade Tax Act. Second, the level of financing through the direct grants did not change significantly. Overall, the level of the direct grants increased by about 2,9 times during the period 1976 and 2013. In parallel, student numbers increased much more significantly during the same time-period. In 1976/1977, the number of students in Germany was 872125

http://www.datenportal.bmbf.de/portal/de/K25.html

and in 2013/2014, it three times higher, 2616881

http://www.datenportal.bmbf.de/portal/de/K25.html

. Price levels in Germany in 2013 were 2,3 times higher than in 1976

https://www.inflationtool.com/euro-germany?amount=100&year1=1976&year2=2013

. Based on this information, the Commission considers that the nature and the level of financing did not change significantly as the number of students increased much more than the level of direct grant financing of HIS’s activities, taking also into account the level of inflation in Germany between 1976 and 2014.

(154) The level of financing through the tax exemptions was not changed significantly, since 2016 as Germany states in its submission (see recital 79) that its tax liability under the Corporation Income Tax Act and the Trade Tax Act would have been zero even it had been liable to pay these taxes.

5.2.2.2.

Source and manner of financing, legal basis

(155) The Commission considers that the source, manner and legal basis of the direct grant financing remained the same throughout the time-period: source of the financing was the budget of the federal State and the Länder. The fact that the co-financing by the universities increased in its proportion in the context of the overall financing of the activity (from 35,7 % to 74,1 %) does not constitute a significant alteration of the financing for the following reasons. First, the level of state financing, more specifically the State aid portion, nominally remained the same, as it was explained in the previous section. Second, the legal basis in fact provided, from 1976 onward, that the financing can be supplemented by revenues if necessary. Therefore, the Commission disagrees with the complainant’s characterization that the manner of financing constantly changed. The relevant language of the Satzung remained identical throughout the years: The owners provide the necessary resources for the execution of the objective as determined by the by-laws to the extent that no private revenues are obtained

See Section 6 of the Satzung from the years of 1976-1977 and 2000.

. In addition, in Namur-Les Assurances du Crédit SA, see recital 151, the court permits this type of alteration of a scheme, so long the statutory provisions underpinning the aid granting remain the same.

(156) The Commission disagrees with the complainant’s position that the manner of financing changed as it was a series of grants of changing levels. (See recital 51.) The Commission is of the view that the direct grants in fact constituted an existing aid scheme and were not a series of annual individual direct grants. According to Article 1(d) of Regulation (EU) 2015/1589 an aid scheme means any act on the basis of which, without further implementing measures being

required, individual aid awards may be made to undertakings defined within the act in a general and abstract manner and any act on the basis of which aid which is not linked to a specific project may be awarded to one or several undertakings for an indefinite period of time and/or for an indefinite amount [emphasis added].

(157) The Commission considers that the characteristics of the direct financing as well as the tax measures vis-à-vis HIS constituted a State aid scheme. It is because the legal bases constituted an act on the basis of which aid, which is not linked to a specific project, may [have been] awarded to one (…) undertaking for an indefinite period of time [and] for an indefinite amount. The mechanisms of granting did not require any further implementing acts.

(158) On these basis of the above law and facts, the Commission concludes that the annual direct grants constituted an existing de facto aid scheme and that the level, the manner and the source of financing did not undergo a significant change within the meaning of the applicable case law, Government of Gibraltar v Commission, Namur-Les Assurances du Crédit, and Commission Decision C(2008) 725 final of 27 February 2008, SA.21395 E8/2006 (ex CP 110/2004 et CP 126/2004) – Belgique Financement du radiodiffuseur public VRT.

(159) Given that the legal basis in the Satzung remained unchanged throughout the time-period in question (see recital 155), the Commission considers that there was no significant alteration to the legal basis of the direct grants.

(160) The Commission considers that there was no significant alteration of the legal basis for the tax benefits. First, the language of the Satzung establishing the public benefit (gemeinnützig) purpose of the operation of HIS also remained unchanged over the years: The undertaking serves exclusively and directly public benefit objectives within the meaning of tax legislation relevant to public benefit objectives

In the Satzung of 1976-1977 reference is made to the relevant legal basis in the Regulation on Public Benefit Organisations of 1953 and in the Satzung of 2000, the reference is made to the relevant provisions of the Fiscal Code (AO) of 1977 which constitutes a technical and non-substantive change in comparison to the 1953 regulation as it is explained in recitals 164 and 165 of this Decision.

.

(161) Second, the legal provisions underpinning the exemptions did not change, or did not change materially since 1 January 1976, when HIS was founded

HIS GmbH was taken over by the federal State and the Länder on 1 January 1976. HIS wurde am 01.01.1976 in die öffentliche Trägerschaft von Bund und Ländern überführt.

. The legal basis of the exemptions were the Corporation Tax Act, the Trade Tax Act and the Fiscal Code. Germany explained that the tax exemptions in question (section 5 of the Corporation Tax Act and section 3 of the Trade Tax Act) refer to sections 51 et seq of the Fiscal Code. (See recital 78 and footnotes 46, 47 and 48.) Section 52 of the Fiscal Code (AO) lists in fact two activities that qualify under the regulation as a public benefit activity: support for science and research (section 52(1)) and support for education and training (section 52(7)). Thus, in the current version of the applicable laws, the exemptions from the taxes in question arise from a combination of section 5 and section 3 of the Corporation Tax Act and the Trade Tax Act, respectively, and section 52 of the Fiscal Code,

(162) Regarding the question of whether and in what form the applicable tax laws were in force at the time of the founding of HIS, the Commission concluded the following: The Corporation Tax Act in 1976 already included the exemption from the corporation tax of public benefit organizations. (See Section 4(1)6 of the version of 24 May 1965

Notice on the modification of 24 May 1965 of the Corporation Tax Act (Bekanntmachung der Neufassung des Körperschaftssteuergesetzes vom 24. Mai 1965), Bundesgesetzbl. 11 June 1965, Nr. 24, I. S. 449.

: Corporations, associations of persons and assets which, in accordance with their by-laws, foundations or other laws and according to their actual management, serve exclusively and directly ecclesiastical, non-profit or charitable purposes are exempt from the corporation tax act and compare it to the almost identical wording of the current statute (see footnote 46)).

(163) The Trade Tax Act in 2013 contained almost identically worded exemption as the version of the same act of 25 May 1965 in its §3(6)

Notice on the modification of 24 May 1965 of the Trade Tax Act (Bekanntmachung der Neufassung des Gewerbesteuergesetzes vom 24. Mai 1965), Bundesgesetzbl. 11 June 1965, Nr. 24, I. S. 458.

. Thus, when HIS was formed, the exemptions were already in effect.

(164) The German Fiscal Code’s first version was established on 23 March 1976, thus, about three months after HIS was founded. This must be the reason why HIS’ Satzung of 1976-1977 refers to a predecessor of the AO, the Regulation of Public Benefit Organisations (Gemeinnützigkeitsverordnung of 24 December 1953).

(165) The Regulation on Public Benefit Organizations of 1953 implements

The official title of this regulation is as follows: ‘Verordnung zur Durchführung der §§17 bis 19 des Steueranpassungsgesetzes (Gemeinnützigkeitsverordnung) vom 24. Dezember 1953. See https://www.bgbl.de/xaver/bgbl/start.xav?start=//%5B@attr_id=%27bgbl153s1592.pdf%27%5D#__bgbl__%2F%2F%5B%40attr_id%3D%27bgbl153s1592.pdf%27%5D__1564471557452

sections 17 to 19 of the Law on the modification of certain tax rules from 1934. This law from 1934 supports explicitly, in its section 17, science and education as a supportable charitable activity

To be recognised as support of the public [interest in] (…) Science (…) Education. Als Förderung der Allgemeinheit anzuerkennen (…) Wissenschaft (…) Erziehung. Article 17 section 3 of the Law on the modification of certain tax rules (Steueranpassungsgesetz of 16 October 1934, Reichsgesetzblatt. Part I page 927).

. Thus, in combination with the Regulation of Public Benefit Organization of 1953, the 1934 law provided, until the AO entered into force, for an exemption from taxation of entities that engaged in public benefit activities, such as the support of education

See a similar reasoning in recital 15 of Commission Decision C(2015) 7225 final of 26 October 2015, SA.33206 (2015/NN) – Alleged unlawful State aid to German Youth Hostel Association (Deutsches Jugendherbergswerk) – Tax measures (OJ C 387, 20.11.2015, p. 1). http://ec.europa.eu/competition/state_aid/cases/260436/260436_1698296_81_2.pdf

.

(166) Given this uninterrupted link of laws and regulations that refer explicitly to the tax exemptions in question, the Commission concludes that the legal basis remained the same within the meaning of the Commission Decision Aide d’État E 8/2006 (ex CP 110/2004 et CP 126/2004) – Belgique Financement du radiodiffuseur public VRT and the Government of Gibraltar v Commission judgment.

5.2.2.3.

Objectives of public financing and supported products/services

(167) The Commission considers that HIS’ activities also remained the same. The objective of the public funding, the support of universities, especially in the field of electronic data processing/information technology, remained unchanged as the Opening Decision itself established in recital 82. The comments also confirmed Germany’s position that HIS’ activities supported by public funding essentially remained unaltered for forty years (see recital 36).

(168) The Commission notes that there was a slight differences between the language of the Satzung relating to the objective between 1976-1977 and later years, but this difference was purely semantic. The language regarding the purpose of HIS GmbH in 1976-1977 was as follows: a) The development and improvement of information systems establishing the basis for decisions in higher education and procedures for rationalisation at higher education institutions, and b) the provision of advice on and cooperation in the introduction and application of information systems. The language in later years slightly changed: The purpose of the undertaking is to support higher education establishments and the competent authorities in their efforts to achieve the rational and effective fulfilment of their higher educational role by a) developing procedures for rationalising university administration and supporting their introduction and application; (…) (d) ensuring information provision and the organisation of information exchange. The Commission considers that both of these formulations are broad but they are targeted at electronic data processing. The Commission also considers that the language of the Satzung relating to the objective had to be broad enough to permit an adaptation of the services to the changing technological requirements. The formulation, at the same time, was not unlimited, as the task of developing procedures for the rationalisation of higher education administration and cooperating in the introduction and application thereof cannot be understood to permit HIS to engage in activities other than the provision of electronic data processing/IT products and services.

(169) With regard to HIS’ products and services over the years, the Commission is satisfied that the overview of the products Germany provided during the formal investigation procedure (see recital 94) as well as the fact that the early version of some of the products were already provided in 1976, sufficiently demonstrated to the Commission that there was a continuous product range provided by HIS GmbH over the years.

(170) Therefore the Commission concludes that HIS’ activities supported by public funds have not been significantly altered during the time period under assessment.

5.2.3.

Conclusions regarding the public funding to HIS between 1976 and 2013

(171) The measures for the benefit of HIS between 1976 and 2013, insofar as they constituted State aid, constituted existing aid pursuant to Article 1(b)(v) of Regulation (EU) 2015/1589.

(172) As recital 16 of the Opening Decision excluded from its scope the examination of any possible measures for the benefit of HIS eG as of 2014, the present decision does not relate to any examination of these measures.

1. CONCLUSION

(173) The Commission therefore concludes that the doubts expressed in the Opening Decision have been successfully eliminated,

HAS ADOPTED THIS DECISION:

Article 1

The measures that Germany has implemented for Hochschul-Informations-System GmbH between 1976 and 2013, insofar as they constituted State aid, constituted existing aid pursuant to Article 1 (b)(v) of Regulation (EU) 2015/1589.

Article 2

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 20 September 2019.

For the Commission

Margrethe Vestager

Member of the Commission