Following a 2017 complaint from a competitor, the commission launched an investigation into AS Tartu Agro, which produces dairy, meat and cereals, to establish whether a land lease agreement signed between it and the rural affairs ministry in 2000 was in line with EU state aid rules.

Estonia joined the EU in 2004.

The commission said the land lease constituted state aid, since AS Tartu Agro was, and still is, leasing the land at below the market rate, which the commission says gives in an unfair advantage over competitors.

AS Tartu Agro now has to return the "aid", valued at €1.2 million, the commission said in a press release Friday. Using commission methodology set out in the decision, the Estonian state has to determine the amount due for recovery.

Doesn't constitute a penalty, commission says

Under EU State aid rules, public interventions in favor of companies must be on terms that a private operator would accept under market conditions (the so-called market economy operator principle), with article 107 of the EU treaty being invoked if that does not happen, due to anfair advantages over competitors arising.

Additionally, the incompatible aid must be recovered as a matter of urgency, int e interests of competition, though no other fines are pending.

The EU says that the rules are not a penalty in that they restore equal treatment after the event, a sort of "pay me now or pay me later" principle.

According to the commission press release, a public version of the decision will be available, case number SA.39182, from the state aid register on the commission's competition website.

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