Opinion of Mr Advocate General Vilaça delivered on 2 July 1987. - Erwin Conradi and others v Direction de la concurrence et des prix des Hauts-de-Seine et ministère public. - Reference for a preliminary ruling: Cour d'appel de Versailles - France. - Concept of wholesale trade. - Case 198/86.



European Court reports 1987 Page 04469



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

1 . I - The cour d' appel, Versailles, has referred to the Court six questions for a preliminary ruling on the interpretation of Article 2*(2 ) of Council Directive 64/223/EEC of 25 February 1964, which was adopted during the transitional period, for the purpose of abolishing restrictions on freedom of establishment and on freedom to provide services in respect of wholesale trade activities .

2 . Article 2*(2 ) of the directive defines wholesale trade as follows :

"2 For the purposes of this directive, 'wholesale trade activities' means activities pursued by any natural person, or company or firm, who habitually and by way of trade buys goods in his own name and on his own account and resells such goods to other wholesale or retail traders, or to processors, or to professional, trade or large-scale users .

The goods may be resold either in the unaltered state or after such processing, treatment or preparation for sale as is customary in wholesale trade ".

3 . II - On the basis of a charge brought by the Direction de la concurrence et des prix des Hauts-de-Seine ( Office for competition and prices of the Department of Hauts-de-Seine ), E . Conradi and H . Hereth, joint managers of the two companies belonging to the Metro group which specializes in wholesale trade in accordance with the cash-and-carry system, and the said companies, were found guilty by the tribunal correctionnel, Nanterre, of infringing certain rules of French law governing the pursuit of retail trade activities . That court held that the business carried on by those companies was not restricted to wholesale trade but also constituted, in various respects, a retail trade activity .

4 . The accused lodged an appeal with the cour d' appel, Versailles, which considered it necessary to ascertain whether the activities carried on by the Metro companies could be described as wholesale trade activities, within the meaning of Article 2*(2 ) of Directive 64/223/EEC and referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty the questions which are set out in full in the Report for the Hearing .

5 . III - In its written observations, the Commission doubted that Directive 64/223/EEC was applicable in this case . In its view, the definition of wholesale trade activities in Article 2*(2 ) of that directive seeks merely to delimit ratione materiae the scope of the directive which relates, as you know, to the attainment of freedom of establishment and freedom to provide services .

6 . In that regard, the Commission emphasizes that the French Republic ( like the other Member States ) has adopted a number of measures necessary for transposing Directive 64/223/EEC into its national law and abolished a number of restrictions on the right of establishment and freedom to provide services, which are referred to in Article 3 . Moreover, Articles 52 and 59 of the Treaty have been directly applicable ( 1 ) since the end of the transitional period, and their effectiveness or their scope are not limited by provisions such as those of the directive under consideration .

7 . It must be stated that at first sight and in spite of the efforts made to that end by the parties' representatives, it is far from clear that a question involving freedom of movement or freedom to provide services arises in the main proceedings .

8 . The issue in those proceedings is whether the business carried on by certain companies falls within one or other of those branches of trade; that question needs answering in order to ascertain to which French legislation they are subject, in particular with regard to the fixing of prices and advertising for value-added tax purposes .

9 . In my view, in formulating the questions now before the Court, the referring court is in substance inquiring whether Community law is able to provide any criteria for interpreting the concept of wholesale trade which would enable that court to decide whether or not the defendants fall within the scope of the French rules on retail trade .

10 . In my view, that is essentially a problem of national law which cannot be resolved by Community law ( which does not contain any general rules on wholesale trade ) and which must therefore be resolved in principle by national law .

11 . The Court has already stated its view regarding the scope of Directive 64/223/EEC in the 1977 Metro judgment, ( 2 ) a case involving the same companies . Although it acknowledged the need to distinguish beween a wholesaler and a retailer in order to prevent distortions of competition, the Court considered that the directive did not make it possible to solve the problems of competition referred to in Article 85 of the Treaty . I would refer to the exact wording of paragraph 30 of the Metro judgment : " ... that directive provides a definition of the function of wholesalers for purposes of the application of the rules of the Treaty concerning freedom of establishment and the freedom to provide services but it is not to be considered that its purpose is to solve the problems of competition referred to in Article 85 ".

12 . The Court therefore expressly stated that the 1964 directive - adopted on the basis of Article 54*(2 ) and ( 3 ) and Article 63*(2 ) and ( 3 ) of the Treaty - does not provide a general definition of wholesale trade since the scope of that directive is limited to the application of the rules of the Treaty relating to the fundamental freedoms in question .

13 . Moreover, freedom of establishment comprises both wholesale trade and retail trade . The pursuit of each of those activities is governed by different rules, which vary from one Member State to another, in so far as the relevant legislation has not been harmonized .

14 . Thus, just as it does not serve to deal with problems of competition in connection with Article 85 - which may undoubtedly be involved in the competitive relationship between the two forms of trade - the view must also be taken that ( a fortiori ) the directive does not serve in principle to define the scope of each of those forms of trade, with a view to subjecting them to the different national rules, whether governing fiscal matters or relating to consumer protection or fair trading .

15 . Is a Community definition of wholesale trade, such as that contained in Article 2*(2 ) of the directive, wholly irrelevant for that reason?

16 . In my view, that definition does become relevant if, and only if, the concepts used in national legislation are capable of producing, in a given Member State, restrictive effects on the freedom of Community undertakings to establish themselves under the same conditions as undertakings from the Member State in question .

17 . In this case, it is not clear to me - either from the written observations or from what the parties said at the hearing - that the companies involved in the main proceedings were or had been discriminated against in relation to any other French company carrying on the same kind of business .

18 . The Metro companies were already established in France at the time of the events in question and there is no question of any obstacle being imposed on them by the relevant French legislation or such an obstacle arising as the result of its application by the national administration .

19 . Moreover, that legislation dates back to 1945 and was therefore adopted long before the date of the companies' establishment ( they were first located there in 1971 ) so that it cannot be said that it was adopted with a view to discriminating against the defendants in the main proceedings .

20 . The criminal proceedings instituted before the national court are concerned with the special and original type of trade carried on by the defendant companies which, according to the French authorities, are covered by the national rules on retail trade .

21 . The Metro companies were the first ( and, according to their representatives, the only companies on the Community market ) to undertake transactions of the kind in question - described as "wholesale self-service", which appeal to traders operating in various industries and having widely differing activities, on account of the issue of a "customer purchasing card" and involving the sale of a number of products by the unit or in small quantities - and any French undertaking wishing to carry on the same kind of business must be subject to the same rules .

22 . Clearly, the fact that national legislation has not been harmonized in this area may to some extent disrupt the implementation in the common market of the principle of freedom of establishment .

23 . However, the use of the rules laid down by Directive 64/223/EEC as a general instrument for the harmonization of legislation clearly goes beyond the objectives of that directive .

24 . Moreover, the Court has consistently held ( 3 ) that, according to Article 52*(2 ) of the Treaty, freedom of establishment entails the right to take up and pursue activities as self-employed persons under the conditions laid down for its own nationals by the law of the country where such establishment is effected . It follows therefrom that, where legislation has not been harmonized, the application without discrimination of the legislation of the country of establishment is lawful under Article 52 . In particular, the Member States are entitled to distinguish clearly between wholesale trade and retail trade in order to prevent distortions of competition which might arise "if wholesalers, whose costs are in general proportionally lighter precisely because of the marketing stage at which they operate, competed with retailers at the retail stage, in particular on supplies to private consumers" ( Metro, paragraph 29 of the decision, (( 1977 )) ECR 1909 at p.*1910 ).

25 . However, the situation could be different if, as a result of the application - even non-discriminatory - of national legislation that is incompatible with the definition in Article 2*(2 ) of the directive, the traders concerned were subjected to conditions governing the right to take up and pursue their activites that were very difficult or impossible for foreigners to fulfil . This would then constitute a disguised barrier to establishment, open to criticism on account not so much of a broad interpretation of Article 52 of the Treaty ( which the Court does not seem to favour ) as of the existence, in that case, of a directive whose rules have been infringed .

26 . From that point of view, the companies in question sought to persuade the Court that only a supranational undertaking would be able, in economic terms, to undertake in France operations of that kind, which would not therefore be within the reach of exclusively French companies .

27 . However, that contention would not appear to be supported by evidence that is sufficiently convincing .

28 . It is hypothetically possible to concede that the application of the French retail trade system to that trade practice may come to constitute a serious threat to its survival . As it is an option which may be exercised by the national legislature, it will have to be applicable to national traders and Community traders alike .

29 . None the less, I cannot in theory rule out the possibility that the converse situation might arise as a result of the adoption of a definition of wholesale trade which is incompatible with Article 2*(2 ) of the directive . In my view, that possibility must be taken into account in the answers to be given to the national court .

30 . In that regard, it is necessary to provide the national court with the criteria for interpreting the concepts contained in the aforesaid provision of the directive which might prove relevant for the purpose of resolving the main dispute and be capable of affecting the attainment of freedom of establishment . It would thus be possible to meet the concern expressed by the national court in Questions 2 and 4 .

31 . In that respect, it must be acknowledged that, as the defendant companies suggest in their observations, the definition in Article 2*(2 ) of the directive, in referring to resale to "professional, trade or large-scale users", is based on the status of the purchasers and not on their number or on the nature or quantity of the goods bought and sold .

32 . However, the definition is relevant only in connection with the application of the directive, that is to say with regard to the attainment of freedom of establishment and freedom to provide services .

33 . Accordingly, national legislation which adopts a different definition of wholesale trade in order to make it subject to rules different from those governing retail trade should be considered incompatible with the directive only if it creates an indirect barrier in the Member State in question to the establishment of other Community undertakings under conditions that are discriminatory in relation to national undertakings .

34 . Moreover, the directive does not provide any criteria for distinguishing trade customers from non-trade customers or large-scale users from non-large-scale users, so that that distinction ( underlying Question 3 ) is therefore a matter for the national legislature .

35 . In the absence of harmonization, the subject-matter of Questions 5 and 6 is likewise beyond the scope of Community law and, consequently, beyond the objectives of Article 177 of the Treaty .

36 . IV - I believe that the answer to be given to the questions submitted by the cour d' appel, Versailles, as part of the cooperation between the Court of Justice and the national courts, must clarify the nature of Article 2*(2 ) of Directive 64/223/EEC in the manner which I have just described .

37 . I therefore suggest that the questions submitted by the national court should be answered as follows :

"( 1 ) Article 2*(2 ) of Council Directive 64/223/EEC of 25 February 1964 defines wholesale trade for the purposes of the application of the rules of the Treaty relating to freedom of establishment and freedom to provide services and cannot be interpreted as serving to regulate purely domestic situations which do not call in question those two fundamental freedoms, laid down in Articles 52 and 59 of the EEC Treaty, which have direct effect since the end of the transitional period .

( 2 ) Whether or not the activities carried on by the companies in question may be described as wholesale or retail trade, for the purposes of subjecting those activities to the national rules governing their pursuit, is a question that must be resolved, in principle, by the national court in accordance with national law .

( 3 ) Within its own field of application, Article 2 ( 2 ) of the directive must be interpreted as meaning that, in referring to resale to 'professional, trade or large-scale users' , the definition of wholesale trade set out therein is based on the status of the purchasers and not on their number or on the nature or quantity of the goods bought and sold . National legislation which adopts a different definition of wholesale trade in order to make it subject to rules different from those governing retail trade should be considered incompatible with the directive only where it creates an indirect barrier to the establishment of undertakings from other Member States in conditions which discriminate against them ."

(*) Translated from the Portuguese .

( 1 ) See, on the right of establishment, the judgment of 21 June 1974 in Case 2/74 Reyners (( 1974 )) ECR 631; and, on freedom to provide services, the judgment of 3 December 1974 in Case 33/74 Van Binsbergen (( 1974 )) ECR 1299 .

( 2 ) See the judgment of 25 October 1977 in Case 26/76 Metro v Commission (( 1977 )) ECR 1875, at p.*1910 .

( 3 ) See, most recently, the judgment of 12 February 1987 in Case 221/85 Commission v Belgium (( 1987 )) ECR 719, paragraph 9 et seq . of the decision; see also the judgment of 6 November 1984 in Case 182/83 Fearon v Irish Land Commission (( 1984 )) ECR 3677 at pp.*3685 et seq .; and the judgment of 28 January 1986 in Case 270/83 Commission v French Republic (( 1986 )) ECR 273 .