EN Official Journal of the European Union C 197/10

Action brought on 14 May 2008 — Commission of the European Communities v Republic of Austria

(Case C-198/08)

(2008/C 197/15)

Language of the case: German

Parties

Applicant: Commission of the European Communities (represented by: W. Mölls, Agent)

Defendant: Republic of Austria

Form of order sought

— Declare that the Republic of Austria has infringed its obligations under Article 9(1) of Council Directive 95/59/EC of 27 November 1995 (1) by adopting and maintaining legal provisions according to which minimum selling prices for cigarettes and fine-cut tobacco for the rolling of cigarettes are fixed by the State;

— Order the Republic of Austria to bear the costs.

Pleas in law and main arguments

Manufactured tobacco products are one of the three groups of products which are subject to harmonised Community rules on excise duties. Directive 95/59/EC contains a number of general provisions applicable to all manufactured tobacco products and also regulates the structure of excise duty on cigarettes. Article 9(1) enshrines the principle that both the manufacturer and the importer are free to determine the maximum prices for manufactured tobacco products. That provision guarantees not only that the tax base is subject in all Member States to the same principles; it also prevents the achievement of the goals of the directive from being frustrated by State price rules which harm competition and the internal market.

The rule introduced in Austria in 2006, according to which minimum prices for cigarettes and fine-cut tobacco for the rolling of cigarettes are laid down by State bodies, infringes the abovementioned provision of Directive 95/59/EC. The fixing of minimum prices eliminates the price differences between various products which can exist owing to the different factors influencing price formation, by immediately raising the retail prices in the lower price range to a minimum level. Such a mechanism leads unquestionably to distortions in the flow of goods between the Member States, even if the minimum price, as in Austria, is derived from the average market prices.

Among the interests which the Member States can pursue by means of their trade and taxation policies is of course also the protection of public health. That also includes the aim of keeping the price of tobacco products at a high level. As the Member States can however use taxation mechanisms in order take this objective fully into account, it is not possible for them to rely on such interests in order to depart from the provision of the directive in question, since they would thereby harm the functioning of the internal market.

According to the Commission, taxation is an effective and sufficient mechanism of price regulation. Examples from other Member States also show that the price of manufactured tobacco products can be raised by the pressure of taxation alone, since the tax level can be increased as much as desired in order to push up the final price, regardless of the exact profit margin of the manufacturers concerned and/or the extent to which they are prepared to sell without making a profit or even at a loss. That approach, according to which taxation functions as an objective cost factor, not only avoids the negative consequences of minimum prices on competition and the internal market but also a further disadvantage associated with minimum prices, namely the protection of the margins of the manufacturers of tobacco products. That is a result which makes no contribution whatsoever to health protection but is in fact counter-productive. The Commission is therefore convinced that the desired protection of public health can be guaranteed by means of a dynamic and successful State taxation policy, without it being necessary to resort to minimum prices which are incompatible with Article 9 of Directive 95/59/EC.

(1) OJ 1995 L 291, p. 40.