C-216/98

COMMISSION V GREECE

OPINION O F ADVOCATE GENERAL JACOBS delivered on 13 April 2000 *

1. In this case the Commission seeks a Article 99 of the Treaty (now Article 93 declaration pursuant to Article 169 of the EC) and consolidates Council Directive EC Treaty (now Article 226 EC) that 72/464/EEC of 19 December 1972 2 and Greece has failed to fulfil its obligations Council Directive 79/32/EEC of 18 Decem- under Article 9 of Council Directive 95/59/ ber 1978 3as amended on several occa- EC of 27 November 1995 on taxes other sions, most recently by Council Directive than turnover taxes which affect the con- 92/78/EEC. 4 sumption of manufactured tobacco 1 by adopting and maintaining in force legisla- tive provisions which authorise the Greek Minister for Economic Affairs to determine by decree the minimum retail selling prices 3. The overall objective of the Directive is, of manufactured tobacco products. according to the second recital in the preamble, to facilitate the establishment of an economic union within the Commu- nity. To that end, the Directive lays down two types of rules.

shall comprise two elements: a propor- Manufacturers, or, where appropriate, their tional duty calculated on the maximum representatives or authorised agents in the retail price and a specific duty calculated Community and importers of tobacco from per unit of the product. Under Article 16, non-member countries shall be free to the specific duty must not be less than 5% determine the maximum retail selling price or more than 55% of the amount of the for each of their products for each Member total tax burden levied on the cigarettes. 5 State for which the products in question are Excise duties are, according to Article 10, to be released for consumption. in principle collected by means of tax stamps which are acquired by the manu- facturers or importers from the relevant authorities in the Member State and fixed to the products prior to their sale at the retail ievei. The second [sub] paragraph may not, how- ever, hinder implementation of national systems of legislation regarding the control of price levels or the observance of imposed prices, provided that they are compatible with Community legislation. 5. There are, secondly, rules about the formation of retail selling prices of all manufactured tobacco products. 6 Accord- ing to the seventh recital in the preamble 'the needs of competition imply a system of freely formed prices for all groups of 2. In order to facilitate the levying of the manufactured tobacco'. On that basis, excise duty, Member States may, for each Article 9 of the Directive, which corre- group of manufactured tobacco, fix a scale sponds to Article 5 of Directive 72/464 as of retail selling prices on condition that amended, provides: each scale has sufficient scope and variety to correspond in fact with the variety of Community products. Each scale shall be valid for all the products belonging to the group of manufactured tobacco which it concerns, without distinction on the basis of quality, presentation, the origin of the products or of the materials used, the ' 1 . A natural or legal person established in characteristics of the undertakings or of the Community who converts tobacco into any other criterion.' manufactured products prepared for retail sale shall be deemed to be a manufacturer.

2. ...

Procedure and delimitation of the issues

3. The Minister for Economic Affairs shall 8. The Commission takes the view that set by decree published in the Official Article 45 of Law No 2127 is contrary to Gazette minimum retail selling prices for Article 9 of the Directive and Article 30 of the products covered by paragraph 1, the Treaty (now Article 28 EC). It initially which shall be at least equal to the prices communicated that view to the Greek of those products on 1 December 1993, in Government by letter dated 21 February accordance with paragraph 2, increased by 1994. 7The Greek Government replied by 20%. Other minimum prices may be deter- letter of 31 March 1994 that it did not mined by like decrees of the Minister for Economic Affairs. Where new types of manufactured tobacco are placed on the 7 — Article 9 of the Directive corresponds to Article 5 of Directive 72/464/EEC, and the Commission's letter referred market, their minimum retail price shall be to the latter.

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12. It contends, first and foremost, that Article 9 of the Directive establishes a principle of free formation of retail prices of manufactured tobacco by the manufac- turers or importers. The determination, by 10. According to the Court's settled case- the authorities of a Member State, of law, the pre-litigation stage defines the subject-matter of an action for failure to fulfil Community law obligations. The 8 — See, for example, Case 7/69 Commission v Italy [1970] ECR 111, paragraph 5 of the judgment, Case C-306/91 Commis- Commission cannot subsequently extend sion v Italy [1993] ECR I-2133, paragraph 22.

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legally binding maximum or minimum 15. It also denies that Law No 2217 creates retail prices is contrary to that principle legal uncertainty. While paragraph 1 of and thus to the Directive. The Commission Article 45 lays down the general principle refers to the purpose of the Directive as set that the manufacturers and importers freely out in its preamble and to the Court's case- determine the retail price of manufactured law on Article 5 of Directive 72/464. 9 tobacco, paragraph 3 merely restricts the scope of that principle. There is thus no contradiction between the two paragraphs.

13. The Commission adds that Article 45 16. Finally, the Greek Government submits of Law No 2127 creates legal uncertainty that Law No 2127 falls within the reserva- and that Greece has therefore failed to tions, in the third subparagraph of Arti- implement Article 9 of the Directive cor- cle 9(1), concerning national legislation rectly. That uncertainty is caused by the intended to control price levels or imposed apparent contradiction between paragraph prices. 1 of Article 45, which provides that man- ufacturers and importers can freely deter- mine the retail prices of manufactured tobacco products, and paragraph 3 which provides that the Minster for Economic Affairs determines the minimum retail prices of those products. 17. The following questions need, in my view, to be considered.

Is Article 45 of Law No 2127 contrary to importers on the basis of which tax is the second subparagraph of Article 9(1) levied. As the Court stated in INNO v and thus prima facie in breach of the ATAB, where the basis of assessment to tax Directive? 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 pre- 18. The second subparagraph of Arti- vent producers and importers from under- cle 9(1) provides that manufacturers and valuing their products for tax purposes. 11 importers shall be free to determine the Thus the reference to 'maximum prices' has maximum retail selling price for each of no bearing on the question whether the their products. According to the Greek Directive allows Member States to fix Government, the reference in that wording minimum retail prices. to 'maximum prices', rather than 'prices', shows that the Directive is not intended to prohibit minimum retail prices.

has held that national rules which impose violated Article 30 of the Treaty (now binding retail prices on manufactured Article 28 EC). It then continued: 15 tobacco products are contrary to Arti- cle 5(1) of Directive 72/464, which for the purpose of these proceedings is indistin- guishable from Article 9(1) of the Direc- tive. In Commission v France 12 the Court of Justice examined the compatibility with Article 5(1) of French rules which author- 'It is clear, moreover, that the Belgian ised the administration to determine the authorities also committed an error of law retail prices of both domestic and imported by disregarding the principle laid down by tobacco products. The Court held that the Article 5(1) of Directive 72/464 of power reserved to the French Government 19 December 1972, according to which to fix prices 'is incompatible with Commu- manufacturers and importers shall be free nity law to the extent to which that power, to determine the maximum retail selling by altering the selling price determined by price for each of their products.' the manufacturer or importer, allows the competitive relationship between imported tobacco and tobacco distributed by the national monopoly to be adversely affected'. 13 24. Finally, in Commission v Italy 16 the Court held that a provision of Italian law which authorised the administration of that State to determine the retail prices with regard to the maximum prices suggested to it by the manufacturers and importers was in breach of Article 5(1) of Directive 72/464 since it created uncertainty about the right of those manufacturers and importers to determine freely the maximum retail prices. 23. The Court confirmed that interpreta- tion of Article 5 in Commission v Bel- gium. 14 That case concerned the Belgian authorities' refusal to deliver tax stamps to a tobacco importer showing lower prices than those laid down by a national price scale established in accordance with Arti- 25. It follows that the Commission's inter- cle 5(2) (now Article 9(2) of the Direc- pretation of the Directive is correct: Arti- tive). The Court held that that refusal cle 9(1) establishes a principle of free amounted to the imposition of a minimum formation of retail prices by manufacturers price on imported tobacco products which and importers which is, subject to the reservations in the third subparagraph of

26. Article 45 of Law No 2127 authorises the Greek Minister for Economic Affairs to impose binding minimum retail prices on manufactured tobacco products. The exis- tence of that power is per se a breach of the principle of free formation of retail selling prices enshrined in Article 9(1) of the Directive. 28. It should be added that the minimum prices laid down in accordance with Law No 2127 may, contrary to the Greek Gov- ernment's assertions, jeopardise the aims of the Directive. According to information contained in the Commission's application, the Greek minimum prices are set in accordance with the following criteria: from December 1995, at which time the Directive entered into force, 18 to 19 Janu- 27. That conclusion is not, as the Greek ary 1997 the minimum prices were at least Government contends, contradicted by the equivalent to the retail prices on 1 Decem- legislative history of the Directive. During ber 1993 increased by 20%; since 20 Jan- the process leading to the adoption of uary 1997 the minimum prices have been at Directive 92/78 which amended Directive least equivalent to the retail prices on 72/464, the Economic and Social Commit- 31 December 1996 increased by 9%. Those tee suggested that the phrase 'maximum levels appear quite high and one can there- prices' in Article 5(1) be changed to 'prices' fore not exclude the possibility that the to make it clear that the Directive applied minimum prices have prevented some also to national minimum price legisla- importers from reflecting lower cost prices tions. 17 The fact that the Community in their retail prices. The minimum prices legislator did not adopt that proposal does laid down in accordance with Article 45 not suggest that minimum prices fall out- may thus have distorted the conditions of side Article 9(1). On the contrary, it sug- competition between domestic and gests that the Community legislator took imported tobacco products and restricted

33. That view is confirmed by the Court's case-law on Article 5(1) of Direc- tive 72/464. In Commission v France the Is Article 45 of Law No 2127 justified Court ruled that the reservations in the under the reservations in the third subpar- third subparagraph 'must be interpreted in agraph of Article 9(1) of the Directive? such a way as to reconcile their content with the rule of the free determination of selling prices by the manufacturer or importer ...'. 19As regards 'control of price levels', the Court held that that expression 31. The Greek Government contends that Article 45 of Law No 2127 falls within the reservations listed in the third subpara- 19 — Case 90/82, cited in note 9, paragraph 20 of the judgment.

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covers only national legislation of a general Law No 2127 is justified under the third nature intended to check the increase in subparagraph of Article 9(1) should there- prices. 2 0 As regards 'observance of fore not be upheld. imposed prices', the Court held that that expression must be read in the light of the mechanism for determination of retail prices laid down in the second subpara- graph of Article 9(1). The expression must be understood as referring to a price which, once determined by the manufacturer or importer and approved by the public authority, is compulsory as a maximum price and must be observed at all stages of the distribution network, up to the sale to the consumer. 2 1 The purpose of that mechanism is, as explained above, to prevent manufacturers and importers from undervaluing their products at the time they acquire the tax labels and pay excise duty on the tobacco products.

(1) declare that the Hellenic Republic has failed to fulfil its obligations under Article 9 of Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco;

(2) order the Hellenic Republic to pay the costs.

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