C-13/77

JUDGMENT OF 16. 11. 1977 - CASE 13/77

whether, apart from abuse of a restriction on imports only if, taking any dominant position which such into account the obstacles inherent in

arrangements might encourage, such the different methods of fiscal control

introduction or maintenance in force which are used by the Member States is also likely to affect trade between in particular to ensure collection of

Member States. the taxes on those products, such a

3. Although a maximum price applicable system of fixed prices is likely to

a Member State whereby a fixed price legislative measure whereby a selling is imposed for the sale to the price, namely the price stated on the

consumer of either imported or tax label, is imposed for the sale to

home-produced tobacco products, the consumer of imported or

namely the price which has been home-produced tobacco products,

freely chosen by the manufacturer or provided that that price has been importer, constitute a measure having freely determined by the manufacturer an effect equivalent to a quantitative or importer.

In Case 13/77

on the interpretation of Article 3 (f), the second paragraph of Article 5 and

Articles 30, 31, 32, 86 and 90 of the EEC Treaty and of Council Directive No 72/464/EEC (OJ, English Special Edition 1972 (31 December), p. 3) on taxes other than turnover taxes which affect the consumption of manufactured

tobacco,

INNO v ATAB

THE COURT

composed of: H. Kutscher, President, M. Sørensen and G. Bosco, Presidents of

The facts of the case, the course of the 2. On 7 February 1972 ATAB arranged 'gerechtsdeurwaarder'

procedure and the written observations for a (a court

submitted under Article 20 of the official) to record the finding that the Enterprises'

Protocol on the Statute of the Court of 'GB company (to which

Justice of the EEC may be summarized GB-INNO-BM is the legal successor) was as follows: offering for sale and selling cigarettes at a price lower than that specified on the tax

label. By a writ of 24 February 1972 it I — Facts and procedure brought proceedings, under Chapter IV of the Law of 14 July 1971 on

is imported Koophandel, Brussel, ordered the sale of which into or produced cigarettes at cut-prices to be within this country the tax shall be levied discontinued, on the grounds that such whenever excise duty has to be paid in infringed Article 58 of the sale accordance with the relevant provisions Value-added tax Code and that of tax laws or regulations. The tax shall observance of the law forms part of be calculated on the basis of the price proper commercial practice. On the stated on the tax label which must be the other hand he refused to order that the compulsory selling price to the decision be officially announced. consumer, or, if no price is specified, on the basis adopted for the imposition of 4. GB-INNO-BM lodged an appeal

excise duty'. against this decision by notice of appeal

JUDGMENT OF 16. 11. 1977 - CASE 13/77

of 24 Mai 1972. Its submissions cover Market within the meaning of

inter alia the incompatibility of Article Article 86 of the EEC Treaty? 58 of the Value-added tax Code with In this respect does the

certain provisions of the Treaty dealing prohibition cover inter alia the

(OJ, English Special Edition 1972 (31 the retailers in a Member State to

December) p. 3). In the alternative it comply with the selling prices to

invites the Hof van Beroep (Court of the consumer fixed by the former? Appeal) to apply the procedure for (b) Is the introduction or the

obtaining a preliminary ruling under maintenance in force of a national

Article 177 of the EEC Treaty. provision such as that referred to

under (a) prohibited even if it is 5. The Hof van Beroep, Brussels, by its general in scope in that it relates

Hof van Cassatie has stayed proceedings introduction or maintenance in by order of 7 January 1977 until the force of such national legislative Court of Justice of the European provisions is by no means

Communities has given a preliminary prohibited but simply that that

ruling on the following questions: provision can have no effect on

1. (a) Must Article 3 (f), the second the scope of application of Article paragraph of Article 5 and Article 86 of the EEC Treaty in the sense 86 of the EEC Treaty be that abuse of a dominant position

interpreted as meaning that a remains unlawful even if it is Member State is prohibited from encouraged by this legislative

introducing into or maintaining in provision in the particular

abuse by one or more must notify the Minister for undertakings of a dominant Economic Affairs of any increases in position within the Common price which they introduce but are

INNO v ATAB

not able to fix the compulsory selling 4. (a) Do the provisions of Directive No price to the consumer, the State 72/464 of 19 December 1972 of

imposes the same obligation to notify the Council of Ministers, in

any increases they introduce price on particular Article 5, have direct manufacturers and importers of effect with the result that, inter certain products but, by means of a alia, individuals have the right to

legislative provision which after rely on them before national

affirmative can the retention of the preted as meaning that the

above-mentioned special or exclusive Member States are prohibited from rights be contrary to the provisions of introducing or maintaining in the EEC Treaty namely those referred force a legislative measure

to in Article 7 and Articles 85 to 94 whereby a selling price, namely inclusive? the price stated on the tax label, is 3. Must Articles 30, 31 and 32 of the imposed for the sale to the

EEC Treaty be interpreted as meaning consumer of imported or

that a 'measure having equivalent home-produced tobacco products, is it is effect'

within the meaning of the that to say, where not

are established in the State or by the The first complaint was directed against

importers of the same products in the Belgisch-Luxemburgse Federatie der particular from other Member States? tabakverwerkende industrieën (The Or should be interpreted To­ these articles Belgo-Luxembourg Federation of bacco Na­ as meaning that such rules only Industries) (Fedetab), the constitute such a measure when it is tionale Federatie van de groothandel in in fact certain that it can hinder tabakswaren (The National Federation of

intra-Community trade directly or Wholesale Traders in Tobacco Products) indirectly, ATAB actually or potentially, a (NFGT) and and requested the

matter which must be determined by Commission to initiate a procedure

the national court in each case? against these three associations in order

Is the position different if, after to compel them to put an end to various

II —

Summary of the written 8. As far as concerns the first complaint observations the Commission on 29 July 1974

initiated a procedure pursuant to Observations submitted by NV Regulation No 17 of the Council. On 18 GB-INNO-BM July 1975 it notified the associations of

undertakings concerned of its objections. GB-INNO-BM recounts the history of In this notification it gave its view that Article 58 of the VAT Code, the original certain agreements, decisions and text whereof in the draft law introduced practices of Fedetab and its members

by the Government provided that VAT contravened Article 85 of the EEC should be calculated 'on the basis of the Treaty. On 22 October 1975 a full maximum price stated on the tax label'. hearing took place. Since then nothing The present text which states that this has been heard of this complaint. price 'must be the compulsory price to

the consumer'

and 'maximum price', was the provisions of the regulation annexed incorporated in an instrument dealing to the Ministerial Order of 22 January with taxation. Furthermore the fact that 1948 governing the collection of excise the compulsory consumer price of duty on tobacco with the text of Article manufactured tobacco may be 58 of the VAT Code. The Raad van State determined by the person who affixes the has not yet delivered judgment in this tax label — that is to say either the action. manufacturer or the importer — and not

Procedure by the competent governmental authority is itself also an anomaly.

The order making the reference was Belgian Nevertheless, case-law requires

registered at the Court Registry on 26 that Article 58 of the VAT Code be January 1977. In accordance with Article applied in accordance with its ordinary 20 of the Protocol on the Statute of the that is to as a provision meaning, say, Court of Justice of the EEC written fixing mandatory retail prices which

observations were submitted by must be adhered to. GB-INNO-BM, ATAB the Council of

the European Communities, the Com­ Proposed answer to the questions

On 19 and 20 February 1968 an For many years Fedetab and NFGT have made endeavour to regulate the agreement was concluded by an every exchange of letters between Fedetab and distribution of tobacco products in the three companies mentioned above. Belgium.

This was the position when the Law or 3 On 9 January 1967 Fedetab entered into July 1969 laying down the VAT Code an agreement with NFGT under which was drawn up. the members of NFGT undertook not to

buy or sell cigarettes with which gifts of Thus there was a definite link between any kind were offered; the penalty for Fedetab NFGT to the attempts by and

failing to comply with this undertaking make all the retailers enter into the same was the loss of wholesale terms. This had agreements which they concluded agreement was implemented by means of relating to compulsory selling prices and separate agreements concluded by the provisions of Article 58 of the VAT Fedetab with individual wholesalers. Code Mr Goeman's as modified by amendment. This agreement was supplemented on 22

May 1967 by a new agreement between 2. Evaluation of the agreements and Fedetab and NFGT under which acts of Fedetab and NFGT in the wholesalers with their own retail outlets light of the rules of competition of undertook to sell all their cigarettes to the EEC Treaty the consumer at the price indicated on

the tax label without any discount. On GB-INNO-BM evaluates the agreements

Fedetab not to supply retailers who dominant position prohibited by Article their prices. Individual wholesalers were 86 of the Treaty. informed of this agreement by circulars

from Fedetab and NFGT of 6 and 26 It can hardly be denied that Fedetab had October 1967. letter 26 October a dominant position within the By of

1967 NFGT notified the wholesalers that manufactured tobacco market if account

the manufacturers would discontinue is taken of its large share of that market.

deliveries to wholesalers who supplied This dominant position was strengthened the 'price-cutters'. even more by the close links which it

JUDGMENT OF 16. 11. 1977 - CASE 13/77

distributor) the individual distributors applied solely to undertakings, it is no

were to be classified. less true that under the Treaty Member States must not adopt measures which

Fedetab's dominant position on the might jeopardize the proper functioning Belgian and Luxembourg markets is in 'a of the rules of competition. The legal substantial part of the Common Market'. justification for imposing this obligation

upon Member States can be found either

The pressure exerted by Fedetab, in in the general obligation set out in the

co-operation with NFGT, on wholesalers second paragraph of Article 5 or in and retailers to force them to align their Article 90 of the Treaty. sales policy on the one which it had adopted is an abuse of a dominant The Court has already held that the position. second paragraph of Article 5 lays upon Member States a general obligation the

of the consequent infringement of

3. Connexion between Community Article 5 is such that it can be the

rules of competition and national subject-matter of proceedings brought law on competition directly before national courts.

Relying on the judgment of the Court in (a) The effectiveness of Article 85 Case 14/68 (judgment of 13 February 1969, Walt Wilhelm and Others v The effect of Article 58 of the VAT Code Bundeskartellamt [1969] ECR 1 et seq.) and of the agreements is exactly the GB-INNO-BM submits that it would not same. The aim of the latter is to compel be in keeping with the particular system retailers when selling to the public to

introduced by the Treaty to allow charge the price stated on the tax label. Member States to take, or maintain in Article 58 contains provisions similar to.

force, measures capable of preventing the stipulations in the agreements

Fedetab and NFGT unnecessary. What Therefore the only possible conclusion is was previously stipulated in the that a legal provision which encourages

agreements is now in fact law. abuses is prohibited in its entirety, even if it can also be applied in cases where there is no dominant position. It is perhaps unfortunate that the Hof van Cassatie has not raised any question For these reasons GB-INNO-BM on the interpretation of Article 85 read proposes that the first question should be together with the second paragraph of answered in the following terms: Article 5 especially as a similar question is raised in the case of Article 86. An 'Article 3 (f), the second paragraph of answer on this point by the Court of Article 5 and Article 86 of the Treaty Justice would be of interest to the Hof must be interpreted as meaning that a van Beroep to which the Hof van Member State is prohibited from Cassatie will refer the case back at a later date. introducing or maintaining in force any national legislative provision which

encourages abuse of a dominant position

(b) The effectiveness of Article 86 by one or more undertakings or

associations of undertakings in that such As far as the first question referred by the a law enables such undertakings or Hof van Cassatie is concerned associations of undertakings to obtain the GB-INNO-BM submits that the question same results — inter alia that of being for consideration is not whether Article able to force retailers to charge the 58 of the VAT Code contravened Article consumer selling prices fixed by the 86 as such, but whether it was a breach manufacturers or importers — as those States'

to quote the words of the Hof van shield their undertakings from the effects

Cassatie in the second part of this of Treaty. Similarly it is unanimously the

question. That would in fact mean that accepted that a measure might be 'contrary'

Article 58 only applies in the case of to the rules contained in the

manufacturers and importers who do not Treaty, in particular to those provided for have a dominant position but does not in Article 86 if it induces the

apply in the case of undertakings having undertakings referred to in Article 90 to a dominant position because it infringes act in such a way that they infringe the

Member States grant special or exclusive the of Article 90 (1) of the Treaty.' meaning rights'

can also refer to private

undertakings. On the other hand the

meaning of the words 'special or (com­ B — The third question be determined rights'

exclusive should patibility of Article 58 of the with reference to the purpose of Article Articles 30, 31 VAT Code with 90 and its place in the system of the and 32 of the Treaty) Treaty.

Article 90 is designed it GB-INNO-BM, relying on the case-law (1) to make of the Court and especially on its impossible for Member States to en­

products are sold to the consumer, it can only fix selling prices their

quite clearly grants them special or themselves if they import manufactured

exclusive rights within the meaning tobacco direct. Now, since Belgian referred to above. No such power is manufacturers market more than half the

granted under Belgian law to any other cigarettes imported into Belgium, foreign category of undertakings. manufacturers cannot be expected to sell

to a Belgian retailer, especially if the

The second question can therefore be latter sells his products at a price lower answered in the following terms: than the normal Belgian price.

importers of other products who are not them. This means that the foreign able to fix the compulsory selling price manufacturer has the right to control the

to the consumer, the State gives the prices which the retailer wishes to

manufacturers and importers of certain charge. The obligation to charge the

products the possibility of themselves price on the tax label makes it therefore

fixing the compulsory selling price to the quite impossible in practice for retailers

consumer. to import direct.

State, which, in the case both of price levels or the observance of imposed imported and home-produced products prices'.

provides that the selling price to the

consumer shall be the price fixed by the The GB-INNO-BM company points out

manufacturers or importers which is that the Council did not adopt an

stated on the tax labels and which, amendment of this provision which was

according to the particular case, is tabled during the debates in the

special circumstances of the market for freely formed prices for all groups of

the products in question, this provision manufactured tobacco'.

prevents retailers from importing these

products direct from other Member The reservation in the second sentence

States or from being free to fix the prices only applies to the systems of imposed of these products'. prices which are compatible with the Treaty. It is impossible to agree that the

C The fourth (com­ Council has of — question made collective systems

selling prices of these products. into force.

JUDGMENT OF 16. 11. 1977 - CASE 13/77

The GB-INNO-BM company suggests matter in the national laws of the

that the fourth question be answered in various Member States. the following terms: 3. The disappearance of tobacco retailers

(a) Article 5 of the Council Directive of due to the abolition of a fixed price

19 December 1972 has direct effect. undoubtedly has serious socio-

price, namely the price stated on the a large number of brands have been tax label, is imposed for the sale eliminated.

to the customer of imported or 5. The continuance in business of

home-produced tobacco products, retailers who are specialists, which

that is to say, where it is not possible thanks to the fixed price is still

to exceed the maximum and it is not possible, constitutes, for economic and

permissible to sell the product at a public health reasons, a guarantee for lower price'. the consumer.

question and also of the protection of the forbidden to do by a specific article of

consumer against certain abuses. the Treaty.

It draws the following conclusions from According to ATAB Article 86 of the its analysis of these questions. Treaty only prevents acts of undertakings 1. The fixed price of manufactured and not acts of a Member State. Article tobacco stems from the special system 86 does not prohibit a legislative of taxation applicable in this sector. It provision but the abuse of a dominant secures for the particular State the position and it makes no difference collection of the large revenue duties whether this dominant position is to which it is entitled and which are consolidated by a legislative provision.

assessed on a consumer price fixed in Consequently in relation to Article 86 advance and shown on the tax label. the introduction of a legislative measure

2. The admissibility of a fixed price for has a neutral effect: even if the measure

manufactured tobacco which is in question is bound to lead to the

undertaking if all its competitors are

equally strong. The system introduced by Observations on the second question

Article 58 of the Belgian VAT Code puts all manufacturers and all importers on Article 90 of the Treaty does not forbid the same footing by imposing the same Member States to grant undertakings

obligations on them. In no way does it 'special or exclusive rights'. This emerges

eliminate competition by laying down from the judgment of the Court of 30 that the sale freely chosen by them price April 1974 in Case 155/73 (Giuseppe shall be adhered to Sacchi [1976] ECR 409). by the distributors. 'right'

In making that choice the manufacturer A granted to all competing or importer so far from abusing a undertakings, in this case to all

even at loss thereby harming the products.

retailers.

ATAB, while acknowledging that 'in the

ATAB accordingly suggests that the first case of these undertakings'

the Member question should be answered in the States cannot adopt any measure contrary following terms: to Articles 7 and 80 to 94 inclusive,

'(a) Article 3 (f), the second paragraph of submits that a measure such as Article 58 Article 5 and Article 86 do not of the VAT Code is in no way prohibit a Member State from incompatible with these articles and

such abuse.

(b) In any event a national provision it is not the manufacturer or importer such as that referred to in (a) is not who imposes a price on retailers, but the prohibited if it is general in scope in Member State which prescribes that the

JUDGMENT OF 16. 11. 1977 - CASE 13/77

price fixed by the manufacturer or Observations on the third question

importer is binding on all concerned; According to ATAB, in order to answer

the manufacturer or importer far from the questions referred by the Hof van

means any measure

question might be answered in the which is capable of hindering directly or following terms: indirectly, actually or potentially, imports between Member States. 'Article 90 of the EEC Treaty has not

to be interpreted as meaning that The Commission defined the concept

"undertakings Member States 'measure having in effect'

to which equivalent

grant special or exclusive rights"

and thus gives to them indirectly the that unlike discriminatory measures,

possibility of themselves fixing the measures which apply equally to

compulsory price to the domestic and imported products are only selling consumer. prohibited 'if their restrictive effects on

the free movement of goods exceed

The retention of these special or effects intrinsic to trade rules'.

exclusive rights cannot be contrary to the provisions of the EEC Treaty, namely If it is true that the Court of Justice has those referred to in Articles 7 and 85 to not followed this distinction, that does 94 inclusive'. not mean that the two kinds of measures

authority concerned is a measure having manufacturers and importers, after

an effect equivalent to a quantitative notification of a price increase which is restriction prohibited by Article 30 but only to come into effect after a certain

that each time the specific effect of the waiting period, to be free to fix retail

disputed measure on the economic selling prices and if it imposes this price

situation has to be ascertained. after publication.

ATAB considers that the recitals to It is in any event for the national court

the legality, under Article 30, of national prices and by means of the measure

rules on maximum prices apply in their referred to above ensures compliance

this case. them'. entirety to with

Unlike the facts in the Dassonville case Observations on the fourth question where the competitors were not on equal

terms the affixing of the tax label is a ATAB is of the opinion that viewed as a

perfectly normal requirement, having whole Council Directive No 72/464/EEC regard to the system which the Belgian of 19 December 1972 does not appear to State has introduced. This formality with have direct effect. which every person using the product must comply and which is required for However, even if this directive has direct the purpose of the tax at collecting effect, under the second sentence of source is in proportion to the objective Article 5 (1) thereof freedom to fix the pursued by the State, since tobacco is maximum selling price would not hinder essentially a revenue-producing product. implementation of the national systems of legislation regarding the control of ATAB suggests therefore that the third price levels or the observance of imposed question be answered as follows: prices. ATAB refers in support of this 'Articles 30, 31 and 32 of the EEC Treaty argument to a letter of 28 March 1973 are not to be interpreted as meaning that which it received from Mr Vogelaer,

takes the view that the provisions, of

only reason why this proposal was not which this article is one, under the Principles'

adopted is that the system of fixed prices heading 'General may be did not apply in the three new Member directly applicable in so far as they fulfil States. The purpose of the second the requirements laid down by the Court,

sentence of Article 5 is therefore to avoid namely that they must be clear and

any dispute as to the validity of the specific and not be subject to any system of fixed prices. That is a very condition.

clear indication that national laws which

effect. the observance of imposed prices

(b) Article 5 of this directive must be (second sentence of paragraph (1)); interpreted as meaning that Member 3. Member States may limit the

States are not prohibited from theoretical number of possible retail

introducing or maintaining in force a selling prices. Such a limitation may specific measure for the sale not however involve discrimi­ which, any to the consumer of imported or nation (subparagraph 2). home-produced tobacco products, imposes a selling price stated on the Although there is no doubt that Article 5 lax label'. (2), which moreover is of secondary interest in answering the question

In a supplemental pleading ATAB puts referred, satisfies the criteria laid down by forward additional observations on the the Court for it to have direct effect, it is question referred by the Hof van more difficult to decide whether

Cassatie. Its examination begins with the paragraph (1) of this article does so. The fourth question. first sentence of this paragraph is

norm by the first sentence of Article 4 to be free to determine their prices. Only (1). prices which have been freely determined can be converted into The first sentence is however more imposed prices. A fixed price imposed in difficult to understand, because it 'free' this way complies in principle with the mentions price fixing by the Community definition of an imposed manufacturer and importer in contrast to price within the meaning of the second the following sentence according to sentence of Article 5 (1) of the directive. which this provision may not hinder implementation of the national systems All the Member States which are at the of legislation regarding the control of present time applying the directive have price levels or the observance of imposed thought it necessary to introduce prices. The second sentence therefore measures these lines. along states clearly what the Hof van Cassatie wants to know: the words of the first Whatever meaning is given to Article 5 sentence do not deprive Member States the conclusion is (1) invariably reached of the right to introduce or maintain in that in the two interpretations examined force legislative provisions regarding the above it satisfies the requirements of control of price levels or the observance being clear, specific and not subject to of imposed prices. any condition. The persons concerned

can therefore invoke it with reference to Article 5 (1) creates rights which are Member States before the national courts. directly applicable but it certainly does However the direct effect of the directive not have the meaning given to it by the viewed as a whole can be questioned. As question referred. far as the rest of the question referred is ATAB nevertheless takes the view that concerned it must be answered in the

directive to the review of this discretion. hindering directly or indirectly, actually or potentially, imports from one Member In the discretion left to State to (judgment 11 whatever manner another of July the Member States by the second 1974 in Case 8/74, Procureur du Roi v

JUDGMENT OF 16. 11. 1977 - CASE 13/77

Benoît and Gustave Dassonville [1974] undertakings to which they grant special

ECR 837). or exclusive rights.

In reliance on the judgment of the Court As these conditions are sufficient but also of 30 April 1974 in the Giuseppe Sacchi necessary the reply to the first two Case 155/73 ([1974] ECR 409) ATAB paragraphs of the third question is submits that Article 90 (1) allows therefore in the affirmative. Member States to do something for

ATAB then gives the main reasons which an undertaking having a dominant position on the market would be blamed. which led the Belgian legislature to distinguishes maintain in force the system of the This is why Article 90 (1) imposed price for manufactured tobacco. between the granting of rights by a

equivalent to a restriction on imports, A direct intervention by a Member State unless it is shown that in practice they on a large scale in economic affairs is somehow or other have a discriminatory not covered by Article 90 (1). This effect. The latter situation cannot arise in consideration alone may be a sufficient

this case, since it has been expressly answer to the question referred.

provided that manufacturers shall be free The first question (Articles 3 (f)), the to determine the price of their products. second paragraph of Article 5 and Article This is always the case when a Member 86 State allows manufacturers and importers, after notification of a price increase after ATAB takes the view that this question compliance with a specified waiting comes down to an examination of the period, to be free to determine the retail Article meaning of 3.(f) and the second

selling price and when it imposes such a paragraph of Article 5 in conjunction price after publication. with Article 86. It considers first of all

whether these articles have the meanings The second question (Article 90) which the questions give them and

whether they have direct effect on the According to ATAB the answer to this national legal order of the Member question can only be in the negative. States.

obligations of the Community. If it duty is levied on manufactured tobacco

governed in principle the activities of the in Belgium and it then considers the

Community no legal effect could legal nature of Article 58 of the Belgian however be inferred from it as far as the VAT Code. It takes the view that this

activities of the Member States are provision isonly an ostensible price

concerned as is suggested by the measure. Indeed because in the case of question referred. manufactured tobacco it in fact eliminates competition at the distributive The question arises whether the effects stage it belongs to the kind of

which are sought are not derived from interventions by public authorities in the second paragraph of Article 5. ATAB, competition which are sometimes called

Community law, goes too far. Neither 2. Interpretation of Article 3 (f), the the legislative power of the Member second paragraph of Article 5 and States nor the actual way in which they Article 86 of the Treaty apply their legal norms depends upon the question whether one or more The first question is concerned with what undertakings have a dominant position the Hof van Cassatie calls encouraging on the market or whether they are the abuse of a dominant position in the abusing it. Common Market. The Commission has serious doubts whether a system of ATAB stresses that the question referred imposed prices derived from a law such cannot be properly examined unless the as the one at issue encourages the abuse infringement of Article 86 is regarded a of a dominant position. It is true that the priori as an irrefutable fact. This applies national measure imposes a specific to the dominant position and its abuse system of price fixing but this system and also to restrictions on inter-State does not create the same degree of trade. It is not for the Court when it is subjection as a dominant position does. dealing with a reference for a preliminary

ruling to check whether this assumption On the other hand it is perfectly true is correct. that under the Belgian tax system the tax

In short the question must be answered label can in practice only be affixed by in the negative. the manufacturer. As far as this aspect of

the matter is concerned the manufacturer

Observations of the Commission certainly has a dominant position

vis-a-vis importers and possibly vis-à-vis

market, especially if he refuses to supply basis of assessment of excise duty also

them. The Commission refers in support determines the price level in respect of

of its argument to the judgment of the which the legislature has taken away the

Court of 13 November 1975 in Case retailer's freedom of action. It is neither a 'right'

26/75, General Motors Continental NV within the meaning of Article 90 'exclusive'

v Commission the European (1) nor is it or 'special'. This of Communities [1975] ECR 1367 at p. measure does not fall within the ratio

incompatible with Articles 30 to 37, their Community and the Member States have powers and the determinative factor in compatibility with the second paragraph defining their limits is whether there is of Article 5 may be considered and that any interference with intra-Community the effect of observance of the obligation trade as provided for in Article 85 of the therein contained is that Member States Treaty. Agreements which may affect this must, as soon as exclusive rights have trade fall within the jurisdiction of the been created, adopt reasonable protective Commission. Agreements which are not measures against foreseeable abuses of capable of having this effect fall within the dominant position inherent in any the national jurisdiction and agreements exclusive rights. In connexion with the between undertakings of the same end of Question 1 (b) the possibility of Member State may come within this justifying any abuse of a dominant category of agreements. position on the ground that it is based on

a national provision can be ruled out. Therefore it is for the competent national

authorities to apply any national 3. Interpretation of Article 90 provisions to agreements or practices

which in fact restrict competition and do The Commission takes the view that the not affect trade between Member States special or exclusive rights mentioned in even potentially. In the field of national Article 90 (1) relate to the production or competition policy it is the duty of the marketing of goods (and mutatis national legislature to decide whether or mutandis of services) by the person not public authorities are to make use of entitled to exercise the rights concerned restrictions on competition having legal himself, in other words to access to the force that is to say compulsory market. This is how the Court agreements governed by public law. interpreted Article 90 in paragraph 14 of However when Member States intervene the judgment delivered in Case 155/73 in this way they must abide by the Giuseppe Sacchi ([1974] ECR 409 at p. division of powers between themselves 429). and the Community.

attainment of the objectives of a single

According to the Commission collective market between Member States and

agreements for imposed prices, to which constitutes also therefore an obstacle to

manufacturers, importers and dealers of this trade.

the same Member States are parties, Such a system creates a situation in unlike individual agreements for imposed prices between a manufacturer which the share of the market taken by imported goods depends solely on the and a certain number of dealers of the importers'

sales policy. The dealers same Member State, in general come

reason comes under the jurisdiction of It is also possible according to the the Commission. Commission to show that collective

systems of imposed prices having legal It is the Commission's view that to this force are compatible with Article 30 by conclusion must be added the fact that putting forward the argument which the for technical reasons, which it gives, Commission usually applies to measures arising out of the tax system introduced presumed to have equivalent effect and is for excise duties, the tobacco sector based on the principles laid down in scarcely provides any opportunity for Directive No 70/50/EEC (OJ, English possible mitigation of the effect which Special Edition 1970 (I), p. 17) of 22 this system has on intra-Community December 1969 supplemented by trade by means of parallel imports. passages from the Court s decided cases

and especially from the Dassonville Consequently the Commission is of the judgment. This approach leads to the opinion that a collective system of same conclusion. imposed prices having legal force, especially if it was combined with a tax Under the collective system of imposed system of this kind, which is normally prices having legal force the importer is

JUDGMENT OF 16. 11. 1977 - CASE 13/77

free to apply his own price policy. There The Hof van Cassatie at the end of the

is no direct obstacle to imports. third question considers what may happen if the producers and importers

The actual circumstances the system with Article surrounding a compatibility of

collective system of imposed prices 30.

having legal force play an important part. Such a system would be much more The Commission ends its observations

likely to hinder trade between Member on the interpretation of Article 30 by States if the imported products were not stressing that, if this article is given a

freely available on the other Community more restrictive interpretation, the

markets, so that parallel imports cannot second paragraph of Article 5 read

the opportunity of effecting such imports The Commission relying on paragraph

which in general exists in the case of 30 of the judgment of 23 January 1975 other products. According to the in Case 31/74 (Mr Filippo Galli [1975] Commission it follows that the probable ECR 47 at p. 64) and on paragraph 51 of obstacle to trade between Member States the judgment of 14 July 1976 in Joined

becomes a certainty even if it is difficult Cases 3, 4 and 6/76 (Cornelius Kramer to quantify. and Others [1976] ECR 1279 at p. 1312) is tempted to answer this question in the

These complaints directed against the affirmative.

system of imposed prices having legal force are confirmed and further It is the Commission's view that even if substantiated by raising the question those restrictions on competition which

whether the objective aimed at could not may be exempted under Article 85 (3) be attained with the help of a less have been voluntarily accepted by restrictive measure. As the Commission undertakings, may not be they made

national interest comes into play over in the second place that this freedom is and above the private interests which subject to any national price control

normally are the subject-matter of exercised by Member States. agreements. The formal application of

Article 85 would be impossible while Article 5 (1) was adopted for a specific

from the practical point of view the purpose indicated in the recitals in the

problem would become complicated and preamble to the directive. The last recital

these are two factors each of which on its reads as follows: 'Whereas the imperative own is enough to jeopardize attainment needs of competition imply a system of

partly from Article 58 of the VAT Code powers in the field of prices remain

and partly from the whole of the tax intact. rules applicable to the tobacco sector.

Viewed in this way Article 5 (1) of the

If Article 30 had to be applied to these directive does not prescribe for Member it be less States any 'particular conduct'

circumstances, would no true course of

that the the the judgment of national measure creates a within meaning of situation which although based on an the Court of2 February 1977 in Case agreement does not qualify for 51/76 (Verbond van Nederlandse exemption under Article 85 (3). The Ondernemingen v Inspecteur der prohibition in the second paragraph of Invoerrechten en Accijnzen [1977] ECR Article 5 applies a fortiori to an 113), so that it can be inferred from this

independently of Article 4 of the single market.

directive which provides that excise duty 2. National rules which place, in law or

must be calculated 'on the maximum in fact, some of the persons or

retail selling price'. Article 5 (1) broadly undertakings carrying on business on

enunciates two principles: in the first a particular market in a dominant place that those who introduce position compared with the others

manufactured tobacco to the market are are incompatible with the second

however preclude the application to Observations of the Council Treaty. undertakings of Article 86 of the

The Council observations are confined to The Belgian Government submits that the fourth question relating to Directive Article 58 of the VAT Code does not in No 72/464/EEC and in particular to the fact grant any rights within the meaning meaning of Article 5 (1). The Council takes the view that Article 5 (1) of Article 90 (1) of the Treaty but imposes obligations. For this particular constitutes an obligation subject to reason which is in itself sufficient Article reservations and does not therefore have 90 (1) cannot be said to apply to the direct effect. The Council then gives an national measure. outline of how the provisions of the

directive were drawn up and suggests that

they are to be interpreted as meaning Articles 30, 31 and 32 must be is nothing in them to prevent that there understood to mean that rules imposing Member States from imposing by means fixed prices on the consumer, which are

of a legislative measure fixed prices shown on the tax labels and which

which retailers must apply. national manufacturers or the importers of the products from other Member Observations of the Belgian Government States freely determine do not contravene the abovementioned articles of the

applied. It is therefore forbidden to sell to infer from the function and effects of

tobacco to the consumer at a higher the national measure that there is an

price than the retail price shown obstacle to imports coming from selling on the tax label, since excise duty and Member States without having to

VAT are assessed on this price. There is establish that imports have in fact been

nothing to stop a manufacturer or hindered.

INNO v ATAB

MainBar, the Council of the European The Netherlands Government explains Communities, represented by its Agents, that there is in Netherlands law a Mr Fornasier and Mr Brautigam, the

provision similar to the Belgian law at Commission of the European issue. According to the Netherlands Communities, by its Agent, represented

Government the relevant considerations Mr van der Esch, the Luxembourg are more social and economic than legal. Government, represented by its Agent, The retail tobacco sector consists on the Mr Emringer and by Mr Arendt, one hand of a large number of small Advocate of the Luxembourg Bar, and specialist retailers who are encountering the Italian Government, represented by serious economic difficulties. The profit its Agents, Mr Maresca and Mr Braguglia margins for manufactured tobacco are submitted their oral observations.

less than those for other retail articles, if account is taken of the fact that the tax During the public hearing ATAB put

element in the price of manufactured forward the specific submission that

tobacco is large. The removal of Article 58 of the Belgian VAT Code is the prohibition can only benefit not subject to Article 30 et seq. of the

Commission made the particular point

The Italian Government emphasizes that that, if it were adopted, it would lead to

in Italy consumer prices are fixed for tax the unacceptable result that if a Member reasons by state law and that Article 86 State wishes to secure its fiscal revenue

does not apply to Member States when and at the same time considers that the

they legislate. Under the Italian system profitability of undertakings must be

JUDGMENT OF 16. 11. 1977 - CASE 13/77

(31 December), p. 3) on taxes other than turnover taxes which affect the

consumption of manufactured tobacco.

2 These questions were raised in the context of an action between the Belgian

limited liability company GB-INNO-BM, which runs several supermarkets in Belgium, and the non-profit-making association Vereniging van de Kleinhandelaars in Tabak (Association of Tobacco Retailers) (hereinafter referred to as 'ATAB').

3 It emerges from the file on the case that, by an order of 24 April 1972,

following proceedings brought by ATAB, the President of the Rechtbank van Koophandel (Commercial Court), Brussels, ordered the company to which

INNO v ATAB

4 The appeal lodged by GB-INNO-BM against that order was dismissed by the Hof van Beroep (Court of Appeal), Brussels, by a judgment of 24 November 1974, and the company then appealed to the Hof van Cassatie (Court of

Cassation).

The national legislation

5 In Belgium manufactured tobacco is subject to a system of excise duties

which is characterized by the imposition of an ad valorem excise duty calculated on the retail selling price 'including VAT'.

10 It is also prohibited to sell tobacco products to the consumer at a price lower

than the one appearing on the tax label.

11 If, at the material time, that prohibition was not in force as regards excise duties, nonetheless it was in force as regards VAT, by virtue of Article 58 (1) of the Law of 3 July 1969, which is quoted above.

12 The questions referred by the Hof van Cassatie for a preliminary ruling must enable that court to assess the compatibility with Community law of Article

JUDGMENT OF 16. 11. 1977 - CASE 13/77

58 (1) of the Belgian Law of 3 July 1969, in so far as under those provisions a selling price determined by the manufacturers or importers is imposed for sales to the consumer.

up against inevitable obstacles and in these circumstances trade between

States in this product requires considerable resources and skill.

16 Taking into account the large tax element in the selling price to the

consumer, the profit made by the wholesaler and by the retailer is relatively small.

17 In a system in which, as in Belgium, the basis of assessment to excise duty and to VAT is the retail selling price, a prohibition on selling tobacco

products to the consumer at a price higher than the retail selling price appearing on the tax label constitutes an essential fiscal guarantee, designed to prevent producers and importers from undervaluing their products at the

been in 19 It has also argued that maintaining a fixed retail price is essential order to ensure that the Member State is certain of actually obtaining the revenue from taxes on manufactured tobacco.

20 However, since in a system such as the one at issue collection is effected

when the tax labels are obtained, that argument cannot be accepted.

21 Finally, it should also be noted that in a system such as the one which applies in Belgium, there is in theory nothing to prevent a retailer from being able to determine his own price for sale to the consumer, by obtaining tobacco

products bearing appropriate tax labels.

22 However, in practice such a transaction is possible only with the co-operation of the manufacturer or importer on the one hand, and of the national tax

introducing into or maintaining in force in their legislation a provision

whereby, for the sale to consumers of both imported and home-produced

goods, a selling price is fixed by the manufacturers or importers if the

provision

— is of such a nature as to encourage the abuse by one or more undertakings of a dominant position within the Common Market within the meaning of Article 86 of the EEC Treaty;

— encourages the abuse by one or more undertakings of a dominant position which exists because the manufacturers and importers of manufactured

26 It is asked secondly whether in such a case the Treaty provisions referred to in the first be interpreted part of the question must not as meaning that the introduction or maintenance in force of such a provision is by no means prohibited but that the provision can have no effect on the scope of

application of Article 86 in the sense that abuse of a dominant position

remains unlawful even if it is encouraged by this provision in the particular

circumstances.

27 The different parts of this question should be dealt with together.

28 First, the single market system which the Treaty seeks to create excludes any

nonetheless it is also true that the Treaty imposes a duty on Member States not to adopt or maintain in force any measure which could deprive that

provision of its effectiveness.

INNO v ATAB

32 Thus Article 90 provides that, in the case of public undertakings and

undertakings to which Member States grant special or exclusive rights,

Member States shall neither enact nor maintain in force any measure contrary inter alia to the rules provided for in Articles 85 to 94.

the application of the provisions of Community law which have been referred

to.

37 In this connexion, the Hof van Cassatie has taken into consideration, first, the

possibility that the fact that manufacturers and importers of tobacco products

can oblige retailers in a Member State to adhere to the prices for sale to the

consumer fixedby them could constitute a dominant position, and, secondly, that the measure regarded as possibly infringing Article 86 in conjunction with the second paragraph of Article 5 is a provision whereby on a sale to the

affecting trade between Member States, for this condition has to be satisfied

for the prohibitions laid down in Article 86 to be applicable.

The second question

39 In the second question, the Hof van Cassatie asks whether undertakings to

which Member States grant special or exclusive rights within the meaning of

Article 90 of the Treaty exist where, by means of a legislative provision, the

quality and which have the same characteristics.

41 Since that possibility is open to all those, including retailers, who become producers or importers of manufactured tobacco, and consequently to an

indefinite class of undertakings, it is questionable whether those undertakings

can properly be described as having been granted 'special', and at all events 'exclusive', rights.

42 However, since it has already been indicated in the reasons given for the answer to the first question that in any case Article 90 is only a particular

application of certain general principles which bind the Member States, it does not appear necessary to give an answer to the second question.

which, according to the particular case, is determined by the manufacturers of

these products who are established in the State or by the importers of the same products, in particular from other Member States.

44 Next it is asked whether such rules only constitute such a measure when it is in fact certain that it can hinder Community trade directly indirectly, or

actually or potentially, a matter which must be determined by the national court in each case.

45 Finally the question asks whether the position is different if, after notification of a price increase and after compliance with a specified waiting period, the Member State permits the producers and importers to fix freely the prices,

including the retail prices, but publishes the prices and, by means of the

22 December 1969 (OJ, English Special Edition 1970 (I), p. 17), 'measures, other than those applicable equally to domestic or imported products, which hinder imports which could otherwise take place, including measures which make importation more difficult or costly than the disposal of domestic production'

are measures which have an effect equivalent to a quantitative

restriction on imports.

However, the 'measures having equivalent in directive effect'

49 referred to the

do not include measures which by having such effect hinder trade between Member States but which are specifically referred to elsewhere in the Treaty, in particular as fiscal measures, or are per se permitted being as the visible or

those factors which were likely to hinder free movement and distort the

conditions of competition.

52 Although a maximum price applicable without distinction to domestic and

imported products does not in itself constitute a measure having an effect

equivalent to a quantitative restriction, it may have such an effect, however, when it is fixed at a level such that the sale of imported products becomes, if not impossible, more difficult than that of domestic products.

53 On the other hand a system whereby the prices are freely chosen by the

subject to obstacles inherent in the different methods of fiscal control which

are used by the Member States in particular to ensure collection of the taxes on those products.

56 Accordingly, in order to assess whether rules in a Member State whereby a

fixed price is imposed for the sale to the consumer of manufactured tobacco,

namely the price which has been freely chosen by the manufacturer or

INNO v ATAB

before national courts, and, secondly, whether the Member States are

prohibited from introducing maintaining or in force a legislative measure

whereby a selling price, stated on the tax label, is imposed for the sale to the consumer of imported or home-produced tobacco products, in that it is not

possible to exceed the maximum and it is not permissible to sell the product

at a lower price.

58 The second part of this question must be considered first, since if it was

the Member States of taxes affecting the consumption of products in this

sector does not distort conditions of competition and does not impede their

free movement within the Community.

61 Article 1 of the directive lays down the principle that the structure of the

excise duties on manufactured tobacco shall be harmonized in several stages

and Article 4 lays down a system of excise duties comprising a proportional

63 Taking the view that the essential requirements of competition imply a

system of freely formed prices for all groups of manufactured tobacco, the

Council provided in Article 5 (1) of the directive that manufacturers and

importers shall be free to determine the maximum retail selling price for each of their products.

64 Taken in context, the second sentence of Article 5 (1) cannot be interpreted as aiming to prohibit the Member States from introducing or maintaining in force a legislative measure whereby a selling price, namely the price stated on

the tax label, is imposed for the sale to the consumer of imported or

Government of the Grand Duchy of Luxembourg, the Government of the

Kingdom of the Netherlands, the Government of the Italian Republic, the

Council of the European Communities and the Commission of the European

Communities, which have submitted observations to the Court, are not

recoverable.

67 As these proceedings are, in so far as the parties to the main action are

1. Article 86 of the EEC Treaty prohibits any abuse by one or

more undertakings of a dominant position, even if such abuse

is encouraged by a national legislative provision.

2. In order to assess the compatibility with Article 86 of the

Treaty, in conjunction with Article 3 (f) and the second

paragraph of Article 5 of the Treaty, of the introduction or

3. Rules in a Member State whereby a fixed price is imposed for the sale to the consumer of either imported or home-produced tobacco products, namely the price which has been freely chosen by the manufacturer or importer, constitute a measure having an effect equivalent to a quantitative restriction on

imports only if, taking into account the obstacles inherent in the different methods of fiscal control which are used by the

Member States in particular to ensure collection of the taxes

on those products, such a system of fixed prices is likely to

hinder, directly or indirectly, actually or potentially, imports

between Member States.

provided that that price has been freely determined by the

manufacturer or importer.

Kutscher Sørensen Bosco Donner Mertens de Wilmars

Pescatore Mackenzie Stuart O'Keeffe Touffait

Delivered in open court in Luxembourg on 16 November 1977.

A. Van Houtte H. Kutscher

30, 31 and 32 of the EEC Treaty and the cellophane cover where such cover

certain provisions of Council Directive exists (and that appears to be the rule for No 72/464/EEC (OJ, English Special cigarettes) even in the case of imported Edition 1972 (31 December), p. 3) on goods the affixation is usually carried out

taxes other than turnover taxes which in practice by the (foreign) affect the consumption of manufactured manufacturers. The basis of assessment

tobacco which entered into force on 1 for the tax is the retail price stated on the

July 1973. tax label. In principle it is freely determined by the manufacturers and

The following observations importers. However it must be noted that preliminary may be made. because there is State control over