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.