61982C0090
OPINION OF MR ADVOCATE GENERAL MANCINI
DELIVERED ON 27 APRIL 1983 (
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Mr President,
Members of the Court,
1.
The case dealt with in this opinion is an action brought by the Commission under Article 169 of the Treaty of Rome. In it the Commission seeks a declaration that the French Republic has failed to fulfil its obligations under Council Directive No 72/464/EEC of 19 December 1972“on taxes other than turnover taxes which affect the consumption of manufactured tobacco” (Official Journal, English Special Edition 1972 (31 December), L 303, p. 1) and under the EEC Treaty. The default is alleged to consist in the fixing of the retail selling price of certain categories of national and imported manufactured tobacco at a different level from that freely determined by the manufacturers and importers.
2.
Let me first describe the present system in France. Pursuant to Article 37 of the EEC Treaty and to the task undertaken by the Council of the Communities by a resolution of 21 April 1970, the monopoly in manufactured tobacco was reorganized by Law No 76-448 of 24 May 1976 and the relative implementing Decree No 76-1324 of 31 December 1976 (Journal Officiel de la République Française, 1976, p. 3083 and 1977, p. 189).
To be specific, the exclusive rights of importation and wholesale dealing in tobacco originating in the Member States of the Community were abolished (Article 2 (1)); on the other hand tobacco originating in nonmember countries is still subject to the monopoly as regards importation and wholesale trading monopoly (Article 2 (2)), as is the manufacture and retail sale of manufactured tobacco (Article 3). Transactions relating to the marketing of tobacco originating in nonmember countries and the manufacture of French tobacco are carried out by the Société d'Exploitation Industrielle des Tabacs et des Allumettes [Tobacco and Matches (Industrial Exploitation) Organization] (known as “SEITA”), whilst the sales monopoly is entrusted to the Finance Administration which operates through retailers (Article 5). The prices which they apply are the same throughout the area of metropolitan France (Article 6) and are fixed by decree of the Minister for Economic Affairs and Finance (Article 10 of the implementing decree).
Finally, as appears from a memorandum from the relevant minister (Bulletin Officiel des Services et des Prix, 27 January 1977), three times a year (namely at the beginning of January, April and October) suppliers may introduce new products on to the market, providing the administration with information justifying the price which they would wish to see applied. On the other hand, for products which are already on the market, they may, at any time, under the same conditions, request that a new retail price be applied. The ministerial decrees fixing prices have been issued pursuant to those rules from time to time.
3.
A few words on the facts which preceded this application. On 26 October 1978 the Commission informed the French Government that, in its view, the system of price-fixing described above was contrary to Directive No 72/464 and in particular to Article 5 (1) thereof. By letter of 7 June 1979 giving formal notice it initiated the procedure laid down by Article 169 of the Treaty. Not being satisfied by the arguments of the French authorities, according to whom the aforementioned system was in full conformity with Community law, the Commission then delivered a reasoned opinion on 21 October 1980 and made an application to the Court on 16 March 1982.
4.
In the Commission's eyes the dispute may be summarized in the following terms: Directive No 72/464 provides that the maximum retail selling price of manufactured tobacco, shall be. freely determined by the manufacturers and by the importers; however, the French authorities are empowered, on the one hand, to fix them at different levels and, on the other, to alter the prices of national tobacco even after approving the prices proposed by the producers. That is not all. The provisions from which the said powers are derived constitute measures having an effect equivalent to a quantitative restriction and are therefore capable of leading to discrimination between national and imported products, thereby also infringing Articles 30 and 37 (1) of the Treaty.
However, let us proceed methodically. In the applicant's opinion the harmonization of fiscal structures sought by Directive No 72/464 has two objectives in view: to ensure that each Member State adopts identical excise duties for each category of tobacco and to ensure that retail prices are fixed in such a way as to reflect fairly the supply price and the differences between the costs of production and of marketing. By empowering the Minister for Economic Affairs to intervene in the procedure for establishing the prices and departing from the rule of fiscal neutrality the French system is frustrating those objectives. Nor can arguments in its favour be drawn from Article 5 (1) of the directive, which provides that “Manufacturers and importers shall be free to determine the maximum selling price for each of their products. This provision may not, however, hinder implementation of the national systems of legislation regarding the control of price levels or the observance of imposed prices”.
The Commission states that, except at frist sight, that rule does not present contradictions. As the Court itself made clear in its judgment of 16 November 1977 (Case 13/77, GB-INNO-BM v Vereniging van de Kleinhandelaars in Tabak [1977] ECR 2115), the two parts of the rule are connected in a framework which protects the freedom of manufacturers and importers. Taking into consideration the context in which it occurs, the Court stated: “The second sentence of Article 5 (1) cannot be interpreted as aiming to prohibit the Member States from introducing or maintaining in force a legislative measure whereby a selling price, namely the price stated on the tax label; is imposed for sale to the consumer of ... homeproduced tobacco products”; but — and here the Court added a crucial reservation — “provided that that price has been freely determined by the manufacturer or importer” (paragraph 64 of the decision). Moreover an interpretative declaration which appears in the minutes of the Council meeting at which the directive was adopted supports that interpretation. The subject of the declaration is the concept of imposed prices: and it is said of that concept that it refers to prices fixed by manufacturers or importers and where appropriate approved by the States.
The position of the French Government is entirely different. In its view, the directive endows States with the right to prescribe prices for reasons of economic policy and of fiscal control; the freedom of traders is not therefore a priority and maybe restricted by national measures adopted in the exercise of that right. In particular, Article 5 must be read in the light of the preceding provision according to which: “In each Member State national and imported cigarettes shall be subject to a proportional excise duty calculated on the maximum retail selling price, including customs duties and also to specific excise duty calculated per unit of the product” (Article 4 (1)). The computation of the tax on the basis of the selling price is decisive; it requires that price to be known in advance and, for technical fiscal reasons, to be fixed.
The French Government also disputes the reliance which the Commission places upon the GBINNOBM judgment and on the interpretative declaration on imposed prices. It observes that Case 13/77 was brought before the Court for a preliminary ruling on the question whether a Member State might impose on sellers the tobacco price fixed by traders. That case therefore differed from this one inasmuch as the interpretation required here is not of the first but of the second sentence of Article 5 (1). As to the interpretative declaration, the defendant government point out that, in it, the Council clarified the real meaning which appears from the GBINNOBM case. The Community legislature — it pointed out — wished to retain the national systems of imposed prices, whether they were fixed directly by a public authority or determined by the importers or producers and where appropriate approved by the State. The system thus conceived — the Council added — allows the Member States to choose whether taxes on the consumption of manufactured tobacco should be levied on the basis of a maximum price or on that of a fixed retail selling price.
5.
The arguments put forward by the Commission on the scope of the obligations imposed upon Member States by Directive No 72/464 are not convincing. Whatever it may say, the provisions of Article 5 (1) are infelicitously drafted and are possibly also contradictory, as often happens when diverse or conflicting interests press upon the legislature (and the history of the directive demonstrates beyond all doubt that the interests of the Commission and of the Council were such conflicting interests). However, that is not a reason to give effect to the provision by laying greater weight on one sentence while diminishing the import of another. In such cases there is only one correct way to proceed: a systematic interpretation which hinges upon the objectives of the law (in this case the directive) of which the provision forms part, and does not overlook the general system (here the Community rules governing State measures relating to prices) to which the law itself belongs.
As far as the objects of the directive are concerned, it is difficult to dispute the validity of the comments made by the French Government. As we know, it proposes to harmonize the structure of taxes on the consumption of manufactured tobacco and in particular to neutralize the effect of such taxes upon competition; but since the maximum retail selling price is to act as the basis of calculation of the tax, it seems to me obvious that its determination is, above all, subject to technical fiscal requirements. It may be said that a legislature such as that of the Communities could not fail to give a preeminent place to market forces and thereby to the traders concerned. That is true. But such a legislature must not forget either that tobacco is an eminently taxable product: hence the reservation introduced in the second half of Article 5 (1), and hence the need, if the reservation is to be effective, for it to allow the State to control price trends by means of economic policy and of fiscal control. Let us suppose, as the Commission argues, that the provision under review empowered States only to approve the price proposed by traders: that reservation would produce only statistical information of more use to academics than to ministers.
But there is a second argument which leads me to rule out the inviolability of the selling price determined by the traders. It derives from the requirements which the Court lays down in order that national price control measures may conform to Community law. Thus in theGalli judgment and in many subsequent judgments the Court has decided that Member States are left “free — without prejudice to other provisions of the Treaty — to take appropriate measures relating to price formation at the retail and consumption stages, on condition that they do not jeopardize the aims or funcitoning of the common organization of the market in question” (judgment of 23 January 1975 in Case 31/74, Galli, [1975] ECR 47 at paragraph 34 of the decision; see also the judgments of 26 February 1976 in Case 66/75, Tasca, [1976] ECR 291 and Joined Cases 88 to 90/75, SADAM and Others v Comitato Interministeriale dei Prezzi and Others, [1976] ECR 323; of 29 June 1978 in Case 154/77, Procureur du Roi v P. Dechmann, [1978] ECR 1573; of 12 July 1979 in Case 223/78 Criminal Proceedings against Adriano Grosoli, [1979] ECR 2621 and of 18 October 1979 in Case 5/79, Procureur General v Hans Buys and Others, [1979] ECR 3203). It may be seen that the Court allows ample room for the State authorities to intervene in respect of prices. And in a situation where there exists a common organization of the market, which in large measure reduces the power of the States, it must be all the more true in a sector such as this, which has been subject to much less of a compression of that power.
The Commission itself, moreover, admits the legality of State intervention on prices as long as its nature is sufficiently general for it to be regarded as aimed at broad objectives such as combating inflation; and the French system for manufactured tobacco does not satisfy the Commission precisely because that intervention is by means of a specific provision. In my view, however, that alleged proportionality between the extent of the aims and the scale of the means seems theoretically untenable and lacking specific proof. There is nothing which in the last resort prevents a provision from relating to the most limited section of the economy and, at the same time, from being included in the most far-reaching of economic policies. In the present case, it seems to me that the defendant Government has demonstrated effectively that the fixing of tobacco prices is not carried out arbitrarily. As a rule the administration accepts the figure suggested by the traders: when it departs from it, either increasing or reducing it, or when it rejects the application, it does so foiimportant reasons — control of inflationary tendencies etc., which the Commission considers to be acts justifying intervention.
6.
As I have said in quoting the Galli judgment, national measures on prices are lawful as long as their consequences do not entail infringements of other rules of the Treaty. The Commission believes that the system with which we are concerned does in fact have those consequences and that the most important of the rules infringed by it is Article 30. The compulsory fixing of prices would be capable of putting imported products at a disadvantage and would thereby constitute a measure having an effect equivalent to a quantitative restriction.
However, even in this respect it does not seem to me that the applicant hits the mark. The Court has often clarified the effect of Article 30 with regard to the national systems of prices laying clown a rule of principle, namely that the price compulsorily fixed has the essential features of a measure having equivalent effect whenever its level makes the marketing of imported products impossible or more difficult than that of national products. In the case of a maximum price, that will occur above all when its level is so low that traders intending to import the product into the Member State can do so “only at a loss” (see the aforementioned judgments in Tasca, ąt paragraph 13 of the decision and SADAM, at paragraph 15 of the decision). In the case of a minimum price Article 30 would be infringed when the imported products “cannot profitably be marketed in the conditions laid down” or “the competitive advantage conferred by lower cost prices is cancelled out” (judgment of 24 January 1978 in Case 82/77 Openbaar Ministerie of the Netherlands v Van Tiggele, [1978] ECR 25 at p. 39, paragraph 14 of the decision).
In the present case none of these situations appears to arise. A number of Community manufacturers have submitted complaints to the Commission about the French system; but it does not in any way appear from those complaints that that system has made the sale of imported tobacco impossible or more difficult, forcing the importers to operate at a loss or without profit, eliminating the competitive advantage or at any rate distorting competition between identical products.
7.
According to the Commission there is another rule of the Treaty which is infringed by the French system, namely Article 37. That provision seeks, not the abolition, but the adjustment of national monopolies so as to ensure that as regards the conditions under which goods are procured and marketed, no discrimination exists between nationals of Member States.
The Commission referred to a part of the judgment of the Court of Justice in the Hansen case in which it was stated that: “Article 37 remains applicable wherever, even after the adjustment prescribed in the Treaty, the exercise by a State monopoly of its exclusive rights entails a discrimination or restriction prohibited by that article” (judgment of 13 March 1979 in Case 91/78 Hansen GmbH and Co. v Hauptzollamt Flensburg [1979] ECR 935, at p. 952, paragraph 8 of the decision. In the French system, according to the Commission, a situation of that nature actually arises: by determining the sale price the authorities are in breach of the principle that conditions between traders must be equal and they obstruct the importation of tobacco from other Member States.
The defendant Government disputes that argument. Article 37, it states, is now inapplicable because, following the reorganization of the monopoly and above all after the financial law of 29 December 1978 (Article 25 and the implementing decree, No 80/262 of 3 April 1980), the importation and wholesale marketing of tobacco were entirely liberalized. It is not true, in any case, that the compulsory fixing of retail sale prices entails discrimination based on nationality. The system is in fact identical for both national and imported tobacco.
Once more I am in agreement with the French Government or at least with its second point. The applicant has not succeeded in proving its assumption, namely the likelihood that the pricing system in operation in France will obstruct the importation of tobacco from other Member States or damage the equality of opportunity guaranteed to all Community traders. It appears in fact — and this is a decisive argument — that exactly the opposite has occurred. In the period 1977 to 1982, far from suffering diminution because of the effects of the intervention of the authorities, the consumption of tobacco from the rest of the area of the Community has increased until it has reached 35% of the total.
8.
For all the reasons set out above I am of the opinion that the French system of fixing retail selling prices of nationally manufactured and imported tobacco infringes neither the rules of the EEC Treaty nor Council Directive No 72/464 of 19 December 1972 on taxes other than turnover taxes which affect the consumption of manufactured tobacco. I therefore suggest that the Court should dismiss the action brought by the Commission on 16 March 1982 seeking a declaration that the French Government has failed to fulfil obligations towards the Community. In addition I suggest that the losing party should bear the costs of the case.
(
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