C-189/95

FRANZÉN

OPINION OF ADVOCATE GENERAL ELMER delivered on 4 March 1997 * Table of Contents

The national legislation and its background I - 59u

Systembolaget's activity in practice I - 5919 Facts I - 5925 Questions referred to the Court I . 5926

Observations submitted to the Court I - 5928

General observations on Article 30 of the Treaty I - 5930

O P I N I O N OF MR ELMER — CASE C-189/95

the EFTA Court for an advisory opinion on 2. Article 16 EEA must be interpreted as the compatibility with Articles 11, 13 and 16 meaning that, as from 1 January 1994, every of the EEA Agreement (which correspond in State monopoly of a commercial character substance to Articles 30, 36 and 37 of the not covered by Protocol 8 EEA must be Treaty) of a statutory system which con- adjusted so as to eliminate the exclusive right ferred on a monopolistic State undertaking to import the goods the subject of the the exclusive right to import alcoholic bever- monopoly into a Contracting Party from ages from other Member States of the EEA other Contracting Parties.' or, in the case of trade between the EEA States, required authorization from the monopolistic State undertaking to import such products and place them on the market. In Case E-l/94 Restamark1 the EFTA Court held, in particular:

I-5912

FRANZÉN

The Act of Accession contains no specific 6. That reform of the Swedish legislation on provisions on trade in alcoholic beverages. alcohol was effected by the Alkohollag of 16 Finland and Sweden made a unilateral decla- December 1994 5 (Law on Alcohol, hereinaf- ration, * according to which the Conference ter 'the Law'), which entered into force on 1 at ministerial level was informed of the January 1995. The statement of reasons in abovementioned exchange of letters with the the draft law 6 states, inter alia, the follow- Commission. ing:

'Excessive consumption of alcohol creates considerable social, medical and socio- 5. With effect from Sweden's accession to economic problems. This is why Sweden has the European Union on 1 January 1995, for a long time had a restrictive policy on V&S's exclusive rights to produce and export alcohol. spirits and to import beer, wine and spirits were abolished, as was Systembolaget's exclusive right to sell alcohol beverages by wholesale to restaurants.

At the same time, far-reaching changes tak- ing place in the outside world are having an impact on the alcohol policy pursued up to now. According to the committee respon- sible for alcohol policy, having regard to the process of integration going on in Europe Those rights were replaced by a system and the foreseeable intensification of social under which traders may import and sell by and cultural exchanges, strong action in the wholesale spirits, wine and beer, provided matter of alcohol will be necessary in future that they have a licence to do so, and resell in order to limit consumption, reduce alco- those products to Systembolaget or to hold- holism and combat the injurious effects of ers of serving licences. alcohol.

The fundamental aim of Swedish alcohol policy throughout the twentieth century has been to limit the effect of market forces, namely competition and private profits. The 7. The Law refers to 'alkoholdrycker' (here- reason for this was the conviction that com- inafter 'alcoholic beverages'), defined in petition and private profits encourage active Article 3 of Chapter 1 of the Law as bever- marketing and active selling, which lead to ages having an alcoholic strength of more increased consumption. The greater the than 2.25% by volume. The beverages number of undertakings having an interest in referred to are classified as 'sprit', 'vin', increased alcohol sales, the better alcoholic 'starköl' and 'öl'. 'Sprit' (hereinafter 'spirits') beverages will fare in the competition for is defined in Chapter 1, Article 2, as any liq- consumers' money. In the case of a sector uid of more than 2.25% alcohol by volume, which society does not wish to see expand, with the exception of 'vin', 'starköl' and 'öl'. market mechanisms such as competition and 'Vin' (hereinafter 'wine') means a fermented profit are not particularly suitable as means beverage based on grapes or other fruit with of control. an alcoholic strength of not more than 22% by volume, see Chapter 1, Article 5. Accord- ing to Chapter 1, Article 6 of the Law, 'starköl' (literally 'strong beer') is a fer- mented beverage made from malt having an alcoholic strength of more than 3.5% by vol- ume. Where the alcoholic strength by vol- In the Government's view, the principle of ume is higher than 2.25% but below 3.5% limiting private profits in the alcohol trade the product comes within the category 'öl' remains valid and must guide the State when (literally 'beer', hereinafter 'light beer').

Under Article 5 of Chapter 4, a person hold- Neither Systembolaget nor holders of serv- ing a manufacturing or wholesale licence ing licences are authorized to import alco- may (only) sell his goods to Systembolaget, holic beverages but under the Law requires to other persons holding manufacturing or that they purchase only from traders who wholesale licences covering the same prod- hold a Swedish production or wholesale ucts or to the holders of serving licences licence. relating to such products.

I-5915

O P I N I O N OF MR ELMER — CASE C-189/95

Charges payable for licences 9 200) and the surcharge is SKR 50 (approxi­ mately E C U 5.8) per 1 000 litres, so that the overall charge comes to SKR 0.056 per litre where the whole band is utilized.

10. Article 4 of Chapter 7 deals with licences. The applicant must pay a charge when submitting his application and the holder of a manufacturing or wholesale Retail trade licence must also pay an annual monitoring charge intended to finance the permanent monitoring of compliance with the condi­ tions of the grant of the Učence and the application of the Law. The authority responsible for administering licences and for control is the Alkoholinspektion (Alco­ 11. Chapter 5 of the Law covers the retail hol Inspectorate). The procedures are laid sale of spirits, wine and beer. down in the 'Alkoholförordningen' (Alcohol Regulation). 7 Article 10 of the Alcohol Regulation provides that the charge payable on submitting an application is to be SKR 25 000 (approximately E C U 3 000).

Article 1 of Chapter 5 is worded as follows:

The provisions relating to the activity and operation of the retail company and its spe- Under Article 6 of Chapter 5, food stores, cific control by the State shall be adopted in Systembolaget and producers in possession an agreement between the company and the of a manufacturing licence are authorized to State.' retail light beer.

12. The agreement referred to in Chapter 5, Article 2 of Chapter 5 provides as follows: Article 1, of the Law between the State and Systembolaget, I0 of which the State is sole shareholder, provides that Systembolaget is to conduct its activities in such a way as to prevent, as far as possible, the harmful pub- lic, social and medical consequences associ- ated with the consumption of alcohol. 'Spirits, wine and beer shall only be retailed by the retail company.

Paragraph 4 of the agreement is worded as follows:

13. Chapter 6 of the Law concerns serving The range referred to in this agreement is the licences. Article 5 of Chapter 6 provides: range in the company's ordinary price list.' 'Holders of serving licences may purchase the spirits, wine and beer necessary for their activities only from holders of wholesale licences relating to such products'.

The agreement also establishes that System- bolagets marketing is to be impartial and that, within the limits of the Law and the restrictions which it imposes on the advertis- ing of alcoholic products, the company is to Penalties take steps to ensure that its customers are acquainted with new products.

Lastly, the agreement provides that System- bolaget's trading margin is to be determined 14. Pursuant to Article 2 of Chapter 10 of according to the objective criteria applicable the Law, anyone who sells alcoholic bever- to both domestic products and imported ages, whether intentionally or negligently, products and that Systembolaget is to pursue without authorization is liable to a fine or to its retail activities in accordance with the a sentence of up to two years' imprisonment.

I-5918

FRANZÉN

Marketing wine and spirits market came to approxi- mately 7% (corresponding to some 10 mil- lion litres). In 1995 Systembolaget was the dominant supplier of wine and spirits to serving outlets. 12

12 — The majority of these figures are taken from pages 3 and 4 11 — As amended by the Lag om ändring af lagen (1978: 763) of the report referred to m footnote 9. The others have been med vissa bestämmelser om marknadsföring av alkoholdry- inferred from the figures provided in the report. See also cker (Law amending the law enacting certain measures gov- the letter of 19 August 1996 from A. L. Galatius, Primeur erning the marketing of alcoholic beverages) of 20 Decem- Vin AB, in which it is stated that the serving outlets' share ber 1994, SFS 1994: 1740. of the wine market was 6%.

I-5919

O P I N I O N O F MR ELMER — CASE C-189/95

19. Systembolaget purchases products from traders who hold a manufacturing or whole­ 22. 130 of Systembolaget's suppliers (87%) sale licence. 1 3 O n 7 October 1996 a total of together delivered less than 1 % in volume of 223 licences for the manufacture and/or Systembolaget's products. Having regard to wholesale of spirits, wine and/or beer had the criteria of sales figures for a product been issued. , 4 which determine whether it remains in Sys­ tembolaget's basic assortment or in its trial assortment (see my observations below on the various assortments), it must be pre­ sumed that these suppliers' products are mainly in the temporary assortment and are only sold for a short period through System­ bolaget's sales network or that they are in the 'available to order' assortment, which is 20. However, in September 1996 Systembo­ not stocked by Systembolaget. It is not clear laget had a total of only 149 suppliers. from the evidence before the Court to what extent these 130 suppliers are able to sell the same products to holders of beverage outlet 13 — It is apparent from a Government decision of 5 October licences; moreover, in this market they 1995 that foreigners operating from their own countries are not required to have a permanent establishment in Sweden in order to obtain wholesale and import licences. However, it is apparent from a survey carried out by the Alkoholins­ pektion on 7 October 1996 that all holders of wholesale licences were undertakings established in Sweden. The 15 — It may be the case that licensed manufacturers export their Commission stated at the hearing that it was investigating, products. It is apparent from the papers before the Court inter alia, whether representation was required. that there are actually some products of Swedish manufac­ 14 — See the Alkoholinspektion's list of undertakings with ture, e. g. Absolut Rod 50% vodka, which are not included wholesale and manufacturing licences. in Systembolaget's various assortments.

16 — Apparently, Systembolaget does not undertake to purchase 18 — See Annex 1(c) to the report referred to in footnote 9 on a specific product from the wholesaler who is the official the situation of alcoholic beverages on the Swedish market, distributor of that product. However, I am unaware from which it is also apparent that the share of the retail whether Systembolaget imposes obligations of exclusivity beer market held by the three largest Swedish breweries is on wholesalers, prohibiting them from competing with Sys- 72%. tembolaget by supplying a product that they sell to System- 19 — See Annex 1(c) to the report referred to in footnote 9. bolaget to holders of serving licences. 20 — See tables 2A and 2D in the report referred to in footnote 9. 17 — See page 3 of the report referred to in footnote 9. 21 — See paragraph 2.2.1 of the conditions of sale and delivery.

I - 5921

OPINION OF MR ELMER — CASE C-189/95

The 'by order' assortment consists of prod- 26. Systembolaget draws up an annual pur- ucts which Systembolaget does not stock but chase plan, which is revised every quarter. which are stocked by licensed wholesalers. Purchases take the form of an invitation to Products in this assortment appear in a spe- licensed manufacturers and wholesalers to cial price list. Products which are ordered are tender for delivery of products of a specific subsequently delivered to the Systembolaget type and possibly from a particular produc- shop where the order was taken. Finally, tion region, 21 for example: Beaujolais, red, there is an import service: at the customer's fleurie; Italy, red, vino nobile; Rioja, red, request, Systembolaget will import a particu- reserva. Traders without a manufacturing or lar product which is not in any of its assort- wholesale licence are unable to tender. ments. The minimum quantity which can be ordered is one case, or ten cases of beer. The purchaser pays the handling and transport 22 — See paragraph 2.3.2 of the conditions of sale and delivery charges and the duty. The papers before the and Systembolaget's 1997 product plan.

I - 5922

FRANZÉN

27. The tenders received are first dealt with 30. Where a product is not placed in the by Systembolaget's buyers, who examine basic assortment, the licensee who offered it whether the price is favourable and assess may, within two months from the decision previous experience with the production rejecting it, register the product with a view region and type of products concerned. Fol- to a trial sale. 24 The product is then tested lowing this initial examination approxi- with other products registered in the same mately half the products offered are rejected. category and the same price range by a panel of 13 consumers chosen from a list of approximately 400 consumers selected beforehand by Jordbrukets provkök, a com- pany owned by the agricultural unions.

I - 5923

O P I N I O N O F MR ELMER — CASE C-189/95

31. Where the product obtains a majority of increasing sales of a product are taken into positive votes it is placed in the 'trial' assort­ account, so that the product may, depending ment appearing in Systembolageťs overall on circumstances, be included in the basic price list. The price list does not state that it assortment even where sales are lower than is a 'trial' product. However, only a limited the minimum thresholds, or the sales period number of special 'trial' shops stock the may be extended. 26 'trial' product. Where sales of the product over 26 weeks reach a certain threshold, a minimum volume of 13 500 litres for wine, corresponding to 18 000 bottles, and a mar­ ket share in the price category in question of 0.5% for red wine or 1% for white wine, the product is transferred to the basic assortment 33. Paragraph 2.3.4 of the conditions of sale and thereby made subject to the conditions and delivery provides, in particular, as fol­ relating to sales figures described in para­ lows: graph 29. The criteria applicable during the trial period are therefore actually the same as those applicable to the basic assortment, since the sales period is reduced by half, to six months, with a corresponding reduction in the volume criteria, the only difference 'A product which has been dropped from being that 'trial' products are only stocked in the basic assortment or the "trial" assort­ a limited number of shops. It the trial sales ment cannot be reconsidered until two years fail to reach the minimum thresholds men­ have elapsed.' tioned above the product is dropped from the list and the remaining stocks are returned to the licensee at his expense. 2 7

36. Systembolaget received 12 576 offers during the first eight months of 1996. 29 37. The four principal wine-supplying coun- Examination of 5 159 of these offers had not tries during the first eight months of 1996 yet been completed when the Konkurrens- were Spain (30.8%), Italy (12.9%), Germany verket delivered its report on the situation (10.7%) and France (9.6%). 30 on the Swedish market in alcohol on 7 November 1996. It is to be presumed that of the 7 417 offers whose examination had been completed, 3 608 (approximately 49% of the offers whose examination had been com- Facts pleted) were rejected in the preliminary examination, since it is stated that only 3 809 of these offers (approximately 5 1 % of the offers whose examination had been com- pleted) reached the tasting stage. Of the 3 809 offers tested, 2 700 (70% of the offers 38. At the beginning of April 1994 Harry tested and 36% of the offers whose examina- Franzén, who at the time owned a food store tion had been completed) were rejected. The in Röstånga, purchased a quantity of wine in remaining 908 offers (12% of the offers Denmark which he imported into Sweden. whose examination had been completed) After selling most of this wine in his shop on which were accepted by Systembolaget and 7 April 1994, he again sold wine in his shop the products to which they related were pur- on 1 January 1995, which was the day of chased as part of the basic assortment, the Sweden's accession to the European Union. 'trial' assortment or the temporary [provi- He had purchased some of that wine from sional?] assortment. Systembolaget and some came from the wine which he had previously imported from Denmark.

'Examination of the proceedings brought by the public prosecutor raises the question whether a person can be sentenced for hav- Questions referred to the Court ing acted in breach of a rule of law which is contrary to Community law. The Law on Alcohol is structured in such as way as to enact a basic prohibition of selling alcoholic beverages. As far as retail is concerned, a derogation from that prohibition gives Sys- 41. By order of 14 June 1995 the Landskrona tembolaget the exclusive right to engage in Tingsrätt (District Court, Landskrona) such trade. It can indeed be argued that even stayed the proceedings and asked the Court if Systembolaget's monopoly position were to answer the following questions: to be regarded as being contrary to Commu- nity law, this still does not mean that ordi- nary persons have a right to sell alcoholic beverages anywhere they wish, since a basic prohibition of sale still subsists. However, it was not the legislature's intention to enact a ' 1 . Is a statutory monopoly such as that of total prohibition on retailing alcoholic bever- Systembolaget compatible with Article 30 of ages but the aim of the Law is to give Sys- the Treaty of Rome? tembolaget an exclusive right in this regard.

I - 5926

FRANZÉN

The Court considers that, in order to be able system in its entirety and not merely as it to give judgment in the case, it must be relates to the various points of sale. determined whether Systembolaget's monopoly is contrary to Community law.'

43. The national court also described the characteristics of the monopoly which result 45. The wording of the questions appears to from the Law and the agreement between indicate that the national court is also asking the State and Systembolaget. That descrip- the Court to consider whether the national tion is, moreover, consistent with the scheme in question must be abolished, or account given above. It follows from those whether it might be adjusted. In that regard, characteristics that the purpose of Systembo- I would observe that in the context of the laget is to limit sales of alcoholic beverages. cooperation procedure established by Article There is a centralized system in which a 177 of the Treaty, the Court only has juris- single undertaking owns and exploits all diction to rule on the interpretation of Com- points of sale and also takes decisions relat- munity law and, as regards the specific case, ing to purchases and marketing. The effect of to provide the national court with the infor- this statutory link between Systembolaget mation which may enable it to determine and the points of sale is to create an indivis- whether the national scheme is contrary to ible whole. In order to answer the questions Community law and, accordingly, must not referred, it is therefore necessary, in the be applied. The Court has consistently held opinion of the national court, to consider the that both Article 30 and Article 37 of the

I - 5927

OPINION OF MR ELMER — CASE C-189/95

Observations submitted to the Court Lastly, Mr Franzén maintains that the restriction on the free movement of goods which results from Systembolaget's statutory monopoly cannot be regarded as justified under Article 36 of the Treaty. In Mr Fran- zén's view it is legitimate to seek to limit 47. Mr. Harry Franzen maintains that the alcohol consumption but Systembolaget is Law is contrary to Article 30 in several not the appropriate instrument for doing respects. First, it constitutes an obstacle to this. Rather, the monopoly increases the con- access of imported products to the Swedish sumption of illegal home-distilled alcohol, market. Systembolaget is the sole sales chan- which represents a greater risk to health. nel to consumers. The limitation of the num- Official alcohol consumption in Sweden, ber of shops, the majority of which only which amounts to 5.3 litres of alcohol per stock a small proportion of the total range, inhabitant (1993), is much lower than the corresponding figure for Denmark, for example, where it stands at 10 litres per 31 — See, for example Case 74/76 Iannelli v Aleroni [1977] ECR inhabitant. However, it is necessary to add 557 and Case 45/75 REWE v Hauptzollamt Landau [1976] secret consumption, which covers both ECR 181.

I - 5928

FRANZÉN

I - 5929

O P I N I O N O F MR ELMER — CASE C-189/95

General observations on Article 30 of the over the free movement of goods. 33 As was Treaty made clear in the 'Cassis de Dijon' judgment, Case 120/78 Rewe-Zentrale v Bundesmo- nopolverwaltung für Branntwein [1979] ECR 649, this case-law is based on the prin- ciple of mutual recognition. Products which have been lawfully produced in one Member State must be able to be marketed in other 51. Article 30 of the Treaty prohibits quan- Member States without having to satisfy the titative restrictions on imports and any requirements in force in those Member measure having equivalent effect between States. Member States.

I - 5930

FRANZÉN

nating against products from other Member would not be consistent with the wording of States: provisions governing the opening Article 30, which refers to measures having times of shops; 3 5 a measure prohibiting equivalent effect to quantitative restrictions pharmacists from advertising outside the on imports. Such an interpretation would pharmacy products commonly sold in phar- undermine the provision which up to now macies; 36 the exclusion of the distribution has been one of the cornerstones of Euro- sector from televised advertising; 37 a prohi- pean integration. bition on the marketing of processed milk for infants outside pharmacies; 38 and a pro- hibition on the sale of tobacco by traders other than specially authorized retailers. 39

I-5931

O P I N I O N OF MR ELMER — CASE C-189/95

Member State of importation or as impeding places where the products concerned might such access more than it impedes access by be distributed by regulating the marketing of domestic products. 40 those products, without thereby preventing access to the market of products from other Member States or specifically placing them at a disadvantage.

58. Consequently, according to the Court's case-law, what matters is whether the meas- ure in question is apt to hinder trade 60. Similarly, in paragraph 44 of its judg- between Member States. The words 'certain ment in Banchero 43 the Court held that Ital- selling arrangements' 41 used in paragraph 16 ian legislation which reserved the retail of of Keck and Mithouard support this view by manufactured tobacco products to distribu- suggesting that certain other provisions relat- tors with special authorization, but without ing to selling arrangements might be caught thereby barring access to the national market by Article 30 even if they do not entail dis- by products from other Member States or not crimination against products from other impeding their access to the market more Member States. than it impeded access for domestic products to the distribution network, was not caught by Article 30 of the Treaty.

59. That interpretation of Article 30, to the effect that it is intended to ensure the access The Court held that the legislation in issue to the market of products from other Mem- did not have such a restrictive effect on trade; ber States, is also consistent with the most it relied, among the evidence, on the fact that recent decisions of the Court. In Case retailers, some 76 000 in number, could C-391/92 Commission v Greece (the freely choose how to stock their outlets Babymilk case), 42 which concerned Greek according to the state of the market and that legislation allowing processed milk for the legislation concerned did not therefore infants to be sold only in pharmacies, the constitute a de jure or de facto centralization Court held, in paragraph 20, that the Greek of purchases. legislation was confined to limiting the

assumed that such a de jure or de facto cen­ importation and imposed an economic bur­ tralization would bring the legislation within den on importers which was likely to restrict the scope of Article 30. Criticism of the Ban- the volume of imports. The determining fac­ chero judgment by academic writers ** seems tor was therefore not a comparison with the to forget that the conclusion of the judgment situation of comparable national products results solely from that assessment of the but the fact that the legislation was likely to probative value of the evidence before the restrict imports. Court as to the practical effects of the legisla­ tion and that it must therefore be presumed that the Court found in its judgment that a de jure or de facto centralization of trade is likely to hinder trade between Member States and in which case is covered by the prohibition laid down in Article 30 of the Treaty. 4 5 62. In recent decisions the Court has applied a uniform interpretation of the various pro­ visions of the Treaty on the free movement of goods, freedom of movement for persons and the free movement of services and capi­ tal, see, inter alia, Case C-55/94 Gebhard. 47 Whether the proposed interpretation of Article 30 is right may therefore also be ascertained by examining the most recent 61. That interpretation is confirmed by a decisions of the Court on freedom of move­ comparison between the decisions in the ment for persons and the free movement of Babymilk and Banchero cases and the judg­ services. ment of the Court in Case C-323/93 Cre­ spelle. 4 6 In that judgment the Court held that rules of a Member State which required private economic operators importing into its territory quantities of bovine semen from another Member State to store it, subject to a charge, in an authorized centre which enjoyed an exclusive concession with regard 63. In Bosman 4 8 the Court had to rule on to the storage of the semen and insemination the applicability of Article 48 of the Treaty, constituted a barrier to imports within the on freedom of movement for workers, to the meaning of Article 30, since that requirement football federations' transfer system, under applied at the stage immediately following which transfers between clubs were subject to payment of a transfer fee by the new club. The Court held in paragraph 103 that, although the transfer rules in issue applied 44 — See E L., Juris-Classeur, Europe, 1996, p. 15, and C. J. Berr, Journal du droit international, 2 1996, p. 495. also to transfers between clubs within the 45 — See, in this regard, my Opinion in that case, in which I con­ sidered — although the Court disagreed — that it had been sufficiently established that there was in fact, if not in law, such a centralization of trade and that the legislation there­ fore came within Article 30 of the Treaty. 47 — Case C-55/94 Gebhard v Consiglio dell'Ordine dežii Avvo­ 46 — Case C-323/93 Centre d'Insémination de la Crespelle v cati e Procuratori di Milano [1994] ECR 1-4165, para­ Cooperative d'Élevage et d'Insémination Artificielle du graph 37. Departement de la Mayenne [1994] ECR 1-5077, para­ 48 — Case C-415/93 Union Royale Belge des Sociétés de Football graph 29. Association v Bosman [1995] ECR 1-4921.

65. An interpretation of Article 30 of the Treaty to the effect that the prohibition it lays down covers measures which are capable of barring or impeding access to the market by goods manufactured in another Member State is also necessary to prevent lacunae in the protection of the free move- ment of goods where there is no domestic production of the goods in question. In such cases there cannot by definition be discrimi- 64. The Alpine Investments case 4 9 con- nation against products coming from other cerned the applicability of Article 59 of the Member States in comparison with domestic Treaty, on the freedom to provide services, to products and a Member State might there- a prohibition of the practice of making unso- fore be encouraged to impose charges on licited telephone calls, known as 'cold call- such products, since it can do so without ing', for the purpose of selling various finan- having to impose comparable charges on cial services. The prohibition in question domestic products. There would be nothing applied not only to the 'cold calling' of cus- to preclude such obstacles to trade if Article tomers in the Member State concerned but 30 were understood as only containing a also to the 'cold calling' of customers in prohibition of discrimination against prod- other Member States in connection with ucts of other Member States in comparison such services. It was not, therefore, the ser- with domestic products. In that regard, refer- vice itself that was prohibited but a certain ence can be made to Case C-47/88 Commis- arrangement for selling the service. The sion v Denmark. 50 The Court there held that Court expressly refused to apply the crite- it was not permissible for the Member States rion of discrimination established in the to impose on products which, in the absence Keck and Mithouard judgment. In para- of comparable domestic production, escaped graphs 35 and 38 the Court stated that, the application of the prohibitions contained whilst the prohibition in issue was general in Article 95 charges of such an amount that and non-discriminatory and neither its the free movement of goods within the object nor its effect was to put the national Common Market would be impeded as far as market at an advantage over providers of ser- those goods were concerned and that such a vices from other Member States, it could question must be appraised by reference to none the less constitute a restriction on the Article 30 of the Treaty. 51 The Court stated freedom to provide cross-border services,

'Member States shall progressively adjust any State monopolies of a commercial char- acter so as to ensure that when the transi- tional period has ended no discrimination 68. Article 37(1) is designed to preclude any regarding the conditions under which goods discrimination between nationals of Member are procured and marketed exists between States regarding the conditions under which nationals of Member States. 53 goods are procured and marketed. It does not therefore prohibit, as, for example, Article 95 of the Treaty does, the imposition on products from other Member States of charges in excess of those imposed on domestic products, but refers generally to The provisions of this Article shall apply to the nationals of the Member States. It fol- any body through which a Member State, in lows, to my mind, that Article 37 of the law or in fact, either directly or indirectly Treaty refers to the traders who supply the supervises, determines or appreciably influ- market in products. That provision therefore ences imports or exports between Member differs from Article 30 of the Treaty, first by States. These provisions shall likewise apply being limited to discrimination and secondly to monopolies delegated by the State to by not protecting the free movement of others.'

54 — See paragraph 27 of Case C-387/93 Banchero, cited in foot- note 39. 52 — See paragraph 17 of Case C-391/92 Commission v Greece, 55 — See Case 59/75 Pubblico Ministero v Manghera [1976] ECR cited in footnote 38. 91, where an import monopoly was held incompatible with 53 — The transitional period expired on 31 December 1969. Article 37 of the Treaty.

goods as such but by protecting the traders a commercial character must be adjusted so of the other Member States who participate as to eliminate the exclusive right to import in the free movement of goods. 56 from other Member States'. That finding is quite general and must be interpreted as meaning that the Court accepted that national import monopolies in themselves constitute discrimination between nationals of the Member States 59 and that it is there- fore unnecessary to ascertain on a case-by- case basis whether such import monopolies 69. That was confirmed in Case C-347/88 actually lead to discrimination between Commission v Greece,57 where the Court nationals of the Member States. held that to maintain in force the State's rights with regard to the importation and marketing of petroleum products gave rise to discrimination within the meaning of Article 37(1) against exporters established in other Member States. Presumably, the determining factor in that case was that the State's monopoly was of such a kind as to prevent certain traders, in particular those with whom the Greek State's monopoly did not have commercial relations, from exporting to 71. The wording of the Treaty provides no the Greek market. There was therefore dis- support for the assumption that Article 37 of crimination between nationals of the Mem- the Treaty derogates from the fundamental ber States, as mentioned in Article 37(1). rule on the free movement of goods laid down in Article 30 of the Treaty. O n the other hand, Article 37(3) shows that Article 37(1) is designed to supplement the rules laid down in Articles 30 to 34. Article 37(3) pro- vides that the timetable for the measures referred to in paragraph 1 is to be harmo- 70. I could also refer to the Manghera judg- nized with the abolition of quantitative ment. 5S In that judgment the Court, after restrictions 'on the same products' provided stating that the exclusive right to import for in Articles 30 to 34. Moreover, the Court manufactured tobacco products enjoyed by has also held 6 0 that it follows from the the monopoly of the Italian State consti- wording of Article 37 and also from its posi- tuted, in respect of Community exporters, tion in the general scheme of the Treaty that discrimination prohibited by Article 37(1) of the article is designed to ensure compliance the Treaty, held that that provision must be interpreted 'as meaning that as from 31 December 1969 every national monopoly of 59 — I also refer in that regard to the Court's reasoning in para- graph 34 of Case C-202/88 France v Commission [1991] ECR 1-1223 (hereinafter the 'telecommunications terminals judgment'), where it is stated that the existence of exclusive importing and marketing rights deprives traders of the 56 — Unlike Article 37, Article 30 is designed to protect the free opportunity of having their products purchased by con- movement of goods, not the operators participating therein. sumers. 57 — Case C-347/88 Commission v Greece [1990] ECR 1-4747, 60 — See paragraph 9 of the Manghera judgment, cited in foot- paragraph 44. note 55, paragraph 42 of the Commission v Greece judg- 58 — See paragraphs 12 and 13 of the judgment, cited in foot- ment, cited in footnote 57, and paragraph 27 of the Ban- note 55. chero judgment, cited in footnote 39.

Is the Swedish statutory system applicable to the retail of alcoholic beverages caught by the prohibitions laid down in Articles 30 72. Furthermore, in its decisions the Court and 37 of the Treaty? has sometimes applied Articles 30 and 37 concurrendy to a national monopoly of a commercial character and sometimes applied only Article 30 to exclusive rights conferred on a national monopolistic undertaking. Thus in Case C-347/88 Commission v Greece, cited above, the Court held that the exclusive right to import and market finished petroleum products was contrary to both 74. As stated above, the national court has Article 30 and Article 37(1). In the telecom- described the characteristics of the munications terminals judgment 62 the Court monopoly which result from the Law and held that exclusive rights to import and mar- the agreement between the State and System- ket terminal equipment constituted a meas- bolaget and which, moreover, are consistent ure having equivalent effect to a quantitative with what I have said on the matter. It fol- restriction on imports within the meaning of lows that the purpose of Systembolaget is to Article 30 of the Treaty. O n the other hand, limit sales of alcoholic products. There is a the Court did not consider it necessary to centralized system in which one undertaking examine the matter under Article 37, which owns and manages all points of sale and itself may be regarded as confirmation of the fact takes purchasing and marketing decisions. that Article 37 supplements Article 30. The existence of this statutory link between Systembolaget and the various points of sale means, in the national court's opinion, that there is an indivisible whole. In order to 61 — In Case 91/78 Hansen v HaupttoUamt Flensburg [1979] ECR 935, paragraph 13, the Court expressed this in the fol- answer the questions which it has referred to lowing words: Article 37 is intended to render the sales the Court, it is necessary, in the national policy of a State monopoly subject to the requirements of the free movement of goods and of the equal opportunities court's view, to evaluate the system in its which must be accorded to products imported from other Member Sutes. entirety and not merely as it relates to a par- 62 — See footnote 59. ticular point of sale.

79. Although the Swedish statutory system governing the sale of alcoholic beverages does not completely prohibit the sale of alcoholic beverages or directly introduce quantitative restrictions on imports of those 77. All the information available in the products and cannot therefore be described present case indicates that that objective has as a quantitative restriction in the strict actually been achieved in practice. The statis- sense, the objective sought and the effect tical information to which Mr Franzen produced by the system amount to the same referred in his observations shows that thing in practice, that is to say, it signifi- recorded alcohol consumption in Sweden is cantly limits sales of a particular group of significantly lower than that in other Mem- products. There is, therefore, a strong pre- ber States of the Community, namely 5.3 sumption that the Swedish statutory system litres of alcohol per inhabitant in 1993 com- hinders intra-Community trade and, accord- pared with, for example, 10 litres per inhab- itant in Denmark, which, like Sweden, is unable to produce grape-based wine and tra- ditionally consumes less wine than other 63 — It is not possible to give the exact figures for wine and spir- its. Sales of spirits probably account for approximately 20 Member States. Similarly, the figures from to 25% of total sales of wine and spirits.

I - 5938

FRANZÉN

ingly, constitutes a measure having an effect guishes products coming from other Mem- equivalent to a quantitative restriction within ber States in relation to domestic products. the meaning of Article 30 of the Treaty.

I - 5939

O P I N I O N OF MR ELMER — CASE C-189/95

the Court. Unlike in the Banchero and Babymilk cases, the Swedish statutory sys- tem makes provision for alcoholic products to be sold to consumers not through a large number of independent operators with spe- cial authorization — in Banchero there were some 76 000 operators able to obtain sup- plies freely — but through an outright State monopoly which centralizes the purchasing of all the products intended to be sold on the 84. If the Swedish statutory system appli- retail market.

An undertaking favour of regarding this severe limitation of the number of shops (which must be even more noticeable in rural areas) as a measure 65 — Sec Scherer & Ross, Industrial Markel Structure and Econ- having an effect equivalent to a quantitative omic Performance, Houghton Mifflin Company, Boston, 1990, p. 17, according to which a purchasing monopoly is, restriction caught by Article 30 of the Treaty. apparently, called in English a 'monopsony'.

87. A proper retail monopoly is therefore It should be pointed out, secondly, that the considerably different, in my view, from a terminals sector is characterized by the system in which a number of independent diversity and technical nature of the prod- retailers are granted the right to sell one or ucts concerned and by the ensuring con- more categories of products which they straints. In those circumstances, there is no obtain independently. This distinction is par- certainty that the holder of the monopoly ticularly clear on a market such as the retail can offer the entire range of models available market in alcoholic beverages, where the on the market, inform customers about the range of different products of different state and operation of all the terminals and brands on offer is extremely wide. It is guarantee their quality. impossible in practice for the monopoly holder to offer more than a fraction of the overall supply.

Accordingly, exclusive importation and mar- keting rights in the telecommunications ter- minal sector are capable of restricting intra- 88. In that regard, reference may be made to Community trade.' paragraphs 34, 35 and 36 of the judgment in

66 — The Court has held, in connection with Article 85 of the Treaty concerning agreements which restrict competition, that the retail trade and the restaurant sector are separate markets: sec Case C-234/89 Delimita v Horniger Bräu [1991] ECR 1-935, paragraphs 16 and 17. Although case- law on the competition rules is not decisive for the purpose 89. The fact that even at that time the Court of interpreting Article 30 of the Treaty, it is none the less important to bear that definition of the market in mind saw a substantial difference between such when assessing the characteristics of Systembolaget. exclusive rights conferred on monopolies

93. The commercial reality is therefore, in 91. In the telecommunications terminals my view, that a product from another Mem­ judgment the exclusive right related to both ber State will only be imported into Sweden imports and marketing. It is therefore rea­ where it is certain that it can be marketed by sonable to ask what importance is to be Systembolaget. What point would there be in attached to the fact that Systembolaget's holders of wholesale licences importing a product if they were unable to sell it? As far as products' access to the market is con­ cerned, the fact that imports are not them­ 67 — Case C-23/89 Quietlynn and Richards v Southend Borough Council [1990] ECR 1-3059. selves in the hands of a State monopoly is 68 — It may seem surprising, therefore, that during the procedure therefore irrelevant. the Commission considered that there was no difference, for the purposes of the free movement of goods, between a retail sales monopoly stricto sensu and a system of adminis­ trative authorization. That view is all the more surprising because quite recently, in a decision of 20 November 1996, N o . ľV/M.784 —Kesco/Tuko, the Commission decided that a merger between two Finnish retail chains, which would have had the effect of creating a dominant undertak­ ing with a market share of at least 55%, was incompatible with the common market. According to paragraph 11 of the decision, the transaction also affected intra-Community trade in so far as suppliers from other Member States would in fact have to seek access to Kesco's distribution channels The fact that on paper the Swedish alcohol to ensure that their products could be adequately marketed monopoly does not extend to the right to in Finland. It may be, however, that the Commission's atti­ tude is explained by_ the correspondence referred to above import strikes me as a purely formal artifice, between the Commission and Ule Swedish Government in connection with the Kingdom of Sweden's accession to the which does not alter the real position, which European Union. is that it is Systembolaget which decides

94. In my view, a State monopoly on retail The delimitation of Article 30 is therefore trade, such as the Swedish monopoly, there- relevant to the scope of the Commission's fore directly affects access of goods to the market in exactly the same way as a State monopoly on imports. In that regard, refer- ence may also be made to the fact that in a 69 — See Commission Recommendations of 22 December 1969 to the French Republic concerning the adjustment of the number of recommendations made on 22 national monopoly of a commercial character in Thomas clinker {Journal Oficiei 1970 L 31, p. 7), to the Italian December 1969 pursuant to Article 37(6) the Republic concerning the adjustment of the national Commission considered it necessary that the monopoly of a commercial character in cigarette papers (Journal Officiel 1970 L 31, p. 9), to the Italian Republic Member States should adjust a number of concerning the adjustment of the national monopoly of a commercial character in flints (Journal Officiel 1970 L 31, State monopolies of a commercial character p. 12), to the Italian Republic concerning the adjustment of the national monopoly of a commercial character in salt so as to ensure State neutrality in relation to (Journal Officiel 1970 L 31, p. 14) and to the Federal retailers and ensure that suppliers from other Republic of Germany concerning the adjustment of the national monopoly of a commercial character in alcohol Member States would be able to set up their (Journal Officiel 1970 L 31, p. 20).

I - 5943

O P I N I O N O F MR ELMER — CASE C-189/95

96. It follows from the judgments in Mang- hera and in Case C-347/88 Commission v 98. Turning now to the way in which the Greece 72 that State import monopolies have system operates in practice, it is also clear in general a discriminatory effect within the that traders from other Member States have meaning of Article 37(1). As I have already great difficulty in penetrating the Swedish stated, I consider that a system such as the market with an alcoholic product. Swedish system actually has the same effects as an import monopoly. The second subpara- graph of Article 37(1) makes it clear that it is

— In order to be able to submit an offer at 70 — See paragraph 21 of the grounds of the telecommunications terminais judgment, cited in footnote 59. all, the person concerned must have a 71 _ OJ 1988 L 131, p, 73. wholesale licence; on this point, see 72 — Sec Case 57/95 Mancherà, cited in footnote 55, and Case C-347/88 Commission v Greece, cited in footnote 57. below, where the effects of this require-

I - 5944

FRANZÉN

— When the offer has been submitted, Sys- tembolagets staff evaluate the quality/ price ratio and assess previous experience with the production region and the type of product in question: see paragraph 27 — To be included in the basic assortment — above. This stage seems to me to involve which, moreover, only contains cheap a largely discretionary choice which leads products and those in the intermediate to the exclusion of approximately half of price range — a product must satisfy cer- the products offered. tain minimum requirements in terms of sales, failing which it will be dropped from the list: see paragraph 29 above. From a commercial and administrative point of view, it is not surprising that Systembolaget, as a monopoly covering the entire territory, should require mini- — Systembolaget's staff then conduct a mum annual sales of 36 000 bottles and a blind test. Taste is by no means objec- certain market share in the relevant sector tively measurable. When, for example, if a product is to remain in the basic does a Châteauneuf du Pape taste suffi- ciently of raspberry, liquorice, exotic spices and roast nuts, or a Brunello di Montalcino taste sufficiently of red and 73 — The gustatory characteristics mentioned are reproduced in Parker's Wine Buyer's Guide, Simon & Schuster, Fourth black fruit, juniper, oak and roast Edition, 1995, p. 516 et seq. and p. 678.

I - 5945

OPINION OF MR ELMER — CASE C-189/95

100. As I mentioned earlier, a particular problem arises from the aspect of both Article 30 and Article 37, namely that trad- ers' access to the Swedish market is even fur- ther hindered by the system resulting from — The possibility of having rejected prod- Articles 1 and 2 of Chapter 4 of the Law, ucts sold on a trial basis (on this point, which make imports subject to possession of see paragraphs 30 and 31 above) does not, a wholesale or manufacturing licence issued in my view, provide unsuccessful suppli- by the Alkoholinspektion. As I observed ear- ers with a real chance of obtaining access lier, such authorization is necessary not only to the market. First, the product must to be able to sell to Systembolaget but also, pass a tasting test. Secondly, even if it generally, to be able to submit an offer to passes that test, the quantities which must Systembolaget, which does not itself have the be sold and the fact that the 'trial' range right to import. In my view, this licensing is only available in a limited number of system is indistinguishable from a commer- shops so that the 'trial' product finds it cial monopoly, since, as I have already said,

I - 5946

FRANZÉN

I - 5947

OPINION OF MR ELMER — CASE C-189/95

in Case 94/79 Vriend [1980] ECR 327 the defined in abundant case-law, should also be Court held that a system which exclusively applied in relation to Article 37. reserved the import of vegetable reproduc- tion material such as chrysanthemum plants to persons affiliated to publically approved bodies was contrary to Article 30 of the Treaty.

107. Accordingly, I consider that Article 37 is to be interpreted as meaning that restric- tions ensuing from the existence and specific Can the system be justified under Article 36 functioning of commercial monopolies but of the Treaty? which are justified on, for example, grounds of the protection of health and life of humans may be compatible with Commu- nity law, subject to the conditions laid down in Article 36, such as the condition that they are not to constitute a means of arbitrary 104. According to the derogations provided discrimination. The Court does in fact for in Article 36 of the Treaty, Article 30 is appear to have implicitly accepted that not to preclude restrictions on imports justi- Article 36 may derogate from Article 37. fied, inter alia, on grounds of the protection Thus, in Case C-347/88 Commission v of health and life of humans. Such restric- Greece, cited above, the Court considered tions are not, however, to constitute a means whether an exclusive right to import and of arbitrary discrimination or a disguised market petroleum products was justified on restriction on trade between Member States. grounds of public security, one of the grounds referred to in Article 36, with- out distinguishing between Article 30 and Article 37.

doubt that the system entails a considerable these alternative measures must be chosen. 79 economic advantage for the Swedish State in If the measure is not in itself appropriate to that all profits from the retail of alcoholic achieve that objective or where it is in itself beverages in Sweden go to the Swedish Trea- disproportionate, it will no longer be com- sury and these profits are maximized patible with Community law. 80 through the reduction of selling costs due to the limitation of the number of shops. How- ever, under the consistent case-law of the Court, no account is to be taken of any loss of resources which the Swedish State would incur if it were required to abolish or adjust the monopoly on the retail of alcoholic bev- 111. The Swedish Government maintained erages in order to render it compatible with during the procedure that alcohol was injuri- the rules of the Treaty. ous to health and that the aim of the Swedish statutory system was to limit sales and thereby limit the consumption of alcohol. The Government referred in that regard to a European Alcohol Action Plan adopted in 1993 by the Regional Committee for Europe 109. O n the other hand, the Court has con- of the World Health Organization, which set sistently held that the health and life of as an objective for all European States humans rank foremost among the values or belonging to the W H O a 25% reduction in interests protected by Article 36 of the alcohol consumption by the year 2 000 com- Treaty and it is for the Member States to pared with consumption in 1980. decide, within the limits imposed by the Treaty, what degree of protection they intend to ensure. 77 The Member States have a cer- tain discretion in that regard.

113. O n the other hand, I think that alcohol whole, gready hinders access to the market consumption can hardly be likened to alco- by products from other Member States and hol abuse. New studies indicate that a certain also leads to discrimination against nationals daily consumption of wine has beneficial of other Member States. Taken as a whole, effects on health. A recent Danish study the Swedish statutory system therefore con- published in, inter alia, the British Medical stitutes, in my view, an appreciable restric- Journal82 reached the following conclusion: tion of the free movement of goods and this 'Light to moderate consumption of wine (up is a factor which must be taken into account to three to five glasses a day) is associated when considering whether the system is nec- with a significant reduction, virtually pro- essary or whether less restrictive measures portionate to intake, of the risk of dying would be capable of protecting public health. from all causes, unlike consumption of beer and spirits. This reduction relates to both a reduction in the risk of death from cardio- vascular and cerebrovascular disease and also to a reduction of the risk of death from all causes.' According to the study, if the rela- tive risk of death of persons who never drink wine is set at 1.00, the risk for persons drink- ing three to five glasses a day is 0.51. O n the 115. As I have said, the main problem of a other hand, the corresponding risk of death State retail monopoly such as the Swedish for those drinking three to five 2-cl glasses of monopoly is that it involves a centralization spirits a day is 1.34. As regards beer, no con- of purchases and that it is therefore the State sistent difference was found in relation to the monopoly which actually decides which relative risk of 1 for those who never drink products from other Member States will be beer; the study does not therefore support imported and have access to the market. It is the assumption that normal consumption of therefore the monopoly as such that restricts beer is injurious to health. trade.

not therefore entail any particular obstacles even in small daily quantities, apparently to the free movement of goods. have adverse effects on health. However, as I have argued, the Swedish system governing the sale of alcoholic beverages must be con- sidered as a whole, so that in the present case there is no need to give a definitive ruling on that question, which the Swedish legislature 117. Such independent sales outlets could be will be able to study more closely should the required, just like Systembolaget, to observe legislation be eventually amended. certain opening hours and not to sell to per- sons under a certain age. The State could also regulate retail marketing. 83 Furthermore, the public authorities would be able to monitor compliance with the licence conditions by the shop owner or manager. It is precisely this model that is used in Sweden for super- vising beverage-serving establishments: 119. It is clear, to my mind, that it is not apparently, it is possible to exercise effective necessary, on the grounds of public health in control over approximately 9 000 indepen- Sweden, to require traders established in dent beverage-serving establishments, a num- another Member State and lawfully carrying ber much higher than the present number of on their activity there who wish to sell on retail shops. the Swedish market either to employ the ser- vices of a Swedish intermediary or them- selves hold a Swedish wholesale licence and be subjected to control by the Swedish Alco- hol Inspectorate and pay the associated charges. From the point of view of health 118. A further question is whether the policy, it cannot matter whether the storage present very low number of sales outlets is premises of such traders outside Sweden necessary or whether it is possible to achieve comply with the Swedish requirements or the desired reduction in abusive consump- whether the conduct of the traders in ques- tion of alcohol by means of an increased tion satisfies the requirements of the Alko- effort to provide information and social mea- holinspektion. sures, which raaji in practice be better suited to reducing alcohol abuse without limiting normal consumption. Less restrictive rules on wine, normal consumption of which appears, as I have explained, to have benefi- cial effects on health, and on beer, normal consumption of which does not appear to be injurious to health, would also be apt to 120. On the other hand, ensuring that the change the drinking habits of the population products are taxed in Sweden and are not so that it would consume less spirits, which, sold in a way contrary to Swedish rules on alcohol, for example to minors, does matter. However, it is perfectly possible to meet these conditions without requiring traders in 83 — See the judgment in Hünermtmá, cited in footnote 36, and other Member States to have a Swedish the judgment in Aragonesa de Publicidad Exterior and Pub- íivíay cited in footnote 78. wholesale licence if they are to sell their

(1) Articles 30 a n d 37 of the E C Treaty are t o be interpreted as p r e c l u d i n g an overall national s t a t u t o r y system g o v e r n i n g the retail of alcoholic beverages w h i c h has the following characteristics: — the system is designed t o Umit sales a n d t h e r e b y limit c o n s u m p t i o n of such p r o d u c t s and it m u s t be p r e s u m e d t o have that effect in practice; and

84 — Purely for the sake of completeness, I would add that the retail monopoly might possibly be maintained for national products, see Joined Cases 80/85 and 159/85 Nederlandse Bakkerij Stichting v Edah [1986] ECR 3359, paragraph 18, which establishes that Article 30 of the Treaty does not pre- vent products from other Member States b a n g favoured in comparison with domestic products.

I - 5952

FRANZÉN

— the law confers on a wholly State-owned company the exclusive right to retail alcoholic beverages, which are sold in a limited number of shops and other outlets; and

— while the retail monopoly in question comes into operation at the stage immediately following the import stage, it is the sole legally authorized purchaser of alcoholic beverages destined for the retail market in the Mem- ber State concerned and therefore in practice determines which products will be imported into that market from other Member States; and