3.

Accordingly although the interpretation of the other provisions of the Treaty referred to by the Hof van Cassatie is certainly not rendered unnecessary, as I stated, I should first like to examine the problems relating to Article 33 et seq. of the Treaty in the light of which it is necessary to clarify whether a national rule under which fixed prices determined by manufacturers or importers for the sale of tobacco products to the consumer are laid down can be regarded as a measure having an equivalent effect. I regard it appropriate to give a certain priority to this matter in my examination because it is clearly of fundamental importance to the case and also because it was the subject of the most detailed arguments. The problem of measures having an effect equivalent to quantitative restrictions on imports has repeatedly come up in decided cases. In that way a number of points have been clarified and I can now start with these. For example I may recall that on a number of occasions the Court of Justice relied on the definitions which were developed at an early stage in Commission Directive No 70/50/EEC. Instances are to be found in Case 155/73 (Giuseppe Sacchi, judgment of 30 April 1974, [1974] ECR 409) and Case 74/76. From the decided cases it is also clear that it is not only measures which relate directly to imports which must be taken into consideration. Those which indirectly influence imports such as measures which concern production or other stages of marketing must also be taken into account. In this respect reference may be made to the judgment in Cases 3, 4 and 6/76 (Kramer, judgment of 14 July 1976, [1976] ECR 1279) or the judgment in Case 65/75 (Riccardo Tasca, judgment of 26 February 1976, [1976] ECR 291). Accordingly it is not surprising that the general definition of measures having an equivalent effect which has often been repeated in the recent decided cases is very comprehensive. In the terms of that definition (cf. for example the judgment of 11 July 1974 in Case 8/74, Procureur du Roi v Benoît and Gustave Dassonville [1974] ECR 837 at p. 852) all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions. Before I begin to examine the situation at issue in the present case in the light of the decided cases I think it would be appropriate to draw two conclusions which may be reached without difficulty on the extensive discussion. It will be remembered that in the course of the proceedings reference was also made to the decided cases relating to rules fixing maximum prices such as Case 65/75 (Riccardo Tasca) and Cases 88 to 90/75 (Societa SADAM and Others v Comitato Intenninisteriale dei Prezzi and Others, judgment of 26 February 1976, [1976] ECR 323). To me it is evident that these cannot directly assist in the present case because they are not on all fours with it. The aforementioned judgments concerned maximum prices fixed by the state the level of which was capable of having restrictive effects on import trade. There are no such effects in the case of the rules relating to fixed prices of the kind at issue here as the maximum prices, which then apply as fixed prices, are freely determined by the importers, if we confine ourselves to them, that is to say, it is for the importers themselves to determine the prospects of selling the imported products by their choice of the level of prices. The second comment which I should like to make at the outset relates to an argument which is to be derived from the aforementioned Commission Directive No 70/50/EEC in support of the Belgian rules relating to fixed prices. In that directive a distinction is drawn between measures which are not applicable equally to domestic and imported products (Article 2) and measures governing the marketing of products which are equally applicable to domestic and imported products (Article 3). In the context of Article 2, paragraph 3 expressly lists in subparagraphs (a) to (e) measures which relate to prices. From that and from the fact that the Belgian measures do not fall under Article 2 because they are equally applicable to domestic and imported products but must fall at any event under Article 3 it was thought possible to draw the conclusion that because Article 3 does not expressly refer to rules in the prices sector they could not be regarded as measures having equivalent effect. However this conclusion does not appear to me to be persuasive and not only because in general terms such deductions a contrario must be treated with caution. What I think is more important is that, because Article 3 refers to marketing in general terms, there is certainly no reason because of the use of that term to exclude measures relating to prices. In addition it is relevant that the arguments brought may at once be countered by reference to the quite wide definition of measures having an equivalent effect which has been developed in the decided cases. Thus if the two considerations set out above cannot contribute to the solution of the present problem there remains to consider what may be derived from the aforementioned general definition formulated by the Court of Justice. In this respect we may restrict ourselves to the determination of prices by importers and leave out of consideration those fixed by domestic producers. For inter-state trade the latter would only be relevant if the retail trader who is bound by the price-fixing carried out export transactions. In fact this does not happen because of the rules relating to tax labels which are correctly described by the Commission as a legitimate measure of control; in any event there is only a quite insignificant disposal to frontier residents crossing the border which may certainly be left out of account in our examination of the rules. In respect of the determination of prices by importers the Commission in particular maintains that inter-state trade is thereby affected even if the measures are not aimed directly against imports. Without the price rules retail traders would be able to pursue their own price policies and thus, by means of price reductions in particular in frontier areas, effect increased disposals and so increase trade. If the measure is retained however the position is made considerably more difficult. It should be taken into account that the mere carrying out of parallel imports is not possible because tobacco products with Belgian tax labels are not in free circulation in other Member States. The possibility of importing tobacco products obtainable on foreign markets must also be left out of account because the refund of foreign tax on tobacco is an extremely complicated process — under the German law relating to tax on tobacco for example the tax labels must be destroyed under official supervision and the cigarettes must then be repacked. Either a retail trader must rely on the co-operation of importers, and as regards them only powerful customers can carry through their own price policies, or another possibility is that retail traders themselves become importers within the meaning of the Belgian law and subsequently determine prices themselves by obtaining the appropriate tax labels. In this respect account must be taken of the fact that such a change of function in economic terms is difficult and costly and can therefore only be considered by powerful market operators. It should further be remembered that traders who are themselves importers are dependent on the co-operation of foreign manufacturers in affixing tax labels because of the rules relating to tax labels which must be regarded as lawful. A consequent problem for the traders is the impossibility of putting into effect their own ideas as to prices in face of the often different price policies of the manufactuers; furthermore because of the existence of exclusive contracts with other importers the problem arises of a refusal of supplies. This was evidenced in the course of the proceedings by an exchange of letters with foreign manufacturers and exclusive importers submitted by INNO. Finally a substantial obstacle in efforts to that end is constituted by the fact that it is impossible to obtain from the Belgian tax authorities tax labels showing a lower price. Indeed the competent authorities take the view, as is shown by a letter sent to INNO from the Belgian Inspector General for Excise Duties of 14 June 1977 that cigarettes of the same make and the same quality cannot be brought onto the market at the same time with differing tax labels. In that respect reliance is placed on the Belgian order on the taxation of tobacco but also on the 1972 Council directive under which more than one maximum retail selling price for one product is inadmissible. For all those reasons it must be recognized that a retail trader faces considerable problems in applying his own price policy in an attempt to increase sales. For foreign brands the problem is all the more serious as they must first fight for a share in the market; . thus for those brands the existing price rules are more burdensome than for domestic products. A further point is that a considerable proportion, more than half in fact, of imports into Belgium is effected by Belgian tobacco manufactures who can scarcely have the same interest in increasing sales of foreign products as would completely independent importers. In any event it is unrealistic to assume that small retailers in tobacco goods have any significant desire to pursue their own price policy by granting price reductions. In this respect they are constrained by the small profit margin which in Belgium for cigarettes is apparently approximately 7.5 % of the price stated on the tax label. Thus the reason given in the preamble to the abovementioned proposal made in the Economic and Social Committee for referring only to fixed retail prices in the Council directive, was that tobacco products were least suitable for price reductions; in retail trade reductions are quite impossible because of the very small profit margins; only department stores are in a position to make them but that is regarded as unfair competition. The department stores have lower costs because of self-service, more favourable bulk purchasing opportunities and the opportunity of using the profit margin of 10 % applicable for wholesale and retail sale as a whole. Accordingly in Belgium attempts to deviate from the prices stated on the tax labels are only made by large department stores while the association of tobacco retailers emphatically defends the system of fixed prices. Seen in this light it cannot be argued that parallel imports with their own price formation are rendered more difficult by the fact that it is not simple to change from the role of retail trader into that of importer. Certainly this is not correct for undertakings such as the appellant in the main proceedings. The following remarks may be made in respect of the problems with which INNO was confronted in its attempts to effect imports with lower prices on the tax labels itself. As we have heard either foreign manufacturers relied on exclusive contracts with Belgian importers or they refused to allow differing prices for their products. Belgian importers refused to apply differing prices relying on the argument that this was not possible as Belgian law stood. The latter view moreover corresponds with the attitude of the Belgian tax authorities as expressed in the aforementioned letter submitted by INNO. If we turn first to the last-mentioned point it is clear that the Belgian authorities were not relying on Article 58 of the Law of 1969 which is at issue in the main proceedings but on the Belgian order on the taxation of tobacco and the Council directive of 1972. Thus the obstacle resulting from the attitude of the Belgian tax authorities originates not in the fixed price rules on tobacco products but in other provisions. Moreover in this connexion it may be stated that the Belgian authorities were incorrect in basing their standpoint on the Council directive; it is impossible to see how they may derive from that directive the principle that only one maximum retail price is possible for a product. With regard to the aforementioned Belgian order concerning the taxation of tobacco it is further important, particularly because the events which the Hof van Cassatie has to assess occurred in 1972, that as a basis for their view the tax authorities relied solely on the version as amended in 1974. In respect of the earlier text on the other hand it is quite clearly stated in the abovementioned letter that the question of the affixing of tax labels showing a lower price had not arisen because at that time sales under the price stated on the tax label had not been prohibited. The other obstacles referred to originate in part from the conduct of foreign producers which as the Commission rightly pointed out may be regarded as an abuse within the meaning of Article 86 of the Treaty in view of their technical monopoly for the affixing of tax labels. In part they originate in the fact that the manufacturers have exclusive contracts with Belgian undertakings for the supply of the Belgian market in which respect doubts must be entertained not only in respect of the fact that parallel imports, which the Commission regards as indispensable in that situation, are impossible because of the peculiarities of the tax law but also because of the fact that to a great extent Belgian manufacturers act as sole importers of tobacco products. On the other hand the fixed price system cannot be regarded as itself actually rendering parallel imports more difficult and thus as having an adverse effect on trade. In my opinion as the adverse effect on trade only arises from the combined effects of the fixed price rules and the conduct of other operators on the market and national administrative practice for which no basis can be found in the fixed price system itself the fixed price system cannot be regarded as incompatible with Article 30 of the Treaty. It would be more appropriate to counter the evident obstacles in another way for example by means of measures against foreign manufacturers in reliance on Article 86 of the EEC Treaty, by taking a more strict view on sole distribution contracts which exclude parallel imports and by prohibiting the Belgian administrative practice in respect of differing prices on tax labels. In order to round off these comments as it were may I add one last but equally important consideration. In the course of the proceedings it became evident that the fixed price system for tobacco products in Belgium also serves an economic policy objective: the protection of the retail trade against the competition of the big department stores partly in the interest of the consumer who thus has available a sufficiently tight distribution network with a comprehensive selection. The fundamental justification of this argument is not doubted by the Commission. It does however take the view that it could be pursued by other means which would be less detrimental to interstate trade and it suggests as a possible measure the prohibition of sales below the purchase price, a restriction of discounts which can be granted in retail trade or a system of licences for retail trade whereby tobacco products may only be sold in specialized businesses. In this respect the Commission is clearly making reference to Article 3 of its Directive No 70/50/EEC of 22 December 1969 in which reference is made to measures governing the marketing of products which are applicable equally to domestic and imported products which are to be regarded as measures having an equivalent effect if their restrictive effects on the free movement of goods exceed the effects intrinsic to trade rules. In the light of the assessment of the various measures which may be taken into account from the point of view of adverse effects on trade such a consideration raises the question whether in a situation in which adverse effects on trade arise from a fixed price system combined with other circumstances (the market conduct of other economic entities and administrative practice in issuing tax labels) it would not seem more appropriate to take steps to deal with the attendant circumstances mentioned which do not present any particular difficulties and to rule that the fixed price system is appropriate within the meaning of Article 3 of the Commission directive rather than to decide to abolish the fixed price system and to introduce simultaneously the substitute measures recommended by the Commission. If it is borne in mind that in this respect the Commission conceives of measures which extend to the issue of licences for retail trade in tobacco products I have no doubt that the first-mentioned possibility would be preferable as encroaching less on economic life. Accordingly, even taking account of the fundamental principles set out in Commission Directive No 70/50/EEC, it cannot be concluded that the Belgian fixed price system for tobacco products is to be regarded as a measure having equivalent effect within the meaning of Article 30 of the EEC Treaty. Thus, since it does not seem necessary to examine in greater detail the various individual point of the questions raised by the Hof van Cassatie, the problem relating to Article 30 of the Treaty has been dealt with in sufficient detail.