# EUR-Lex - 61995J0189 - EN

Avis juridique important

*|*

# 61995J0189

**Judgment of the Court of 23 October 1997. - Criminal proceedings against Harry Franzén. - Reference for a preliminary ruling: Landskrona Tingsrätt - Sweden. - Articles 30 and 37 of the EC Treaty - Monopoly on the retail of alcoholic beverages. - Case C-189/95. **

*
European Court reports 1997 Page I-05909 *

Summary
Parties
Grounds
Decision on costs
Operative part

## Keywords

1 National monopolies of a commercial character - Article 37 of the Treaty - Purpose - Reconciling the requirements of the common market with the Member States' interests in maintaining certain monopolies of a commercial character - Obligation to adjust monopolies so as to exclude any discrimination between nationals of the Member States regarding the conditions under which goods are procured and marketed

(EC Treaty, Art. 37)

2 National monopolies of a commercial character - Article 37 of the Treaty - National monopoly on the retail of alcoholic beverages - Monopoly characterized by criteria and methods for selecting products, a retail sales network and non-discriminatory methods of promoting products or not liable to put at a disadvantage, in fact or in law, beverages imported from other Member States - Whether permissible

(EC Treaty, Art. 37)

3 Free movement of goods - Quantitative restrictions - Measures having equivalent effect - Importation of alcoholic beverages reserved to holders of a production licence or a wholesale licence - Obstacle to the importation of alcoholic beverages from other Member States - Justification - Protection of public health - None

(EC Treaty, Arts 30 and 36)

Summary

4 The purpose of Article 37 of the Treaty is to reconcile the possibility for Member States to maintain certain monopolies of a commercial character as instruments for the pursuit of public interest aims with the requirements of the establishment and functioning of the common market. It aims at the elimination of obstacles to the free movement of goods, save, however, for restrictions on trade which are inherent in the existence of the monopolies in question.

## Summary

Thus, Article 37 requires that the organization and operation of such a monopoly be arranged so as to exclude any discrimination between nationals of Member States as regards conditions of supply and outlets, so that trade in goods from other Member States is not put at a disadvantage, in law or in fact, in relation to that in domestic goods and that competition between the economies of the Member States is not distorted.

5 Article 37 of the Treaty does not preclude national provisions relating to the organization of a national monopoly on the retail of alcoholic beverages laying down such matters as the criteria or methods for the selection of products by the monopoly and rules relating to the establishment of retail outlets or to the promotion of products sold by the monopoly, if those provisions are neither discriminatory nor liable to put at a disadvantage, in law or in fact, beverages imported from other Member States.

6 Articles 30 and 36 of the Treaty preclude domestic provisions allowing only traders holding a production licence or a wholesale licence to import alcoholic beverages if the licensing system constitutes an obstacle to the importation of alcoholic beverages from other Member States by entailing additional costs for those beverages, such as intermediary costs, payment of charges and fees for the grant of a licence and costs arising from the obligation to maintain storage capacity in the territory of the Member State concerned, and if it is not established that the licensing system set up under those national provisions, in particular as regards the conditions relating to storage capacity and the high fees and charges which licence holders are required to pay, is proportionate to the public health aim pursued or that this aim could not have been attained by measures less restrictive of intra-Community trade.

Parties

In Case C-189/95,

## Parties

REFERENCE to the Court under Article 177 of the EC Treaty by the Landskrona Tingsrätt (Sweden) for a preliminary ruling in the criminal proceedings before that court against

Harry Franzén

on the interpretation of Articles 30 and 37 of the EC Treaty,

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, C. Gulmann, H. Ragnemalm, M. Wathelet (Presidents of Chambers), G.F. Mancini, J.C. Moitinho de Almeida, P.J.G. Kapteyn, J.L. Murray, D.A.O. Edward, J.-P. Puissochet (Rapporteur), G. Hirsch, P. Jann and L. Sevón, Judges,

Advocate General: M.B. Elmer,

Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

- Harry Franzén, by Per Löfqvist, Lennart Lindström and Carl Michael von Quitzow, Advocates, Stockholm,

- the Swedish Government, by Lotty Nordling, Under-Secretary for Legal Affairs in the Department for Foreign Trade of the Ministry of Foreign Affairs, acting as Agent,

- the French Government, by Catherine de Salins, Deputy Director in the Legal Affairs Directorate of the Ministry of Foreign Affairs, and Jean-Marc Belorgey, Special Adviser in that Ministry, acting as Agents,

- the Finnish Government, by Esa Paasivirta, Legal Adviser at the Ministry of Foreign Affairs, acting as Agent,

- the Norwegian Government, by Didrik Tønseth, Advocate at the Ministry of Foreign Affairs, acting as Agent,

- the Commission of the European Communities, by Richard Wainwright, Principal Legal Adviser, and Jean-Francis Pasquier, a national civil servant on secondment to its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Harry Franzén, represented by Per Löfqvist, Lennart Lindström and Carl Michael von Quitzow; of the Swedish Government, represented by Lotty Nordling and Erik Brattgård, Assistant Under-Secretary at the Department of Foreign Trade of the Ministry of Foreign Affairs, acting as Agent; of the Finnish Government, represented by Holger Rotkirch, Ambassador, Head of the Legal Affairs Department of the Ministry of Foreign Affairs, Esa Paasivirta and Tuula Pynnä, Legal Adviser at the Ministry of Foreign Affairs, acting as Agents; of the Norwegian Government, represented by Didrik Tønseth; and of the Commission, represented by Knut Simonsson, of its Legal Service, acting as Agent, assisted by Jean-Francis Pasquier, at the hearing on 19 November 1996,

after hearing the Opinion of the Advocate General at the sitting on 4 March 1997,

gives the following

Judgment

Grounds

1 By judgment of 14 June 1995, received at the Court on 16 June 1995, the Landskrona Tingsrätt (District Court, Landskrona) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty three questions on the interpretation of Articles 30 and 37 of that Treaty.

## Grounds

2 The questions have been raised in criminal proceedings brought against Harry Franzén for infringement of the Alkohollag (1994:1738) of 16 December 1994 (Swedish Law on Alcohol, hereinafter `the Law on Alcohol' or `the Law').

The Law on Alcohol

3 The Law on Alcohol, which entered into force on 1 January 1995, regulates production and trade in alcoholic beverages in Sweden. Its aim is to limit the consumption of alcoholic beverages, in particular those of high alcoholic strength, in order to reduce the harmful effects which their consumption has on human health.

4 For the purposes of the Law `alcoholic beverages' means beverages having an alcoholic strength by volume exceeding 2.25%. Such beverages include `wine' (fermented beverage based on grapes or other fruit, with an alcoholic strength by volume not exceeding 22%), `beer' (malt-based fermented beverage, with an alcoholic strength by volume of between 2.25% and 3.5%), `strong beer' (malt-based fermented beverage, with an alcoholic strength by volume exceeding 3.5%) and `spirit' drinks (alcoholic beverages other than wine, beer or strong beer).

5 Under the Law, the production of alcoholic beverages is subject to the holding of a `production licence' whilst wholesale trade in spirits, wine and strong beer is subject to the holding of a `wholesale licence'. However, the Law allows persons holding a production licence to engage in wholesale trade in the products covered by the licence.

6 The Law also makes the importation of wine, strong beer or spirit drinks into Sweden subject to the possession of a production licence or a wholesale licence.

7 Licences are issued by the Alkoholinspektion (Alcohol Inspectorate), upon applications accompanied by supporting documents, pursuant to decisions of the inspectorate. In the case of foreign applicants, such decisions will state that account must be taken of documents which such applicants may reasonably obtain from their national authorities.

8 Submission of an application is subject to payment of a fixed charge, which, at the material time, was SKR 25 000. According to Mr Franzén, who has not been challenged on this point, the charge is not reimbursed if an application for a licence is rejected.

9 The Alcohol Inspectorate must carry out an objective, impartial assessment of the application, taking into consideration the applicant's personal and economic situation and all factors relevant to the issue of a licence, such as the applicant's professional knowledge, in particular of the rules applicable to trade in alcohol in Sweden, and his ability to comply with the provisions of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1). It must also check the applicant's ability to comply with the law and perform his obligations towards the State, in particular by examining his financial resources and investigating whether he has any criminal convictions.

10 An applicant must show that he has sufficient storage capacity to engage in his activity. The Alcohol Inspectorate will examine, case by case, the capacity required, having regard to the form of the applicant's activity. In particular, storage capacity is not required of traders who supply beverages directly to buyers located in national territory.

11 An applicant must also provide a bank guarantee to cover payment of excise duties which, as warehousekeeper or consignee of goods, he may be required to pay under Directive 92/12.

12 Finally, each year the holder of a licence must pay a charge for the monitoring of his premises, the rates of which are set by the State. At the material time, the basic rate was between SKR 10 000 and SKR 323 750, depending on the kind of beverages and the quantities produced or marketed.

13 In reply to written questions from the Court, the Swedish Government explained that the Law on Alcohol did not require an applicant for a licence to be resident in Sweden, which was expressly indicated in a decision of 5 October 1995. It confirmed this point at the hearing.

14 According to evidence provided to the Court, 223 production or wholesale licences had been issued by 7 October 1996.

15 The Law on Alcohol has made a State company, specially constituted for this purpose, responsible for the retail of wine, strong beer and spirits. The company designated for this purpose is Systembolaget Aktiebolag (hereinafter `Systembolaget'), a company wholly owned by the Swedish State.

16 The activities, operation and inspection procedures of Systembolaget are laid down in an agreement made with the State.

17 The Law on Alcohol also makes the sale over the counter of wine, strong beer and spirit drinks subject to the holding of a `beverage retail licence'.

18 Holders of production or wholesale licences may sell beverages only to the company responsible for their retail, to other holders of production or wholesale licences or to holders of beverage retail licences. The retail company itself may apply for licences in order to effect wholesale sales of alcoholic beverages to holders of beverage retail licences.

19 The intentional or inadvertent sale of alcoholic beverages without a licence is subject to criminal penalties.

20 Finally, the Lag med vissa bestämmelser om marknadsföring av alkoholdrycker (1978:763) (Law enacting certain measures governing the marketing of alcoholic beverages), whilst not laying down a general prohibition of advertising of alcoholic beverages, prohibits measures encouraging their consumption, such as insistent or high-pressure promotion techniques, doorstep selling and advertising on radio and television and in newspapers and periodicals. However, the promotion of alcoholic beverages is allowed in written material made available to the public at retail points, in particular those of Systembolaget, and in means of transport with a licence to serve alcohol. Nor does that Law prohibit reference being made to alcoholic beverages in press articles, in particular in columns devoted to wine and drink appearing in daily newspapers or periodicals.

The rules governing the operation of Systembolaget

21 The agreement between Systembolaget and the Swedish State, which entered into force on 1 January 1995, provides in particular that the company is to:

- conduct its activities in such a way that any injurious effects of a public, social and medical nature arising from the consumption of alcohol are prevented as much as possible;

- select the beverages which it markets on the basis of their quality, their possible adverse effects on human health, customer demand and other business or ethical considerations;

- provide in writing to any supplier the reasons why it has decided not to include or to drop a product from its range and to inform it of their rights of appeal;

- adopt marketing and information measures which are impartial and independent of the origin of beverages;

- take steps to ensure that new beverages which it markets become known to consumers, whilst having regard to the restrictions laid down in the Law on Alcohol;

- set its margins according to objective criteria independent of the origin of beverages;

- run its business along rational lines, provide quality service and set its prices so as to cover its costs and ensure the State a reasonable return on its capital and avoid any unnecessary marking up of the prices of beverages;

- establish or close sales outlets according to management constraints, the services to be provided and alcohol policy, whilst in principle allowing each commune applying for one to have a sales outlet and ensuring that, in places where there is no sales outlet, alcoholic beverages can be sold by dispatch to order at the cost of Systembolaget;

- set the opening times of sales outlets in accordance with guidelines laid down by the Riksdag (Swedish Parliament).

22 According to the evidence before the Court, Systembolaget has 384 `shops' spread across Sweden. The products sold by Systembolaget may also be ordered and delivered in around 550 sales outlets in rural areas (grocery shops, newsagents, tobacconists, filling stations and so forth) or upon 56 bus routes and 45 rural postal rounds.

23 Under its internal rules, the beverages marketed by Systembolaget (2 454 products in October 1995) are grouped in `assortments'. The `basic' assortment comprises beverages in the lower or medium-range price categories, available throughout the year in all sales outlets (1 288 products in October 1995). The `provisional' assortment comprises beverages whose availability is limited, in particular during part of the year only, such as vintage wines and seasonal drinks (930 products in October 1995). The `trial' assortment comprises beverages made available on a trial basis in certain `shops' with a view to their being included in the `basic' assortment (236 products in October 1995). The `by order' assortment comprises products which Systembolaget does not hold in stock but which may be obtained on order. Systembolaget also imports beverages upon request and at the expense of its customers (`private' imports).

24 The beverages in the first three assortments appear on a general price list which is published several times a year and made available in `shops' and Systembolag sales outlets or upon subscription. The `by order' products appear on a special list, available on request in the `shops'. New products marketed by Systembolaget are presented in the monthly information review published by the monopoly, which is made available in its `shops' and sales outlets and is sent to subscribers, to restaurants and to newspaper, radio and television wine critics. The reviews are also displayed in the windows of the monopoly's `shops'.

25 Systembolaget draws up an annual purchase plan for its products which is revised each quarter. The company invites production and wholesale licence-holders to submit offers. A preliminary selection is then made on the basis of economic or commercial criteria, such as price competitiveness and commercial history, followed by a `blind' tasting trial. The products selected are then included in the `basic' assortment or the `provisional' assortment. Products not selected may, at the supplier's request, be put in the `trial' assortment after selection on the basis of a new tasting test carried out by a panel of consumers. As a rule, beverages are kept in the `basic' assortment only if their sales reach predetermined quantities and market shares.

26 According to the evidence submitted to the Court, Systembolaget marketed 185.2 million litres of alcoholic beverages from January to September 1995 (45.2% from Sweden and 41.8% from other Member States) and 176.9 million litres of alcoholic beverages from January to September 1996 (45.1% from Sweden and 40.6% from other Member States). During the first eight months of 1996, Systembolaget received 12 576 offers, of which 10 711 were from Member States of the Community (227 from Sweden and 10 484 from other Member States), examined 7 417 of them, of which 6 325 were from the Community (149 from Sweden and 6 176 from other Member States), and accepted 908, of which 704 were from the Community (85 from Sweden and 619 from other Member States).

The facts of the case and procedure before the national court

27 Mr Franzén is being prosecuted before the Landskrona Tingsrätt for, inter alia, on 1 January 1995 intentionally selling without a licence wine purchased from Systembolaget or imported from Denmark.

28 He claimed before that court that he could not be convicted of any offence because the Law on Alcohol was contrary to Articles 30 and 37 of the Treaty.

29 Unsure how it should respond to that argument, the Landskrona Tingsrätt decided to stay proceedings and submit the following questions to the Court for a preliminary ruling:

`1. Is a statutory monopoly such as that of Systembolaget compatible with Article 30 of the Treaty of Rome?

2. Is a statutory monopoly such as that of Systembolaget contrary to Article 37 of the Treaty of Rome and, if so, must the monopoly be abolished or is an adjustment possible?

3. If a monopoly such as that of Systembolaget is to be regarded as being contrary to Article 37, is any period of adjustment available or should it have been abolished or an adjustment made by 1 January 1995?'

The first two questions

30 By its first two questions the national court is asking whether Articles 30 and 37 of the Treaty preclude national provisions governing a domestic monopoly on the retail of alcoholic beverages, such as those mentioned in the order for reference.

31 Whilst these questions will prompt the Court to consider the rules of law applicable to the monopoly in question in the main proceedings, they do not bear upon the question whether the action of the authorities responsible for managing the monopoly may in specific cases be discriminatory towards, in particular, suppliers from other Member States.

32 Mr Franzén contends that Articles 30 and 37 of the Treaty preclude the provisions in question. According to him, the maintenance of a retail monopoly, such as that now existing in Sweden, impedes the importation of alcoholic beverages into Sweden in several ways and enables Systembolaget to promote the marketing of domestic products. He points out that alcoholic beverages produced in other Member States can be sold in Sweden only if they are imported by a production or wholesale licence-holder and if they are selected on the basis of restrictive and arbitrary criteria set by Systembolaget. Such beverages can be marketed only through a restricted sales network and they cannot be promoted otherwise than by Systembolaget. Mr Franzén also contends that the rules governing the monopoly do not form legislation restricting or prohibiting certain selling arrangements, within the meaning of the judgments given in Joined Cases C-267/91 and C-268/91 Keck and Mithouard [1993] ECR I-6097 and in Case C-391/92 Commission v Greece [1995] ECR I-1621, in particular because they concern the activity of an undertaking which is not subject to any competition and do not govern the activity of undertakings exposed to the free play of competition.

33 The French, Finnish, Swedish and Norwegian Governments and the Commission consider that neither Article 30 nor Article 37 of the Treaty preclude national provisions such as those referred to by the national court in this case. They point out that Article 37 does not require the abolition of retail monopolies but simply requires that they be adjusted so that they do not involve rules which are discriminatory according to the origin of products or according to the nationality of traders. In their view, the monopoly in question in the main proceedings meets those conditions. They also consider that the rules applicable to the monopoly do not hinder, directly or indirectly, intra-Community trade. Such rules limit or prohibit certain selling arrangements and affect the marketing of domestic products and imported products in the same way.

34 As is clear from the reasoning in the order for reference and the observations submitted to the Court, the questions raised by the national court concern not only the domestic provisions relating to the existence and operation of the monopoly but also, more generally, the provisions which, although not governing the operation of the monopoly, nevertheless have a direct bearing upon it, as is the case with the rules relating to production and wholesale licences.

35 Having regard to the case-law of the Court, it is necessary to examine the rules relating to the existence and operation of the monopoly with reference to Article 37 of the Treaty, which is specifically applicable to the exercise, by a domestic commercial monopoly, of its exclusive rights (judgments in Case 91/75 Hauptzollamt Göttingen v Miritz [1976] ECR 217, paragraph 5; Case 120/78 REWE-Zentral AG v Bundesmonopolverwaltung für Branntwein (`Cassis de Dijon') [1979] ECR 649, paragraph 7; and Case 91/78 Hansen v Hauptzollamt Flensburg [1979] ECR 935, paragraphs 9 and 10).

36 On the other hand, the effect on intra-Community trade of the other provisions of the domestic legislation which are separable from the operation of the monopoly although they have a bearing upon it, must be examined with reference to Article 30 of the Treaty (see, to this effect, the judgments in Miritz, cited above, paragraph 5, Cassis de Dijon, cited above, paragraph 7, and Case 86/78 Peureux v Services Fiscaux de la Haute-Saône et du Territoire de Belfort [1979] ECR 897, paragraph 35).

The rules relating to the existence and operation of the monopoly

37 It is clear not only from the wording of Article 37 but also from the position which it occupies in the general scheme of the Treaty that the article is designed to ensure compliance with the fundamental principle that goods should be able to move freely throughout the common market, in particular by requiring quantitative restrictions and measures having equivalent effect in trade between Member States to be abolished, and thereby to ensure maintenance of normal conditions of competition between the economies of Member States in the event that a given product is subject, in one or other of those States, to a national monopoly of a commercial character (judgments in Case 59/75 Pubblico Ministero v Manghera and Others [1976] ECR 91, paragraph 9; Hansen, cited above, paragraph 8; Case 78/82 Commission v Italy [1983] ECR 1955, paragraph 11; Case C-347/88 Commission v Greece [1990] ECR I-4747, paragraph 42; and Case C-387/93 Banchero [1995] ECR I-4663, paragraph 27, hereinafter `Banchero II').

38 However, the Court has repeatedly stated that Article 37 does not require national monopolies having a commercial character to be abolished but requires them to be adjusted in such a way as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States (see the judgments cited above: Manghera, paragraph 5; Hansen, paragraph 8; Commission v Italy, paragraph 11 and Banchero II, paragraph 27).

39 The purpose of Article 37 of the Treaty is to reconcile the possibility for Member States to maintain certain monopolies of a commercial character as instruments for the pursuit of public interest aims with the requirements of the establishment and functioning of the common market. It aims at the elimination of obstacles to the free movement of goods, save, however, for restrictions on trade which are inherent in the existence of the monopolies in question.

40 Thus, Article 37 requires that the organization and operation of the monopoly be arranged so as to exclude any discrimination between nationals of Member States as regards conditions of supply and outlets, so that trade in goods from other Member States is not put at a disadvantage, in law or in fact, in relation to that in domestic goods and that competition between the economies of the Member States is not distorted (see, to this effect, the judgment in Commission v Italy, cited above, paragraph 11).

41 In the present case, it is not contested that, in aiming to protect public health against the harm caused by alcohol, a domestic monopoly on the retail of alcoholic beverages, such as that conferred on Systembolaget, pursues a public interest aim.

42 It is therefore necessary to determine whether a monopoly of this kind is arranged in a way which meets the conditions referred to in paragraphs 39 and 40 above.

The product selection system

43 Mr Franzén contends that beverages are selected and maintained in the assortments of Systembolaget pursuant to criteria which are not only restrictive but also arbitrary and not subject to any possible review.

44 It must first be pointed out in this regard that the agreement made between the State and Systembolaget requires the latter to select the products which it markets on the basis of their quality, lack of adverse effects on human health, consumer demand and business or ethical considerations, that is to say on the basis of criteria independent of the origin of the products.

45 It must be examined next whether the criteria and methods of selection used by Systembolaget are discriminatory or likely to put imported products at a disadvantage.

46 First of all, it is apparent from the explanations provided to the Court that the purchase plan followed by the monopoly in calling for offers is based on foreseeable changes in consumer demand. The producer, importer and consumer organizations are also consulted about this when the plan is drawn up.

47 Second, the calls for offers made by Systembolaget concern all production or wholesale licence-holders and all types of beverage, irrespective of their origin.

48 Third, the offers are selected by Systembolaget on the basis of purely commercial criteria (price competitiveness of the product, commercial history, etc.) or qualitative criteria (`blind' tasting), which are not apt to put domestic products at an advantage.

49 It is true that the beverages selected are maintained in the basic assortment of Systembolaget only if their sales exceed a certain volume and gain a certain market share. However, this constraint, although it may have the consequence of handicapping small producers, is not in itself apt to afford a direct or indirect advantage to domestic products. In any event, it appears justified both with regard to the freedom of choice which the monopoly has in its commercial policy and by the requirements inherent in its management. For its aim is to provide a variety of alcoholic beverages in all the monopoly's sales outlets during a specific period within limits compatible with the need to run the monopoly profitably. Furthermore, it does not concern products whose quantities are by nature limited, such as vintages or seasonal drinks, which are included in the `provisional' assortment.

50 Fourth, there are other ways for traders to have their products marketed by the monopoly: those whose offers are not selected by Systembolaget may ask for their products to undergo a second qualitative test before a panel of consumers and, if they pass it, for the monopoly to market them on a trial basis for a given period. Products which have not been accepted by Systembolaget and which fulfil the objective conditions laid down in clause 4 of the agreement between the State and Systembolaget may be included in the `by order' assortment and sold at the customer's request. Finally, Systembolaget is required to import any alcoholic beverage at the request and cost of the consumer.

51 Fifth, traders are entitled to be told the reasons for decisions taken by the monopoly regarding the selection of beverages and their maintenance in the `basic' assortment and may challenge such decisions before a board offering every guarantee of independence.

52 So, having regard to the evidence before the Court, the criteria and selection methods used by Systembolaget do not appear to be either discriminatory or apt to put imported products at a disadvantage.

The monopoly's sales network

53 Mr Franzén contends that the sales network maintained by Systembolaget is restricted and does not offer the full range of beverages available, which restricts even more the possibilities of sale.

54 It is true that a monopoly such as Systembolaget has only a limited number of `shops'. However, it does not appear from the information provided to the Court that the number of sales outlets are limited to the point of compromising consumers' procurement of supplies of domestic or imported alcoholic beverages.

55 First of all, under the agreement which it has made with the State, Systembolaget must establish or close sales outlets on the basis of management constraints, consumer demand and the necessities of alcohol policy and ensure that each commune which so wishes has a sales outlet and that all points of the territory are served at least by dispatch deliveries.

56 Second, according to the information provided to the Court, alcoholic beverages may be ordered and supplied in the monopoly's 384 `shops', through around 550 sales outlets as well as along 56 bus routes and on 45 rural post rounds. Furthermore, there is at least one `shop' in 259 of the 288 Swedish communes and Systembolaget is planning for every commune to have at least one `shop' in 1998.

57 Finally, even if the retail network of Systembolaget is still imperfect, this circumstance does not adversely affect the sale of alcoholic beverages from other Member States more than the sale of alcoholic beverages produced in Sweden (see, mutatis mutandis, in relation to Article 30 of the Treaty, Banchero II, cited above, paragraph 40).

The promotion of alcoholic beverages

58 Mr Franzén also contends that the system for promoting alcoholic beverages favours the marketing of beverages produced in Sweden. He points out that the promotion of alcoholic beverages is confined to mere provision of information about the products, varying in form depending on whether the products are in the `basic' assortment or in the `by order' assortment, that the information is provided by the monopoly alone, without any control by suppliers and, furthermore, that suppliers may not canvas persons in charge of the monopoly's `shops'.

59 As far as these points are concerned, it must be observed first of all that the restriction of the possibilities for promoting alcoholic beverages to the public is inherent in the situation where there is only one operator on the market for their retail.

60 Second, the monopoly rules do not prohibit producers or importers from promoting their products to the monopoly. Although suppliers may not directly promote products to managers of the monopoly's `shops', it appears that this prohibition is designed to meet the concern, expressed by some suppliers, in particular to the Swedish Competition Authority (Konkurrensverket), that there should be strictly equal conditions for the promotion of products.

61 It must also be pointed out that the promotion of alcoholic beverages to the public is subject, in the Member State in question, to a general restriction, the validity of which has not been called in question by the national court nor challenged by Mr Franzén. That restriction consists, in particular, of a ban on advertising on radio and television and in all newspapers or other periodicals, that is to say the means traditionally used by producers to promote their products to the public. However, alcoholic beverages selected by Systembolaget may be advertised in written material available at sales outlets. Furthermore, any alcoholic beverage may be mentioned in press articles.

62 As far as product promotion is concerned, the agreement made between the Swedish State and Systembolaget requires the latter to adopt marketing and advertising measures which are impartial and independent of the origin of the products and to endeavour to make known new beverages to consumers whilst taking account of the restrictions in the Law on Alcohol.

63 Although it is true that the monopoly's promotion of alcoholic beverages is mainly in the form of product presentation, it appears that this method of promotion simply meets the obligations which are referred to above. It must, however, be noted that new products are systematically presented either in the monthly review distributed by the monopoly or to newspaper, radio and television wine critics, or, finally, in displays in the monopoly's `shops'.

64 Finally, it must be noted that the method of promotion used by the monopoly applies independently of products' origin and is not in itself apt to put at a disadvantage, in fact or in law, beverages imported from other Member States in relation to those produced on national territory.

65 Whilst it is true that beverages in the `by order' assortment appear on a special price list which can be provided at the consumer's request, this difference of treatment, which is also independent of the origin of the products, is justified by the fact that these beverages are not held in stock by Systembolaget and are not therefore in a situation comparable to that of beverages in the other assortments.

66 So, having regard to the evidence before the Court, it appears that a retail monopoly such as that in question in the main proceedings meets the conditions for being compatible with Article 37 of the Treaty, set out in paragraphs 39 and 40 of this judgment.

The other provisions of national legislation bearing upon the operation of the monopoly

67 As explained above, in view of the arguments which have been exchanged before both the national court and this Court, the questions referred for a preliminary ruling must be understood as also relating to the provisions of the domestic legislation which, although not, strictly speaking, regulating the functioning of the monopoly, nevertheless have a direct bearing upon it. Those provisions must be examined with reference to Article 30 of the Treaty.

68 On this point, Mr Franzén observes that the monopoly may obtain supplies only from holders of production licences or wholesale licences whose grant is subject to restrictive conditions and that such an obligation necessarily impedes imports of products from other Member States.

69 According to the established case-law of the Court, all trading rules which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade constitute measures having an effect equivalent to quantitative restrictions (judgment in Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837, paragraph 5).

70 In a national system such as that in question in the main proceedings, only holders of production licences or wholesale licences are allowed to import alcoholic beverages, that is to say traders who fulfil the restrictive conditions to which issue of those licences is subject. According to the information provided to the Court during the proceedings, the traders in question must provide sufficient personal and financial guarantees to carry on the activities in question, concerning in particular their professional knowledge, their financial capacity and possession of storage capacity sufficient to meet the needs of their activities. Furthermore, the submission of an application is subject to payment of a high fixed charge (SKR 25 000), which is not reimbursed if the application is rejected. Finally, in order to keep his licence, a trader must pay an annual supervision fee, which is also high (between SKR 10 000 and SKR 323 750 for the basic amounts, depending on the kinds of beverage and the quantities produced or marketed).

71 The licensing system constitutes an obstacle to the importation of alcoholic beverages from other Member States in that it imposes additional costs on such beverages, such as intermediary costs, payment of charges and fees for the grant of a licence, and costs arising from the obligation to maintain storage capacity in Sweden.

72 According to the Swedish Government's own evidence, the number of licences issued is low (223 in October 1996) and almost all of these licences have been issued to traders established in Sweden.

73 Domestic legislation such as that in question in the main proceedings is therefore contrary to Article 30 of the Treaty.

74 The Swedish Government has, however, invoked Article 36 of the EC Treaty. It maintains that its legislation was justified on grounds relating to the protection of human health.

75 It is indeed so that measures contrary to Article 30 may be justified on the basis of Article 36 of the Treaty. All the same, according to established case-law (Cassis de Dijon, cited above; Case C-470/93 Verein gegen Unwesen in Handel und Gewebe Köln v Mars [1995] ECR I-1923, paragraph 15; Case C-368/95 Familiapress [1997] ECR I-0000, paragraph 19; and Joined Cases C-34/95, C-35/95 and C-36/95 De Agostini and TV-Shop [1997] ECR I-0000, paragraph 45), the domestic provisions in question must be proportionate to the aim pursued and not attainable by measures less restrictive of intra-Community trade.

76 Although the protection of human health against the harmful effects of alcohol, on which the Swedish Government relies, is indisputably one of the grounds which may justify derogation from Article 30 of the Treaty (see, to this effect, the judgment in Joined Cases C-1/90 and C-176/90 Aragonesa de Publicidad Exterior and Publivía v Departamento de Sanidad y Seguridad Social de la Generalitat de Cataluña [1991] ECR I-4151, paragraph 13), the Swedish Government has not established that the licensing system set up by the Law on Alcohol, in particular as regards the conditions relating to storage capacity and the high fees and charges which licence-holders are required to pay, was proportionate to the public health aim pursued or that this aim could not have been attained by measures less restrictive of intra-Community trade.

77 It must therefore be held that Articles 30 and 36 of the Treaty preclude domestic provisions allowing only traders holding a production licence or a wholesale licence to import alcoholic beverages on conditions such as those laid down by Swedish legislation.

Breach of Article 52 of the EC Treaty and of the public procurement directives

78 In his observations, Mr Franzén also contends that some of the provisions of the Law on Alcohol are contrary to Article 52 of the Treaty and to Community directives on public procurement.

79 In this regard, it must be reiterated that, under the division of jurisdiction provided for by Article 177 of the Treaty in preliminary ruling proceedings, it is for the national court alone to determine the subject-matter of the questions which it wishes to refer to the Court. The Court cannot, at the request of one party to the main proceedings, examine questions which have not been submitted to it by the national court. If, in view of the course of the proceedings, the national court were to consider it necessary to obtain further interpretations of Community law, it would be for it to make a fresh reference to the Court (Case 311/84 CBEM v CLT and IPB [1985] ECR 3261, paragraph 10; Case C-337/88 SAFA v Amministrazione della Finanze dello Stato [1990] ECR I-1, paragraph 20; and Case C-196/89 Nespoli and Crippa [1990] ECR I-3647, paragraph 23).

80 The reply to be given to the first two questions must therefore be that Article 37 of the Treaty does not preclude domestic provisions relating to the existence and operation of a national monopoly on the retail of alcoholic beverages such as those mentioned in the order for reference. However, Articles 30 and 36 of the Treaty preclude domestic provisions allowing only traders holding a production licence or a wholesale licence to import alcoholic beverages on conditions such as those laid down by Swedish legislation.

The third question

81 The third question was submitted only in the event that the Court considered that Article 37 precluded domestic provisions governing the organization of a national monopoly on the retail of alcoholic beverages, such as those mentioned in the order for reference.

82 Having regard to the answer given to the first two questions, it is not necessary to reply to this question.

Decision on costs

Costs

## Decision on costs

83 The costs incurred by the Swedish, French, Finnish and Norwegian Governments and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

## Operative part

THE COURT,

in answer to the questions referred to it by the Landskrona Tingsrätt by judgment of 14 June 1995, hereby rules:

1. Article 37 of the EC Treaty does not preclude domestic provisions relating to the existence and operation of a national monopoly on the retail of alcoholic beverages such as those mentioned in the order for reference.

2. Articles 30 and 36 of the EC Treaty preclude domestic provisions allowing only traders holding a production licence or a wholesale licence to import alcoholic beverages on conditions such as those laid down by Swedish legislation.