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Dutch Public Broadcasters|in the Hole for $101M

(CN) - The Netherlands must return nearly $101 million in government grants received since 2005 after a European court ruled that the funds constituted overcompensation in the form of unpermitted state aid.

The Netherlands' media system, once controlled by public broadcasting, was opened to private media in the late 1980s. The country now has mixed public and private system, with public service television - mainly funded by the Dutch government - capturing more than a third of the viewer market there.

Since 1994, the state has made "ad hoc" payments to the Netherlands Radio and Television Association, which acts a broadcaster and runs a management board that coordinates the entire public broadcasting system and distributes funds to other public broadcasting entities.

After complaints by commercial broadcasters in 2002 and 2003, the European Commission investigated the funding system and concluded in 2006 that the ad hoc payments constituted a new source of state aid. The funds had not been labeled as such, however, and had not gone through proper legislative channels.

The European Commission concluded that state aid for public broadcasting is compatible with the common market, as long as the funds held in a public broadcaster's special reserve account did not exceed 10 percent of its annual budget.

Since ad hoc moneys held in the reserve account exceeded the 10 percent annual budgetary figure, the European Commission determined that the public broadcasters had been overcompensated.

The European Commission in 2006 ordered the association to pay back $100.8 million it received since 2005.

The General Court of the European Union agreed, shooting down the association's joint appeal with the Netherlands government.

The Luxembourg-based court rejected arguments that the right of defense was infringed, that the ad hoc funding was new aid and that the amount of overcompensation was miscalculated.

The appeal could still work its way to the Court of Justice, the European Union's highest legal authority.

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