CELEX: 61978CC0170(01)
Language: en
Date: 1982-06-16
Title: Opinion of Mr Advocate General Reischl delivered on 16 June 1982. # Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland. # Tax arrangements applying to wine. # Case 170/78.

FURTHER OPINION OF MR ADVOCATE GENERAL REISCHL
      DELIVERED ON 16 JUNE 1982 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      This procedure for a declaration that a Member State has failed to fulfil its obligations under the Treaty on which I am today to give an opinion was commenced in 1976. At that time, the Commission informed the United Kingdom that in its opinion the considerable difference between the rate of excise duty on wine produced in other Member States and the rate of excise duty on beer produced in the United Kingdom afforded indirect protection for domestic beer, in infringement of the second paragraph of Article 95 of the EEC Treaty. The United Kingdom disputed that contention and the Commission finally brought an action against the United Kingdom in which the Italian Government intervened in support of the Commission.
      In my Opinion of 28 November 1979 to which I would refer in this respect, I found in principle in favour of the applicability of the second paragraph of Article 95 of the EEC Treaty to the taxation of beer and wine but finally argued that. the application should be dismissed, as in my view the Commission had not succeeded in proving that the differential taxation of beer and wine was of such a nature as to afford indirect protection, within the meaning of that provision, to the domestic production of beer.
      Indeed, the Court of Justice detected with regard to the development of the tax systems for beer and wine a protective trend against importers of wine into the United Kingdom but, in view of the uncertainties relating both to the characteristics of the competitive relationship between wine and beer and to the question of the appropriate tax ratio between the two products from the point of view of the whole of the Community, considered that it was not in a position to come to a decision on the - alleged failure by the United Kingdom to fulfil its obligations under the Treaty and therefore delivered an interlocutory judgment on 27 February 1980, which provided as follows:
      “The Court... hereby:
      Orders the parties to reexamine the subject-matter of the dispute in the light of the legal considerations set out in this judgment and to report to the Court on the result of that examination before 31 December 1980. The Court will give final judgment after that date after examining the reports which have been submitted to it or in the absence of those reports.”
      That date was extended several times, finally to 31 January 1982, without settlement of the dispute, and the main parties as well as the intervener again presented their views. The Court of Justice finally decided to reopen the oral procedure.
      That resumption of the proceedings is the reason for this further Opinion, in relation to which I would refer for the facts to my abovementioned Opinion and also to the interlocutory judgment cited. In relation to the facts, it is necessary to add only that since 1977 the divergence of the taxation curves for beer and wine has diminished, in so far as the taxation on beer has arisen proportionately more steeply than that on wine with the result that the two curves now run more or less parallel to one another.
      With regard to the law I can also refer to a great extent to my comments at that time. I shall therefore confine myself to a brief summary of the questions to which a preliminary answer was given by the interlocutory judgment but which are still open, in order to consider then whether or not, after an examination of the legal considerations set out in that judgment, the new observations now justify a declaration that the United Kingdom has failed to fulfil its obligations under the Treaty.
      
               1. 
            
            
               In relation to the interpretation of Article 95, the Court of Justice first confirmed that the first paragraph thereof prohibited any tax provision whose effect was to impose, by whatever means, higher taxation on imported goods than on similar domestic products. The second paragraph was to apply to the treatment for tax purposes of products “which, without fulfilling that criterion of similarity, are nevertheless in competition, either partially or potentially, with certain products of the importing country.” In order to determine the existence of potential competition, as the Court of Justice expressly pointed out, “it is necessary to consider not only the present state of the market but also the possibilities for development within the context of free movement of goods at the Community level and the further potential for the substitution of products for one another which may be revealed by intensification of trade.”
            
         
               2. 
            
            
               With regard to the factual criterion of “protective effect” alluded to in the second paragraph of Article 95 of the EEC Treaty, the Court of Justice further explained that it was impossible to require in each case that the protective effect should be shown statistically, but it was sufficient for the purposes of the application of that provision “for it to be shown that a given tax mechanism is likely, in view of its inherent characteristics, to bring about the protective effect referred to by the Treaty” (“... est susceptible d'entraîner l'effet protecteur...”; “... die ... Schutzwirkung zur Folge haben kann ...”).
               After examining those criteria the Court then stated in relation to the competitive situation between wine and beer that “it is impossible to deny that to a certain extent the two beverages in question are capable of meeting identical needs, so that it must be acknowledged that there is a certain degree of substitution for one another.”
               That statement confirms the more recent case-law of the Court of Justice according to which, to determine whether goods are similar or may be substituted for one another, it is necessary to consider whether the products concerned “have similar characteristics and meet the same needs from the point of view of consumers” (cf. Case 45/75, REWE (
                     2
                  )); further, the second paragraph of Article 95 is applicable if an imported product is, by reason of one or more economic uses to which it may be put, in competition with the protected domestic product (cf. Case 27/67, Fink-Frucht. (
                     3
                  ) At the same time the Court explained in its interlocutory judgment in this case that the tax policy of a Member State should not crystallize given consumer habits so as to consolidate an advantage acquired by national industries whose task it was to provide for them.
            
         
               3. 
            
            
               If it must therefore be accepted that the taxation of beer and wine should in principle be measured by the standard contained in the second paragraph of Article 95 of the EEC Treaty, it is nevertheless undeniable, as is also pointed out in the interlocutory judgment, that there are considerable differences between wine and beer in relation to the manufacturing processes, the natural properties of those beverages and their price structures which make comparisons from the point of view of taxation particularly difficult in spite of the competitive relationship between the finished products.
               On account of the different taxation of wine and beer in the individual Member States — in the winegrowing countries, wine production is, unlike that of beer, entirely exempt from excise duty or subject to a purely nominal rate — and so that it would be able to assess the effects of a decision on the treatment for tax purposes of the two products throughout the Community, the Court of Justice therefore considered that it was necessary for the Commission to state what tax ratio it considered to be appropriate in view of the uncertainties mentioned.
               The ratio of the taxation on wine to that on beer varies according to the criteria for comparison which are applied. With regard to the individual bases of calculation put forward by the parties, the Court stated the explanations supplied showed that neither a simple consideration of volume nor a comparison between the typical units of consumption, nor a comparison between the ratio of tax to selling price of the two types of beverages could provide a suitable basis for comparison. Of the criteria put forward by the parties the only factor which, albeit inadequate, may enable an appropriate, though scarcely objective, comparison to be made consists “in the appraisal of the incidence of the tax burden in relation to the alcoholic strength of the beverages in question”. By application of that criterion it may be ascertained that wine is at present subject in the United Kingdom to a tax which is approximately 50% higher than that on beer, assuming that the alcoholic strength of the beverages is respectively 11o to 12o to 3.7o, although the disparity is greater if the alcoholic strength of ordinary table wine with which it is in competition is taken into consideration.
            
         
               4. 
            
            
               If against that background the new submissions of the parties are assessed, it is at first striking that, if I understand it correctly, it is no longer seriously contended by any of the parties to these proceedings that the two types of beverages are partially or potentially in competition with one another. Moreover, all the parties seem to agree that the differences in relation to the manufacturing processes and natural properties of those beverages in principle justify a difference in taxation. Consequently they concentrate mainly on the question of the tax ratio of the two products, which is closely connected with the method of comparison chosen. In that regard it was confirmed that on account of the special features of viticulture in relation to the different methods of cultivation, linked to the distinctive features of the region and climatic factors, it was extremely difficult, if not impossible, to make a precise statement on the influence of conditions of production on the price structure of wine.
            
         
               5. 
            
            
               Further information is, on the other hand, available on the question left open in the interlocutory judgment concerning the tax ratio which the Commission considers appropriate for the two types of beverages. In its opinion the Member States may in accordance with the case-law of the Court of Justice lay down differing tax arrangements even for identical products so long as, in doing so, they are pursuing, on the basis of objective criteria, legitimate objectives of economic or social policy which are compatible with Community law. If, in the Member States which produce an appreciable quantity of wine, wine is wholly free of excise duty or subject only to a symbolic rate whilst beer is subject to tax, that is an expression of a legitimate choice of economic policy and does not constitute discrimination within the meaning of Article 95, as both imported wines and imported beers are treated in the same way as the corresponding domestic products. The relationship between the excise duty on wine and excise duty on beer must in the last resort be established by means of harmonization pursuant to Article 99 of the Treaty. In any event Article 95 does not require the establishment of a ceiling for excise duty on beer in relation to the corresponding duty on wine. The position is different, however, if in a Member State there is no appreciable wine production and imported wine is therefore in competition with domestic beer. In that case the duty on a given volume of imported wine and the corresponding duty on domestic beer may not exceed the ratio resulting from a comparision of the respective alcoholic strengths of the beverages. The ratio between the most popular beer with an alcoholic strength of 3.5o to 3.6o and the most popular table wine with an alcoholic strength of 10o to 12o is between 1 :2.8 and 1 : 3.4. By application of an average alcoholic strength of 3.6o for beer and 10o for wine, a ratio of 1 :2.8 is obtained. If that ratio is exceeded, as in this case, there is a presumption that indirect protection is being afforded to domestic beer as against imported wine.
               The United Kingdom on the other hand points out first that the protective trend observed by the Court as a result of the different rates of duty on wine and beer has meanwhile been eliminated. As before, it takes the view that consumers' behaviour is ultimately determined chiefly by the selling price of the products concerned, not by the ratio of the price to the alcoholic strength. The incidence of tax on the price of the products therefore represents a better basis for comparison than the incidence of tax per degree of alcohol of the beverages in question. Such a method of comparison shows, however, that the taxation of wine in the United Kingdom is not of such a nature as to afford indirect protection to domestic beer production Furthermore, there is no evidence of such an illicit protective effect, even if the incidence of tax per degree of alcohol of the beverages in question is accepted as the basis for comparison.
               The Italian Government also considers, on the same grounds as those put forward by the United Kingdom, that the incidence of tax per degree of alcohol is not a suitable criterion for comparison. Indeed, in its opinion it is in principle for the Member States to determine at their discretion the criterion of taxation which they consider appropriate. However, once the Member States have decided, as in the case of the United Kingdom, to adopt taxation by volume, only that criterion may in principle be applied as a basis for comparison of the tax burden. It may in this regard be accepted at the most that according to experience about one and a half times as much beer as wine is consumed under comparable circumstances. Consequently, in this case a tax ratio of 1 : 1.5 may at best be accepted as appropriate.
               In the assessment of those new arguments, it is necessary first to recall the judgments of the Court of Justice, according to which it is not prohibited for the Member States to treat differently with regard to tax even goods which must be regarded as similar within the meaning of the first paragraph of Article 95 of the EEC Treaty, provided that there has been no harmonization of the taxes concerned. In this way, as emerges particularly from the judgments in the cases of Hansen & Balk, Chemial Farmaceutici and Vinal (
                     4
                  ) legitimate objectives of economic or social policy may be pursued, provided only that objective criteria are respected and that those objectives are compatible with Community law. Such a possibility of laying down differential tax arrangements must apply all the more to products which must be regarded merely as interchangeable for the purpose of the second paragraph of Article 95 of the EEC Treaty. As the Court of Justice pointed out in its judgments of 27 February 1980 (
                     5
                  ) on the tax arrangements applicable to spirits, it is necessary only that the differential taxation should not discriminate or afford protection against imported products.
               On the. basis of those judgments no objection may therefore in principle be made if, although from the point of view of the consumer beer and wine may serve the same purposes, they are taxed differently, for, as has been shown, they exhibit a number of considerable differences with regard to manufacturing processes, alcoholic strength, price structure and not least elements of taste.
               On the one hand, therefore, such differential taxation justified on objective grounds does not constitute indirect protection of national beer production within the meaning of the second paragraph of Article 95, on the sole ground that the United Kingdom has no appreciable wine production. On the other hand, it cannot be denied that precisely in cases of that kind there is a risk that taxation may be used as a means of discriminating against imported competing products. That is all the more valid here as, in contrast to the Vinal case, (
                     4
                  ) which is not comparable in this respect, the taxation of wine may not be regarded as the reason why it has not been possible to develop appreciable wine production in the United Kingdom.
               Within that framework, it is necessary to examine up to what limit the ratio between the taxation of wine and that of beer may still be described as “appropriate” within the meaning of the interlocutory judgment. As inter alia the Italian Government correctly points out, it cannot be the task of the Court of Justice in that regard to determine in the framework of the second paragraph of Article 95 of the EEC Treaty the correct method for the comparison of the two products. The consideration of individual methods of comparison, which are in part discussed and rejected in the interlocutory judgment, in this respect can serve only as an indication as to whether differences in taxation are objectively justified and compatible with the objectives of Community law.
               In its interlocutory judgment, the Court regarded the appraisal of the incidence of the tax burden per degree of alcohol oi the beverages in question as the only criterion of those put forward by the parties which might make possible an appropriate comparison, albeit scarcely objective and therefore not fully adequate, and applying that basis for comparison the Court ascertained that, taking into consideration an average difference in the alcoholic strength in the ratio of 1 : 3, the tax burden on wine in the United Kingdom was approximately 50% higher than that on beer.
               The same also applies to the present situation, even if a ratio of 1 : 2.8 were to be regarded as appropriate, as the Commission suggests, for by that criterion, as we have heard, the taxation on beer and wine in the United Kingdom is at present in the ratio of 1 :4.2. Accordingly even now it must suffice to determine that, as the Court of Justice has already ascertained in its interlocutory judgment, according to that criterion wine is subject in the United Kingdom to a tax burden which is relatively heavier than that imposed on beer.
            
         
               6. 
            
            
               As before, however, I have considerable doubts as to whether that statement alone is sufficient to establish that there has been an infringement of the second paragraph of Article 95 of the EEC Treaty. For that to be true it would in fact be a precondition that it should be proved that the taxation system in question was “of such a nature as to afford indirect protection” to the production of the importing Member State.
               In this regard, however, the Commission has essentially put forward no fresh arguments. Indeed, there is support for the criterion of alcoholic content, on which the Commission now relies for the determination of a ceiling for taxation, in the fact that comparison is based on objectively-ascertainable comparative values. In my opinion it follows from that, and I would make this comment on the view expressed by the Italian Government, that taxation of wine and beer which remains within that purported framework is as such objectively justified and therefore cannot be regarded as an infringement of the Treaty.
               Nevertheless, that basis of comparison, as the Court stated in its interlocutory judgment, is “imperfect” for an apprehension of the complex competitive situation between wine and beer. In relation to that method it is questionable, to start with, whether and how far alcoholic content has a decisive effect on consumer behaviour, in view of the other considerable differences between wine and beer, and whether that is not ultimately influenced only by the selling price of the beverages in question. Moreover, that method is based on a comparison of the alcoholic content of “average wine” and “average beer”, and that does not mean that only those two average products are in fact in competition with one another. If, on the other hand, a comparison is made by that method between a lighter beer and a heavy wine, the resulting ratio is close to the taxation arrangements of the United Kingdom. Furthermore, in relation both to wine and to beer there is not always a fixed ratio between the alcoholic content of those beverages and their price.
               Those considerations in my view show that the relatively heavier taxation of wine as opposed to that on beer, which has been described, does not in itself justify with sufficient certainty the assumption that those tax arrangements are of such a nature as to afford indirect protection to domestic beer production. In this regard it should not be overlooked that, until the taxation of beer and wine is harmonized throughout the common market, the requirement that there should be an “appropriate tax ratio” offers the Member States in the framework of autonomy with regard to taxation a discretion limited only by the fact that the tax arrangements in question may not be discriminatory or protective in nature in relation to imported interchangeable products. The limits of that discretion are naturally wider, the smaller or more partial the possible degree of interchangeability between the two products.
               In view of the fact that beer and wine are only partly interchangeable and of the considerable differences described between those two beverages, it therefore seems to me in this case that it has still not been proved that those limits have been exceeded. There is in my view support for the opposite opinion above all, in the fact that, both according to the criterion for comparison used by the Commission and on the basis of other methods of comparison, substantial grounds emerge which are still capable of justifying tax arrangements of that kind and that the Commission has not succeeded in proving that the tax arrangements in question lead with a certain degree of probability to indirect protection of British beer production against wine imported from other Member States.
            
         
               7. 
            
            
               I therefore conclude once again that the application must be dismissed as unfounded and that the Commission must be ordered to pay the costs.
            
         (
            1
         )	Translated from the German.
      (
            2
         )	Judgment of 17 February 1976 in Case 45/75 REWE-Zentrale des Lebensmittel-Großhandels GmbH v Hauptzolhmt Landau/Pfalz [1976] ECR 181, p. 194.
      (
            3
         )	Judgment of 4 April 1968 in Case 27/67 Fink-Frucht GmbH v Hauptzollamt München-Landsberger Straße, [1968] ECR 333.
      (
            4
         )	Judgment of 10 October 1978 in Case 148/77 H. Hamen & O. C. Balle v Hauptzollamt Flensburg [1978] ECR 1787; Judgment of 14 January 1981 in Case 140/79 Chemial Farmaceuti v DAF [1981] ECR 1; Judgment of 14 January 1981 in Case 46/80 SpA Vinal v SpA Orbat [1981] ECR 77, with further references.
      (
            5
         )	Judgment of 27 February 1980 in Case 168/78 Commission v French Republic [1980] ECR 347; Judgment of 27 February 1980 in Case 169/78 Commission v Italian Republic [1980] ECR 385; Judgment of 27 February 1980 in Case 171/78 Commission v Kingdom of Denmark [1980] ECR 447; Judgment of 27 February 1980 in Case 55/79 Commission v Ireland [1980] ECR 481 ; Judgment of 27 February 1980 in Case 68/79 Hans Just v Danish Ministry for Fiscal Affairs [1980] ECR 501.
    ---documentbreak--- 
      
         OPINION OF MR ADVOCATE GENERAL
      VERLOREN VAN THEMAAT
      DELIVERED ON 10 MAY 1983 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      1. State of the procedure
      1.1.
      Today the Court is once again concerned with the question whether the Commission correctly concluded in its application of 7 August 1978 that the excise duty on still light wine levied by the United Kingdom at that time conflicted with the second paragraph of Article 95 of the EEC Treaty. At that time the excise duty was UKL 3.250 per gallon, compared with UKL 0.6084 per gallon of beer of standard quality.
      1.2. The material time for purposes of the decision
      The relevant situation, according to the judgment of the Court in inter alia Case 7/61 (Commission v Italy [1961] ECR 317, paragraphs 1 to 7, relating to pigs) and the commentaries thereon, is the situation at the time at which the application is lodged (see H.G. Schermers, Judicial Protection in the European Communities, Second Edition, p. 227, and H. A. H. Audretsch, Supervision in European Community Law, pp. 29, 36, 38 and 40 to 46). That judgment shows that even if the Member State concerned has fulfilled its obligations during the procedure the Commission may have an interest “in obtaining a decision on the issue whether the failure occurred.”
      Mr Advocate General Lagrange, at page 334 of his Opinion in Case 7/61, cited above, reached the same conclusion as the Commission, inter alia on the basis of the text of Article 171 of the Treaty, namely that the Court must decide “whether the failure to fulfil obligations under the Treaty has occurred, without taking into account what has happened since” and that the Commission may still have an interest in a decision even after the infringement has ended, if only because the Member State concerned would otherwise be free “to carry on with its improper conduct in the absence of any judgment finding that it was in breach of its obligations.”
      I consider the foregoing reference to the earlier case-law of the Court to be of particular importance in this case for two reasons. First, certain passages of the written and oral submissions of the parties since the Court's interlocutory judgment of 27 February 1980 give the impression that they regard the situation between 1980 and 1983 as relevant for the purpose of determining whether the Treaty was infringed. However, such a view would conflict with the interpretation of Articles 169 and 171 of the Treaty contained in the judgment cited. In that regard, developments in the United Kingdom after the application was lodged are of importance solely in so far as they may be helpful in throwing new light on the position at the time at which the application was lodged. Secondly, the reference to the earlier case-law of the Court is important in this case because the Commission clearly takes the view that even since its application was lodged the infringement of the Treaty which it set out has still not been wholly brought to an end. On that ground alone the Commission retains a specific and obvious interest in a decision of the Court of Justice which states sufficiently clearly the measures to be taken by the United Kingdom under Article 171 of the Treaty in order to put an end to the alleged infringement of the Treaty.
      1.3. The relevant facts according to the application
      In its reasoned opinion of 8 November 1977, the Commission stated that the excise duty on still light wine had been increased with effect from 1 January 1977 from UKL 2.955 per gallon to UKL 3.250 per gallon, whilst the excise duty on the relevant beer was UKL 0.6084 per gallon. Per degree of alcohol, an excise duty of UKL 0.2955 and UKL 0.2708 per gallon was levied on still light wines of 11o and 12o respectively, in comparison with UKL 0.2028 per gallon of beer. In relation to price, the excise duty on beer represented on average 25% and the excise duty on wine at least 38% of the sale price to the consumer.
      According to the reasoned opinion, the excise duty on the relevant wines was, according to the criteria used, approximately 50% (on the basis of the criterion of alcoholic strength or price to the consumer) or even more than 400% (on the basis of the criterion of volume used in the United Kingdom legislation on excise duty) higher than the excise duty on beer.
      There was a competitive relationship between beer and wine so that the differential taxation described afforded indirect protection to the production of beer, such as is prohibited by the second paragraph of Article 95 of the EEC Treaty.
      1.4. Judgment of 27 February 1980
      In its interlocutory judgment of 27 February 1980, [1980] ECR 417, the Court stated first that the United Kingdom had essentially admitted (had not called in question) the facts put forward by the Commission, especially as regards the evolution in the rates of excise duty. The United Kingdom did deny the existence of a competitive relationship between wine and beer, with the result that there was no possibility of substitution, which was the condition for the application of the second paragraph of Article 95. Moreover, according to the United Kingdom, even if such a possibility of substitution were recognized, the tax system applied to wine was not protective in nature within the meaning of that provision.
      In paragraph 6 the Court stated that, in order to determine whether there was a competitive relationship within the meaning of the second paragraph of Article 95, it was necessary to look not only at the present state of the market but also at possible developments within the context of free movement of goods within the Community and at further possibilities for the substitution of products for one another which might be revealed by intensification of trade, so as fully to develop the complementary features of the economies of the Member States in accordance with the objectives laid down by Article 2 of the Treaty.
      In paragraph 10 of the judgment, the Court emphasized that the second paragraph of Article 95 (in relation to determining whether there was a protective effect) was linked to the “nature” of the tax system in question so that it was not possible to require in each case that the protective effect should be shown statistically. The Court stated: “It is sufficient for the purposes of the application of the second paragraph of Article 95 for it to be shown that a given tax mechanism is likely, in view of its inherent characteristics, to bring about the protective effect referred to by the Treaty.”
      In paragraph 14 of the judgment, the Court stated: “It is impossible to deny that to a certain extent the two beverages in question are capable of meeting identical needs, so that it must be acknowledged that there is a certain degree of substitution for one another.”
      In his first Opinion Mr Advocate General Reischl further confirmed that the products were interchangeable by stating at page 442 that, from the point of view of consumers, beer and wine were put to the same use and had the same characteristics. Both were produced by fermentation and differed from the other thirst-quenching beverages listed in Chapter 22 of the Common Customs Tariff in that they contained alcohol. According to his Opinion, the relatively small alcoholic content also distinguished both drinks from spirits covered by tariff heading 22.09 C of the Common Customs Tariff and obtained by distillation. I regard paragraph 14 of the judgment, as amplified by Mr Advocate General Reischl in his first Opinion on this case, as an important starting-point for-my own Opinion.
      With regard to the basis of calculation to be used, in relation to the established competitive relationship, for comparing the total tax burdens imposed on the two products, the Court stated in paragraph 18: “The explanations supplied show that neither simply taking into consideration the volume of the two beverages nor a comparison between the typical units of consumption can provide a suitable basis for comparison. The same applies to a comparison based on the effect of the tax burden on the selling price of the two types of beverages in view of the fact that although it is relatively easy to ascertain an average price in the case of beer it is difficult to determine a representative basis for comparison in the case of wine, a characteristic of which is the wide range of prices.”
      In paragraph 19 of its judgment the Court added: “Of the criteria put forward by the parties, the only factor which may enable an appropriate and somewhat objective comparison to be made consists therefore in the appraisal of the incidence of the tax burden in relation to the alcoholic strength of the beverages in question.” By taking into consideration that criterion, the Court then ascertained inter alia that wine was at that time subject in the United Kingdom to a tax which was approximately 50% higher than that on beer, assuming that the alcoholic strength of the beverages was respectively 11o to 12o and 3o to 3.7o. As appears from the same paragraph, the Italian Government argued that in the case of normal table wines with an alcoholic strength of 9o to 10o the margin of discrimination was approximately 100% to 125%.
      In paragraph 20 the Court stated in conclusion and subject to the observations made in paragraph 16 on the need first to determine an appropriate tax ratio between wine and beer that, according to the only criterion whereby an objective, although imperfect, comparison could be made between the rates of tax applied to wine and beer, it seemed that wine was subject in the United Kingdom to a tax burden which was heavier than that imposed on beer.
      I shall take paragraphs 18 to 20 inclusive in relation to the criteria to be used for comparison as the second starting-point for my own analysis. In that regard, I infer from the words which I have italicized on the one hand that the Court considers alcoholic strength to be an appropriate, although imperfect, criterion for comparison. On the other hand, I infer that the Court did not intend also to exclude the supplementary use of the criteria of volume and price. At least in relation to the supplementary importance of the criterion of price, that also seems to be the logical inference to be drawn from the questions put to the parties in the Court's subsequent order of 15 July 1982.
      A third important starting-point for my own analysis is in my opinion to be found in the view expressed in paragraph 24 “that a comparison of the development of the two tax systems in question shows a protective trend as regards imports of wine in the United Kingdom.”
      1.5. The further course of the procedure
      For a summary of the supplementary observations of the parties on the basis of the Court's interlocutory judgment, I will at this stage simply refer to the second Report for the Hearing. With reference to those supplementary observations, the Court in the letter of summons to the reopened oral procedure expressly asked the Commission to explain at the hearing its views concerning the appropriate tax ratio between wine and beer and also for an explanation of the influence of the manufacturing processes for wine and beer on their price structures. At the sitting on 19 May 1982, the Commission confirmed that in its view a ceiling should be established by the Community for the taxation of wine but there should be no fixed reciprocal relationship between rates of taxation applicable to wine and beer. That point of view, to which I shall return in my analysis, is based on the twofold consideration that there are Member States which produce beer exclusively or almost exclusively but that in the remaining Member States both beer and wine are produced without its appearing that the heavier taxation of beer in those countries affects the healthy development of breweries. There is virtually no importation of beer in that group of countries, whilst in the first-mentioned group of countries there is in fact significant importation of wine. The Commission added that, as appears from the judgments of the Court in Case 127/75 Bobie v Hauptzollamt Aachen-Nord [1976] ECR 1079, Case 148/77 Hansen v Hauptzollamt Flensburg [1978J ECR 1787, Case 21/79 Commission v Italy [1980] ECR 1, and Case 46/80 Vinal v Orbat [1981] ECR 77, a Member State may lay down differing tax arrangements even for identical products on the basis of objective criteria provided that such arrangements pursue objectives of economic policy which are themselves compatible with Community law and that they are not discriminatory or protective in nature. The establishment of a reciprocal relationship between the rates for beer and wine, like the harmonization of the rates of taxation, constitutes an essential aim only in the context of the harmonization of legislation and cannot be achieved by means of the application of Article 95. For a summary of the remaining submissions of the parties at the second hearing I refer to the third Report for the Hearing.
      In his Further Opinion of 16 June 1982, Mr Advocate General Reischl, in connection with determining whether products may be substituted for one another, refers to the judgments in Cases 45/75 REWE v Hauptzollamt Landau [1976] ECR 181, and 27/67 Fink-Frucht v Hauptzollamt München-Landsbergerstraße [1968] ECR 223, as well as to the interlocutory judgment of the Court. With regard to the proper tax ratio between wine and beer he considers on the basis of the judgments of the Court of 27 February 1980 on the tax arrangements applicable to spirits in Cases 168/78, 169/78, 171/78, 55/79 and 68/79, [1980] ECR 347, 385, 447, 481 and 501 respectively, that differential taxation — which he also regards as permissible in principle on the basis of the judgment of the Court cited by the Commission — should not dicriminate or afford protection against imported products. In his detailed examination of the excise duty applied to wine in relation to the various criteria for comparison, he questions inter alia“whether and how far alcoholic content has a decisive effect on consumer behaviour, in view of the other considerable differences between wine and beer, and whether that is not ultimately influenced only by the selling price of the beverages in question.” Finally, he concludes “that the relatively heavier tax burden on wine in relation to that on beer... does not in itself justify with sufficient certainty the assumption that those tax arrangements are of such a nature as to afford indirect protection to domestic beer production.” I should probably have reached the same conclusion on the basis of the information available at that time. In my own examination I shall therefore concentrate on examining the new facts which have since become available as a result of the questions put by the Court in its order of 15 July 1982. As the Court is aware, those questions related in particular to the consumer prices and the fiscal element therein in the various Member States since 1977 and also to the trend in the consumption of wine and beer in the various Member States since 1972.
      2. Supplementary remarks
      2.1. Summary of the starting-points for my own analysis
      I now pass to my own analysis of the problems raised by this case. For that purpose I have chosen as the starting-points for the definition of my view the following points, already referred to, in the Court's interlocutory judgment:
      
               (a)
            
            
               The interchangeability of wine and beer;
            
         
               (b)
            
            
               The comments on the various criteria for comparison, in the light, however, of the statements contained in the Court's decision of 15 July 1982 and also in the light of the parties' replies to that decision;
            
         
               (c)
            
            
               The protective trend identified in paragraph 24.
            
         2.2. The interchangeability of wine and beer
      With regard to the interchangeability of wine and beer, I have nothing to add at this stage to the remarks contained in the Court's judgment and the two Opinions of Mr Advocate General Reischl. If it is accepted that there is a competitive relationship, it is at the same time recognized that the second paragraph of Article 95 may be applicable. In my closing remarks, however, I shall return to a number of characteristics of the competitive relationship between wine and beer.
      2.3. The criteria for comparison for the determination of the tax burden
      The Court concluded in paragraphs 19 and 20 of its interlocutory judgment that on the basis of the alcoholic strength, which was regarded by the Court as the most objective, although imperfect, criterion, the wines considered to be relevant for puposes of comparison were subject to a tax which was approximately 50o/o higher than that on the relevant beer. I shall later return to the question of the proper tax ratio, which was left open. According to the Commission and the Italian Government (which take into account lower percentages of alcohol), the tax advantage on the basis of that criterion is substantially higher. Precisely because the Court itself regarded the criterion of alcoholic strength as imperfect I consider it desirable to make also a few remarks on the other criteria applied by the Commission.
      First of all, as the Italian Government has rightly observed in its various observations, the use of the criterion of volume is logical, inasmuch as the United Kingdom's tax arrangements are themselves based on the criterion of volume. Moreover, Mr Advocate General Reischl rightly observed in his first Opinion that the interchangeability of wine and beer results in particular from the fact that both are thirst-quenching drinks of low alcoholic content and, as is well-known, the volume of a drink is one of the decisive factors in the quenching of thirst. The Italian Government admits that a corrective factor of 1.5 must be applied here, that is to say that 1 litre of wine must be compared with 1.5 litres of beer. It rightly remarked in its observations on the replies given by the Commission and the United Kingdom that the information provided on the consumption of wine and beer in the most important wine- and beerconsuming countries justifies even a somewhat lower corrective factor of 1.35. On the basis of that criterion, taxation on wine would be more than three times as high as that on beer. The margin of discrimination would therefore amount to at least 200%.
      So far as the criterion of the comparison of prices is concerned, I agree with the United Kingdom and Mr Advocate General Reischl that it is xertainly relevant in principle. First, I agree with the United Kingdom that the Neumark Committee's view, which it cites at page 3 of it report of 1 December 1981, is in fact still authoritative. That is in spite of the fact that, as the Commission somewhat disparagingly remarked, 20 years have now passed since the publication of that report. Secondly, with reference to the Further Opinion of Mr Advocate General Reischl, I take the view that differences in production costs, alcoholic strength and other differences in. cost and quality, together with consumers' preferences, ultimately find expression in the price of the various products. It is not without reason that the terms “competitive mechanism” and “price mechanism” are often regarded as synonymous. The competive relationship between wine and beer is in fact expressed in their price ratio. If the United Kingdom had imposed upon beer and wine taxation calculated on the basis of the same percentage of their respective prices to the consumer net of tax, there could in my view be no question of an infringement of the second paragraph of Article 95.
      The difficulties in applying the criterion of price in this case, however, arise out of the fact that in its tax system the United Kingdom applies the criterion of volume as the basis for the taxation of wine and beer, rather than that of price. The comparison of price is further hampered by the very divergent structures of the sales markets for wine and beer and by the very different prices which are charged for different types of wine as a result of inter alia differences in quality.
      The difficulty relating to the structures of the sales markets may be overcome by comparing prices on one market in which both products are sold, that is to say supermarkets and other retail traders which sell both beer and wine to the consumer. In its reply to the Court's order of 15 July 1982, the Commission in my view rightly adopted that basis for its comparison of prices.
      The difficulty arising out of the wide range of wine prices may in my view be overcome either by comparing taxation on the cheapest table wines with taxation on beer (as the Italian Government recommended in its observations on the information furnished by the Commission) or by calculating the maximum price of the cheapest table wines which together have a share of the market considered to be sufficient (as the Commission in fact suggests). The relevant price of table wines, according to which of the two solutions is chosen amounts to UKL 2 pr UKL 3 per litre. (
            2
         ) The margin of discrimination against wine thus amounts to between 30 and 120% of the price net of tax (± 70 to 300% of the excise duty on beer).
      The Italian Government argues, in defence of the comparison which it favours between the tax burden on beer and the tax burden on the cheapest table wine, that Article 95 prohibits protective tax discrimination affecting any imported product. However, I consider that as in cartel law for the purpose of determining whether fair competitive relationships exist particular products with a negligible share of the market may be disregarded and that the calculation by the Commission of a maximum price for cheap table wine therefore offers a more secure basis for the comparison of prices. According to the United Kingdom's own explanation at the most recent sitting, the relatively cheap Italian table wines have a 20% share of the British market, which certainly represents a sufficiently important share of the market to apply the comparison of taxation. In that connection I recall that in the Commission Notice on agreements of minor importance in the field of cartel policy (Official Journal 1977, C 313, p. 3) restrictions on competition in relation to market shares of only 5% are regarded as relevant from the point of view of maintaining fair competitive relationships. On the other hand, I again agree with the Italian Government that the average import price for wine imported into the United Kingdom indicated by the United Kingdom itself in Annex E to its reply of 30 September 1982 makes it unlikely that the two types of German wine referred to by the United Kingdom for the purposes of the comparison of prices may in fact be regarded as representative. Certainly that applies to supermarket chains which import their own wine.
      The information set out by the Italian Government is also of importance inasmuch as it appears from it that the most relevant Italian wines for purposes of assessing appreciable restrictions on competition have an alcoholic strength of only 9 to 10o. As appears from the information provided by the Commission at pages 16 and 17 of its report of 1 December 1981, the margin of discrimination against the most relevant wines at the material time for the determination of an infringement of the Treaty amounts to at least 90% for those wines by application of the criterion of alcoholic strength. Moreover, there is a clear connection between the criteria for comparison of alcoholic strength and price in so far as, by virtue of the regulation relevant to this case, Regulation (EEC) No 816/70 of the Council (Official Journal, English Special Edition 1970 (I), p. 234), replaced only in 1979 by Council Regulation (EEC) No 337/79 (Official Journal, L 54, p. 1), the guide price is laid down per degree of alcohol per hectolitre. For table wines with a lower alcoholic strength proportionately lower guide prices apply as compared with table wines with a higher alcoholic strength.
      At the most recent sitting of the Court in this case, the United Kingdom put forward another legal argument which may not remain unchallenged in this connection. From Article 97 of the EEC Treaty it inferred that a Member State may establish average rates of taxation for wine and that for the purpose of the application of Article 95 the taxation burden on average wine prices must be compared with the taxation burden on average beer prices. That argument is untenable, Article 97 is clearly a derogative provision which, like all such provisions, must be interpreted restrictively. Article 97 applies exclusively in relation to turnover taxes calculated on a cumulative multistage tax system. The discrimination, in particular in favour of integrated domestic undertakings, which resulted from Article 97 was in fact, together with the opportunities of manipulating trade offered by that provision and the other distortions of competition arising out of the old turnover tax system, one of the main reasons for replacing turnover tax calculated on a cumulative multistage tax system by value-added tax. As a derogative provision, Article 97 cannot in any event be extended to cover excise duties. Indeed, that article underlines the fact that in principle Article 95 must be interpreted as meaning that taxation on specific imported products (thus in this case, for example, on cheap table wines) must be compared with taxation on similar domestic products (by application of the first taxation on similar domestic products (by application of the first paragraph of Article 95) or with competing substitute products (by application of the second paragraph of Article 95). Thus that argument may in fact be used against the view of the United Kingdom and tends to provide support for the view of the Italian Government that the cheapest types of wine must serve as the criterion for comparison, although I, on the grounds of general competition policy which I have set out, would not wish to go so far.
      2.4. Conclusions based on the application of the various criteria for comparison
      In short, it is clear from an analysis of the documents received after the Court's decision of 15 June 1982 that the tax burden on the wines most relevant from the point of view of competition, was at the material time for the purpose of determining a possible infringement of the Treaty, at least 70 to 100% higher than that on beer on the basis of all the defensible criteria. I, like Mr Advocate General Reisçhl (who did not possess sufficient information on this point at the time when he delivered his Further Opinion), consider that the criterion of the influence on prices is the most relevant criterion from the point of view of competition. However, I have at the same time pointed out that under the common organization of the market in wine there is a direct relationship between wine prices and alcoholic strength, which also confirms the relevance of the criterion of alcoholic strength, for which the Court expressed a preference in its interlocutory judgment. A difference of 70 to 100% in the tax burden is in my opinion, without prejudice to the question of the proper tax ratio to be discussed next, itself a clear indication that the excise duty levied by the United Kingdom on wine affords indirect protection to the production of beer in that country, since the burden thereof may, as appears from the information provided, increase the retail price net of tax to as much as 160% of that price.
      2.5. The question of the proper tax ratio
      I agree with the Commission that a proper tax ratio between wine and beer can be established only by means of harmonization of legislation on excise duty under Articles 99 and 100 of the Treaty. It will then be possible, if the harmonizing directive is also based on Article 43 of the Treaty, also to take account of considerations relating to the common agricultural policy. Because of the vagueness of the very term “indirect protection” in the second paragraph of Article 95 no precise limit can be established on the basis of that provision of the Treaty. However, in the case of a tax burden as high in absolute terms as that concerned in this case, a difference in the tax burden of at least 70 to 100% compared with the substitute product, beer, is on the basis of all elementary experience concerning the competitive mechanism bound to result in a very appreciable restriction of competition to the detriment of wine. Even in the case of a difference in tax burden of 50%, as was accepted by the Court in its interlocutory judgment, I would still consider that to be the case, if, as in this case, other factors indicate that there is an even greater difference. Thus in my opinion an appreciable restriction on competition to the detriment of wine ipso facto means that there is indirect protection of the competing product, beer, within the meaning of the second paragraph of Article 95.
      Although the question is of course not an issue in these proceedings and therefore cannot be answered definitively, I understand, however, that the Court is also concerned that its judgment in this case may establish a precedent in the determination of tax ratios in Member States which produce both wine and beer. I agree with Mr Advocate General Reischl that the Commission's arguments in favour of allowing taxation on beer to be higher than that on wine in those countries are strong, partly in the light of the case-law of the Court of Justice cited by the Commission. From the point of view of the competition in prices, which as I have stated earlier I consider essential for the application of the second paragraph of Article 95, I would add that wine production is not in my opinion afforded indirect protection by higher taxation on beer provided that the price of beer including tax is no higher than the price of the competing wines. Once the price of beer becomes appreciably higher than the price of comparable wines as a result of the taxation levied upon it, I would not a priori exclude the possibility that there is an infringement of the second paragraph of Article 95. However, I consider that for reaching a final decision the development of the volume of domestic beer production and beer importation in the countries concerned should also play a part. The legal uncertainty naturally increases the desirability of determining once and for all the tax ratio between wine and beer for all Member States by means of harmonization of legislation. Especially by use of price as the relevant criterion, it seems to me in principle that the symmetrical application of the second paragraph of Article 95 with regard to countries producing mainly beer and those producing mainly wine does not, on the grounds given, lead to consequences which are unacceptable for the Community. I therefore consider that the problem of the proper tax ratio between wine and beer does not call for a conclusion on the basis of a comparison of the tax burden different from that reached above.
      2.6. The protective trend
      The information which became available after Mr Advocate General Reischl delivered his Further Opinion also clearly confirms the protective trend identified in paragraph 24 of the Court's interlocutory judgment. On the basis of Articles 169 and 171 of the Treaty, as interpreted in the case-law of the Court cited above, for the application of that criterion the way in which the tax ratio between beer and wine has developed in the United Kingdom between the date of accession and the date on which the application was lodged is decisive.
      As appears from the information provided by the Commission and not contested by the United Kingdom in relation to the trend during the relevant period of 1973 to 1978, the tax ratio between beer and wine rose from 1 : 3.2 on 1 January 1974 to 1 :4.2 on 27 March 1974 and to 1 : 5.6 on 16 April 1975. On 1 July 1977 the tax ratio began to fall slightly to 1 : 5.3, which is the decisive tax ratio for purposes of these proceedings. From the information on consumption provided by the provided by the Commission it is clear that the increase in excise duty in 1975 was coupled with a fall in the consumption of wine per head of the population. The connection between a rise in the excise duty and consumption per head of the population is, however, even more clearly demonstrated by the information on developments after 1978. In 1980 the tax ratio between beer and wine fell to 1 :4.9 and in 1981 to the 1974 level of 1 :4.2. At the same time the consumption of wine per head of the population rose substantially (from 5.41 litres per head in 1977 to 7.8 litres per head in 1981), while the consumption of beer fell between 1979 and 1981 for the first time since 1972, from 122.1 litres to 111.5 litres per head of the population. The United Kingdom confirms those developments by means of its own figures. It also recognizes the relationship which exists between the tax burden and consumption and in its report of 1 December 1981 and during the most recent sitting of the Court in this case it concluded from the developments after 1978 that the protective trend identified in the Court's interlocutory judgment had now been wholly eliminated. Apart from the fact that that conclusion is incorrect in comparison with the tax ratio on 1 January 1974, I have already observed that in these proceedings the developments between 1973 and 1978 alone are relevant for the purpose of determining a protective trend. In relation to that period, the existence of a protective trend is also confirmed by the said report of the United Kingdom.
      To those remarks I would further add that the establishment of a protective trend over a material period of time may indeed constitute important evidence in relation to an infringement of the second paragraph of Article 95, but none the less such evidence cannot in itself be decisive for purposes of the application of that provision. Instead it is ultimately a question of deciding whether, at the material time for the purpose of determining an infringement of the Treaty, the tax burden on imported products is so much higher than the tax burden on domestic substitute products that it must be assumed that domestic production of the substitute products is indirectly protected by the taxation on the imported products. Conclusions on the latter point may certainly be supported by a simultaneous increase over that time in the difference in tax burden.
      3. Final remarks and conclusion
      3.1. Characteristics of the competitive relationship between wine and beer
      In relation to the cheap types of wine which are relevant from the point of view of competition, I agree with the Commission and Mr Advocate General Reischl that differences in the manufacturing structures of wine and beer are ultimately of no great importance. First, differences in production costs will, as stated above, be expressed in differences in price, so that in the use of the criterion of price they are automatically taken into account in the comparison of the tax burden. Secondly, the most relevant cheap wines and beer are both usually produced by large-scale production processes, as the Commission and Mr Advocate General Reischl have already observed.
      The great differences in the structures of the markets in wine and beer I also consider ultimately to be no impediment to a clear comparison of the tax burdens. From the very fact that Article 97 is not applicable it follows that in the application of the second paragraph of Article 95 average rates of taxation may not be applied to all imported wine. From the objective of the second paragraph of Article 95 together with the general scheme of the Treaty it in fact follows that proof of a clear restriction of competition with regard to imported products which separately or collectively have an appreciable share of the market in those products is of itself sufficient to establish an infringement of that provision. Such an appreciable share of the market is, as appears from the information provided by the United Kingdom itself, already constituted by the fact that wine is sold in supermarkets and by other retailers who sell wine and beer, whereas the market share of the relevant cheap wines in the total supply of wine may, as appears from the information provided by the two parties during the proceedings and by the Italian Government, be assessed at at least 20%. A market share of only 5 to 10% would, as has already been stated, in my view have been sufficient.
      Finally, the information provided on prices and consumption of wine and beer confirms that in the competitive relationship between wine and beer price ratios and the tax included therein for the consumer play a part which may be clearly demonstrated and which has also been acknowledged by the United Kingdom.
      I therefore consider that the uncertainties regarding the competitive relationship between wine and beer referred to in paragraph 24 of the Court's interlocutory judgment may now be regarded as having been satisfactorily removed.
      3.2. The legal consequences of a finding that the United Kingdom has infringed the Treaty
      As, for example, is also frequently the case with the judgments of the Court on infringements of Article 30 of the EEC Treaty, the precise legal consequences which judgment against the United Kingdom in this case entails under Article 171 of the Treaty cannot be ascertained. In that regard there is certainly a much wider area of uncertainty in relation to a judgment on the second paragraph of Article 95 than a judgment on the first paragraph thereof. In this case it is in any event in my view certain that the United Kingdom may not after judgment has been. given against it return to a protective trend in the development of the tax relationship. I consider that that that conclusion in itself makes it clear that the Commission retains a legitimate interest in continuing its action even after the reversal of the trend in the United Kingdom between 1977 and 1981. In that connection I also refer to the detailed consideration given to the question of legitimate interest in the Opinion of Mr Advocate General Lagrange in Case 7/61, already cited.
      However, it must also in my opinion be concluded from general experience with regard to the competitive mechanism and from the information provided by the parties that there is still indirect protection of the production of beer at least as long as the tax burden on the relevant cheap wines, as measured by reference to the price net of taxation, remains at least 30% higher than the tax burden on beer. Indeed it cannot in my opinion be ruled out that even in the case of a lesser difference in tax burdens there may still be indirect protection of beer, but that would nevertheless have to be demonstrated by means of more evidence than has been produced up to now.
      Inasmuch as the excess taxation will in fact be passed on to the consumer, the reclaiming of such tax feared by the United Kingdom seems in this case to be ruled out by the exclusion of that possibility in the Court's judgment in Case 68/79 Just v Danish Ministry for Fiscal Affairs [1980] ECR 501.
      3.3. Conclusion
      In conclusion I propose that the Court should declare, in accordance with the Commission's application, that the United Kingdom of Great Britain and Northern Ireland has failed on the grounds stated to fulfil its obligations under the second paragraph of Article 95 of the Treaty. So far as the costs of the action are concerned, the fact that the Commission furnished all the information necessary for the determination of its application only after repeated action on the part of the Court in my view constitutes an exceptional circumstance, as provided for in the first paragraph of Article 69 (3) of the Rules of Procedure, so that the United Kingdom should be ordered to bear only its own costs.
      (
            1
         )	Translated from the Dutch.
      (
            2
         )	It should naturally be borne in mind that this calculation of the margin of discrimination related to 1982. The tax ratio between wine and beer at that time was substantially less unfavourable to wine than at the material time for the purposes of the judgment, namely the time at which the application was lodged. On the basis of the criterion of price, at the material time the tax mechanism applied in the United Kingdom was, on account of the characteristics already referred to, protective in nature with regard to beer production, as defined in paragraph 10 of the Court's interlocutory judgment, in relation to all wines with a consumer pnce (net of tax) which was less than five times the consumer price (net of tax) of beer. The margin of discrimination could then, on the basis of the more unfavourable tax ratio, certainly rise to far above the highest margin of protection for 1982, calculated at 120% of the price net of tax.