C-325/00

I - 9980

COMMISSION v GERMANY

forestry and food sector ('the Fund'). of products which satisfy those requirement According to Paragraph 2(1) of the AFG, may, on application to the CMA, be the Fund aims to promote the distribution licensed to affix to their products the and exploitation (den Absatz und die quality label 'Markenqualität aus deut- Verwertung) of products of the German schen Landen' ('the CMA label'). The agricultural and food sector. To that end it CMA verifies — with the help of indepen- seeks to open up new markets and to dent laboratories — that products licensed develop existing markets, inside as well as to carry the label satisfy the relevant quality outside Germany, by stimulating the use of requirements. However, the CMA reserves modern technology by the sector, and by the use of the label for products which are working for improvements in the quality of produced in Germany, either from German the relevant products. or from imported raw materials. The CMA label has, apparently, existed for approxi- mately 30 years and it is according to the German Government currently used by 2 538 undertakings in respect of 11 633 different products.

5. Paragraph 2(2) of the AFG provides that the Fund is to carry out its task through a central body (einer zentralen Einrichtung der Wirtschaft). That body is to receive financing from the Fund. It is to promote the distribution and exploitation of prod- ucts of the German agricultural and food sector, and it may not seek profit by the sale of goods. Procedure and delimitation of the issues

10. According to the Court's case-law, 8. The German Government resists the Article 28 EC 'concern[s] only public meas- Commission's submissions. Before the ures and not the conduct of undertakings'. 7 Court it argues, essentially, that the activ- It is however clear — as Germany also ities of the Fund and the CMA are of a accepts in this case — that measures private nature and thus outside the scope of adopted by bodies, including companies Article 28 EC, that it does not follow from constituted according to the rules of private the Court's case-law that reserving the use law, which are not formally part of the of the CMA label for German products State, may fall within the scope of infringes Article 28 EC and that in so far as Article 28 where, in brief, those measures the German quality label scheme at issue are attributable to the State. 8 restricts the free movement of goods, that restriction is justified by, in particular, the difficulties inherent in verifying the quality of products produced outside Germany and the need to protect industrial property rights.

12. In Apple and Pear Development Coun- cil13 the Court was asked, inter alia, whether the activities of a body (the Development Council), including in par- ticular the organisation of advertising cam- paigns for varieties of apples and pears The Fund which were typical of English and Welsh production, infringed Article 28 EC. Hav- ing pointed out that the Development Council had been established by a statutory instrument made pursuant to national law, that it consisted of members appointed by 14. The Fund was set up, at the initiative of the Government and that it was financed the German Government, in accordance by a charge which the Council was with the provisions of the AFG. 15 It empowered, under the statutory instru- must — as Germany itself appears to ment, to impose on all growers of apples accept — be regarded as a public body and pears in England and Wales, the Court for the purposes of Article 28 EC. That is held that 'a body such as the Development clear from Paragraphs 1(1) and 7(1) of the Council, which is set up by the Government AFG according to which the Fund is subject of a Member State and is financed by a to German public law (Anstalt des öffent- charge imposed on growers, cannot under lichen Rechts) and to the supervision (Auf- Community law enjoy the same freedom as sicht) of the German Federal Government. regards the methods of advertising used as The public status of the Fund is moreover confirmed by an examination of the rules governing its financing and management. 10 — See paragraph 24 of the judgment. 11 — See paragraph 15 of the judgment. 12 — See paragraph 29 of the judgment. 14 — Paragraph 17 of the judgment. 13 — Case 222/82 [1983] ECR 4083. 15 — See above paragraph 4.

18. The CMA is a private limited liability company (GmbH). Its capital is subscribed by the trade associations (Spitzenverbände) of the German agricultural and food sector. While it is unclear whether the CMA was created at the initiative of the German Government or the German agricultural, forestry and food sector, it is common ground that it was set up (in 1969) in order 16. Second, the Fund is, according to to assume the role of the central body Paragraphs 3 to 6 of the AFG, managed envisaged by the provisions of the AFG. It by a Board of Management (Vorstand), the appears moreover from an examination of members of which are appointed, subject to the legislative history of the AFG that the the approval of the German Government, original Articles of Association of the CMA by the Board of Directors (Verwaltungsrat). were approved by the German Govern- The Board of Directors has a total of 21 ment. 19 members all of which are appointed by the German Government. 1 7Under Paragraph 5(1) of the AFG, five of those members are to be appointed on the proposal of the parties present in the Bundestag, 13 members on the proposal of the German agricultural and food sector and three 19. According to Article 2 of the Articles of members on the proposal of the bodies Association (entitled 'Purpose'), the CMA managing the CMA. is to assist the Fund in the execution of its

18 — See above paragraph 6. 16 — See in that regard Apple and Pear Development Council, 19 — Paragraph 2(2) of the AFG of 26 June 1969 provided, in cited in note 13, paragraph 17 of the judgment. substance, that the Articles of Association of the central 17 — See in that regard Commission v Ireland, cited in note 9, body required the approval (Genehmigung) of the com- paragraph 15 of the judgment. petent federal ministers.

22. It is on the basis of those facts that the German Government's submission — to the effect that the quality label scheme 20. General guidelines were issued by the adopted and administered by the CMA falls Fund on 12 June 1972. 23They state, in so outside the scope of Article 28 EC — must far as is relevant, that the Management of be assessed. The German Government the Fund ( Vorstand) supervises the activ- stresses that the CMA is a private company ities of the CMA and the correct manage- which is not controlled by the German ment of the finances provided to it by the State, directly or through the Fund: the Fund. 24 In order to carry out that task, the Fund proposes only three of the 26 management of the Fund may, inter alia, members of the Supervisory Board and demand access to all relevant business the competent German minister is documents held by the CMA. 25 empowered only to decide what level of contributions the undertakings in the sector are liable to pay under the AFG and to supervise how the CMA spends the funds it receives via the Fund.

24. First, it is clear that the CMA acts for a entrusted to it, or agree with a body to do purpose — namely the promotion of Ger- so on its behalf, if the central body (the man agricultural and food products — CMA) does not fulfil its obligations. It which has been broadly defined by the cannot be denied that the Fund would, by German Government and laid down in threatening to take such a step, be capable provisions of national law. That consider- of influencing the conduct of the CMA to ation is not, in my view, affected by the fact some degree. that the AFG neither lays down in detail what measures the central body (the CMA) must adopt to achieve that purpose nor explicitly provides for the adoption of a quality label scheme such at the one at issue in the present case. 27. For those reasons, I conclude that the measures adopted by the CMA, which are supported financially by the public auth- orities and given statutory recognition by the AFG, are not outside the scope of Article 28 EC.

25. Second, I attach importance to the fact that the activities of the CMA, including the quality label scheme at issue, are financed by a public body (the Fund) which is in turn financed through a compulsory charge on producers of agricultural and food products. The system of financing of The existence of restrictions on the free the CMA thus distinguishes it from private movement of goods undertakings and trade associations of a voluntary character. 30

28. The next question to be considered is whether a quality label scheme such as that operated by the CMA creates restrictions on intra-Community trade contrary to Article 28 EC. 26. Third, the CMA is — as the German Government itself points out — not com- pletely outside the control of the Fund. The CMA must respect the general guidelines laid down by the Fund, and the Fund supervises the activities of the CMA and its financial management. Moreover, Para- 29. In its application, referring to the judg- graph 7(5) of the AFG provides, essentially, ments in Eggers 31 and Pistre, 32 the Com- that the Fund may itself exercise the tasks mission contends that that question must

clearly be answered in the affirmative. At relevant, since the CMA label cannot be issue in Eggers were provisions of German regarded as a product designation. The law according to which spirits could be label is, in substance, a form of advertising designated as 'Qualitätsbranntwein aus and its lawfulness therefore falls to be Wein' or 'Weinbrand' only if (i) at least considered in the light of the Court's 85% of the alcoholic content was derived judgments in Buy Irish 36 and Apple and from wine distillate produced in Germany Pear Development Council. 37 In its view, it and (ii) the whole of the distillate used had follows from those judgments — and from been kept for at least six months at the certain passages in two communications factory in Germany where home-produced issued by the Commission 38 — that distillate was extracted by distillation. The national quality labels are compatible with Court stressed that although the Member Community law so long as they genuinely States are 'empowered to lay down quality seek to improve the quality of agricultural standards for products marketed on the products, and do not serve as a pretext for territory and may make the use of desig- 'chauvinist tendencies'. nations of quality subject to compliance with such standards', it follows from Article 28 EC that the right to use desig- nations of quality cannot be linked to a requirement that the products in question are produced within the relevant Member State. 33 The right to use designations of quality may be made 'dependent solely on the existence of the intrinsic objective characteristics which give the products the quality required by law'. 34 In Pistre the Court held that provisions of French law 31. I agree with the German Government which reserved the use of the description that the lawfulness of the scheme at issue in 'mountain' for food products manufac- the present case cannot be decided by a tured within certain French regions were simple transposition of the judgments in contrary to Article 28 EC since, essentially, Eggers and Pistre. While the product desig- those rules discriminated against imported nations at issue in those cases were apt to goods. 35 describe products independently of their origin, the CMA label states, in essence, that a product on which it appears is made in Germany and is of a certain quality. Such a label cannot logically be regarded as a generic product designation which ought to be open to all quality products indepen- dently of their origin.

32. In order to determine whether the 34. That conclusion is not, in my view, CMA label scheme is contrary to Article 28 affected by the German Government's EC, it is therefore necessary to examine assertion that it is difficult or impossible whether it creates restrictions on intra- to verify whether products produced out- Community trade, taking account of the side Germany comply with the quality Court's case-law on the interpretation on requirements laid down by the CMA. In that notion. According to that case-law the the absence of detailed information about prohibition laid down in Article 28 EC the specific nature of those difficulties, that covers all measures which are capable of assertion cannot be upheld. In that regard, hindering, directly or indirectly, actually or it may be recalled that in Eggers the potentially, intra-Community trade. 39 It is German Government argued that super- moreover, as the German Government vision of the quality of spirits, which it itself points out, well established that considered essential for the information of Article 28 EC covers measures which may consumers, could be achieved only if there restrict trade by encouraging the purchase were 'undivided responsibility', that is to of domestic products only. 40 say if the final distillation and storage were undertaken in the same factory in Ger- many. 41 The Court rejected that argument on the basis that 'such controls may be carried out just as effectively by means which are less restrictive of trade between Member States' . 42

compared with products which do not have been, registered as a designation of benefit from its use'. 4 3 origin or a geographical indication under the provisions of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the pro­ tection of geographical indications and designations of origin for agricultural prod­ 44 36. Finally, it may be noted that the CMA ucts and foodstuffs. The restrictions on label differs from the advertising schemes the free movement of goods caused by the at issue in Buy Irish and Apple and Pear operation of the CMA label scheme cannot, Development Council in one essential therefore, be justified by reference to the respect. While the schemes considered in provisions of that Regulation. those cases were aimed exclusively at pro­ moting national products, or products typical of certain national regions, the CMA label scheme has a dual aim: it seeks to enhance the quality of German agricul­ tural products and — through the ensuing improvements in quality — to promote the sale of those products. The fact that the scheme at issue pursues a quality policy cannot, however, bring it outside the scope of Article 28 EC. The existence of an Article 30 EC infringement of Article 28 EC must be determined by reference to the effect on trade of the measure at issue, not by reference to the aims pursued by the German authorities.

38. According to the German Government, the scheme at issue is however justified under Article 30 EC. Article 30 EC permits restrictions on imports which are justified Justification on various grounds including the protec­ tion of industrial and commercial property, provided that the restrictions do not con­ stitute a means of arbitrary discrimination or a disguised restriction on trade between Member States. The German Government Regulation No 2081/92 submits that the quality label scheme at issue falls within that derogation, citing in support of its view the judgment in Expor- tur 45 in which the Court appeared to 37. It is common ground in this case that accept that the protection of simple geo- the CMA label has not been, and could not

40. First, and most importantly, it may be recalled that the Court held in Sekt48 that '[a]n area of origin which is defined on the basis... of the extent of national territory... 41. Second, this case differs in any event cannot constitute a geographical area... from Exportur in a critical respect. In that capable of justifying an indication of ori- case, the Court appeared to accept that gin...'. 49 However, the CMA label scheme indications of source were entitled to pro- defines the area of origin as the whole of tection because they 'may... enjoy a high the German territory, and it applies to a reputation amongst consumers and consti- vast range of agricultural products. A tute for producers established in the places measure of such broad application cannot, to which they refer an essential means of as the Commission points out, be regarded attracting custom'. 51 Protection of such as an indication of source capable of indications of source was therefore justified justification under the provision in because of the risk that their reputation Article 30 EC on the protection of indus- might otherwise be exploited by another. In trial and commercial property. It may be this case, however, the CMA refuses to noted in that regard that Article 2(2)(b) of license the use of the quality label in respect of all products produced outside Germany whether or not there is, for each product or 46 — By 'simple geographical indications of source', the German category of products, any reputation linked Government appears to mean a place name designating a product where, first, there is no link between the char- to the geographical indication 'aus deut- acteristics of the product and its geographical provenance schen Landen'. and, secondly, use of the name may or may not lead consumers to think that the product originates in that place. 47 — See paragraph 37 of the judgment. 48 — Case 12/74 Commission v Germany [1975] ECR 181. 50 — Cited in note 44. 49 — Paragraph 8 of the judgment. 51 — See paragraph 28 of the judgment.

43. Finally, it appears from the Commis- sion's explanations in the present case that simple geographical indications are pro- tected, as a matter of German law, only by 44. I accordingly conclude that a national Paragraph 127(1) of the Markengesetz quality label scheme such as that at issue in (Trade Marks Law), which provides that the present case does not fall within the '[g]eographical indications of source may derogation for measures for the protection not be used commercially for goods or of industrial and commercial property services which do not come from the place, within the meaning of Article 30 EC.

52 — Although the judgment was given some months after 54 — Case 78/70 Deutsche Gramophone v Melro [1971] ECR Regulation No 2081/92 had entered into force, the facts 487, paragraph 11 of the judgment; frequently affirmed arose before that date. since. 53 — Cited in note 44. 55 — Case C-312/98 |2000] ECR 1-9187.

I - 9991

OPINION OF MR JACOBS — CASE C-325/00

Conclusion

45. On the basis of the above considerations, I am of the opinion that the Court should: