European Commission investigates Chupa Chups over state aid

By Peter Stiff

- Last updated on GMT

Related tags: Chupa chups, European union

The European Commission has launched an open inquiry into lollipop
maker Chupa Chups to establish if a €35 million loan granted by
Spain's Catalonian government breaks EU competition rules.

Chupa Chups spokesperson Rose Santane told ConfectioneryNews.com that the company believes the loan to be at market rates. "We are surprised by this investigation, but will have to wait until reception of the EU communication to provide an answer to their questions," said Santane. EC competition policy spokesperson Audrey Lemonnier told ConfectioneryNews.com that if the loan is seen to break the rules the confectioner would have to pay back the loan with interest from the date of granting. "The Commission is now collecting further information. In its final decision it will first, have to decide whether the loan involves state aid elements and, if so in a second step whether such aid can be found compatible with the common market. If this is not compatible, recovery would be the normal consequence," said Lemonnier. Competition commissioner Neelie Kroes said she has doubts over whether the Catalonian government has behaved in the same way as a market investor. If the loan was granted without similar conditions to an investment loan both parties would be adjudged to have distorted competition between member states. Kroes said that there were rules that allowed governments to help out companies experiencing financial difficulties. However, the rules stipulate that money must benefit both the company concerned and the taxpayer. "I am opening an inquiry to establish the facts because I have some doubts that the rules have been complied with in this case," Kroes said. Chupa Chups has experienced sales shortfalls in recent years resulting in the closure of facilities in Brazil, France and China as well as some secondary brands. The loan issued in 2003 by the financial agency of the Catalonian regional government aided the company's restructuring. A complaint was subsequently submitted to the Commission. Spanish authorities have since revealed further additional measures in favour of the confectioner. Chupa Chups is the world's main supplier of lollipops, which make up 70 per cent of its business, worth €264 million in 2004. Chupa Chups was established in 1940 and is based in Spain with two production facilities in its home country as well as Russia and Mexico.

Related topics: Ingredients

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