In its judgment in Télévision francaise 1 SA (TF1) v Commission T-354/05, the Court of First Instance (CFI) has upheld a Decision by the European Commission that the French licence fee system is compatible with the State aid provisions of the Common Market.

Following a 2003 investigation into the repayment by the French Government of audiovisual licence fees to public television channels, the Commission had concluded that this constituted State aid. It made certain recommendations to ensure compatibility with the Common Market, namely that (i) compensation payable by the State be proportionate to the cost of the public service and (ii) public service broadcasters perform commercial activities under market conditions. In 2005, following specific commitments made by the French Government, the Commission determined that the French licence fee system was compatible with the Common Market in accordance with Article 86(2) EC.

TF1, a commercial channel operating in France, appealed this Decision to the CFI. It argued that State aid schemes resulting in overcompensation could not be justified under Article 86(2) EC.

After reviewing existing case law, the CFI rejected TF1’s reasoning and concluded that so-called overcompensation schemes could be justified as compatible State aid. It concluded that the Commission had neither erred in its application of the relevant test, nor made inappropriate recommendations. Furthermore, the commitments made by the French Government satisfied those recommendations.