CELEX: 62017CC0596
Language: en
Date: 2018-12-06 00:00:00
Title: Opinion of Advocate General Saugmandsgaard Øe delivered on 6 December 2018.

Provisional text
OPINION OF ADVOCATE GENERAL
SAUGMANDSGAARD ØE
delivered on 6 December 2018 (1)

Case C‑596/17

Japan Tobacco International SA,
Japan Tobacco International France SAS
v
Premier ministre,
Ministre de l’Action et des Comptes publics,
Ministre des Solidarités et de la Santé
(Request for a preliminary ruling from the Conseil d’État (Council of State, France))
(Reference for a preliminary ruling — Directive 2011/64/EU — Excise duty applied to manufactured tobacco — Article 15(1) — Freedom to determine maximum retail selling prices — National legislation requiring manufacturers and importers to set a single retail selling price per 1 000 items or 1 000 grams for each tobacco product without being able to vary that price according to the quantity contained in unit packets)

I.      Introduction

1.        The request for a preliminary ruling made by the Conseil d’État (Council of State, France) concerns the interpretation of Article 15 of Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco products, (2) read in the light of Articles 2 to 5 of that directive.

2.        This request has arisen in the course of an action for the annulment of certain provisions of two letters, sent by the French authorities to licensed manufacturers and suppliers of tobacco products, concerning the detailed rules governing the approval of retail selling prices for tobacco manufactured in metropolitan France. According to those letters, which reiterate the provisions of Article 572 of the code général des impôts (General Tax Code) (‘CGI’), those operators are free to set a single retail selling price for each tobacco product, which must be expressed as a value per 1 000 items or 1 000 grams. The effect of this system is that the unit price per product remains the same irrespective of the quantity of the product contained in the packaging in which it is released for consumption. Manufacturers and importers are therefore unable to vary the retail selling price for each of their products according to the unit packet in which those products are presented.

3.        The referring court seeks, in essence, to ascertain whether national legislation such as Article 572 of the CGI, inasmuch as it produces such an effect, is compatible with Directive 2011/64. Under that provision, manufacturers and importers are free to determine for each of their products the maximum retail selling price that forms the basis of assessment to the proportional excise duty applied to manufactured tobacco.

4.        At the end of my analysis, I shall conclude that Article 15(1) of that directive does not preclude such national legislation.
II.    Legal framework

A.      EU law

5.        In accordance with Article 1, Directive 2011/64 ‘lays down general principles for the harmonisation of the structure and rates of the excise duty to which the Member States subject manufactured tobacco’.

6.        Article 2(1) of that directive states:
‘For the purposes of this Directive manufactured tobacco shall mean:
(a)      cigarettes;
(b)      cigars and cigarillos;
(c)      smoking tobacco:
(i)      fine-cut tobacco for the rolling of cigarettes;
(ii)      other smoking tobacco.’

7.        Articles 3, 4 and 5 of that directive define cigarettes, cigars or cigarillos and smoking tobacco respectively. 

8.        Article 15(1) of the same directive is worded as follows:
‘Manufacturers or, where appropriate, their representatives or authorised agents in the Union, and importers of tobacco from third countries shall be free to determine the maximum retail selling price for each of their products for each Member State for which the products in question are to be released for consumption.
The first subparagraph may not, however, hinder implementation of national systems of legislation regarding the control of price levels or the observance of imposed prices, provided that they are compatible with Union legislation.’
B.      French law

9.        Article 572 of the CGI, in the version arising from the Law of 26 January 2016 modernising the health system, provides:
‘The retail price for each product, expressed as a value per 1 000 items or 1 000 grams, shall be uniform throughout the territory and freely determined by licensed manufacturers and suppliers. It shall apply following approval by joint order of the ministers responsible for health and budgetary matters, in accordance with the conditions laid down by decree adopted after consultation of the Conseil d’État (Council of State). It shall not, however, be approved if it is less than the sum of the cost price and all taxes.
...’
III. The dispute in the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court

10.      On 30 September 2016 and 20 January 2017, the companies Japan Tobacco International SA and Japan Tobacco International France SAS (hereinafter referred to jointly as ‘the Japan Tobacco companies’) brought before the Conseil d’État (Council of State) actions seeking the annulment for misuse of powers of certain provisions of two letters, dated 6 April 2016 and 22 November 2016, sent by the French authorities to licensed manufacturers and suppliers of tobacco products. Those letters set out the detailed rules for the approval of retail selling prices for tobacco manufactured in metropolitan France, as laid down in Article 572 of the CGI.

11.      That provision requires manufacturers and suppliers to set a single retail selling price for each of their tobacco products, expressed as a value per 1 000 units or 1 000 grams, irrespective of the quantity of the product contained in its packaging. The letter of 22 November 2016 states that, in that context, each product is defined by the combination of a brand and a trade name. That rule, hereinafter referred to as the ‘price per 1 000 items rule’, means that the price for each product remains the same irrespective of the unit packet (termed ‘reference’) in which it is presented. The price per 1 000 items rule is intended to avoid any growth in the consumption of tobacco that might follow from reducing prices for certain products when packaged in larger quantities.

12.      In support of their actions, the Japan Tobacco companies submit, among other pleas in law, that Article 572 of the CGI, on which the contested letters are based, infringes the principle of the freedom to determine maximum retailing selling prices for tobacco products as set out in Article 15(1) of Directive 2011/64 in that it prevents account being taken, in the setting of prices, of any differences in packaging costs on account of the quantities packaged.

13.      In that regard, the referring court has doubts, in the first place, as to the scope of that directive. It observes that that directive may be interpreted, in accordance with its fiscal purpose, as regulating only the prices of tobacco products to the extent that those products are subject to excise duty, that is to say the price of cigarettes, cigars, cigarillos and smoking tobacco as defined in Articles 2 to 5 of the same directive. (3) On that basis, the principle laid down in Article 15(1) of Directive 2011/64 would not apply to the packaging of those products. Consequently, the price per 1 000 items rule, inasmuch as it prohibits any variation in the price of products according to the quantity contained in the unit packets thereof, would not be in breach of that principle.

14.      The Conseil d’État (Council of State) recalls, however, that, in two judgments on actions for failure to fulfil obligations that were given in 2002 (4) and 2010, (5) the Court held to be contrary to that provision two previous versions of Article 572 of the CGI which, in addition to the price per 1 000 items rule, introduced compulsory minimum retail selling price schemes for tobacco products. According to the Court, those schemes were liable to hinder free competition by preventing certain producers and importers from taking advantage of cost prices lower than those of their competitors. The referring court wishes to ascertain whether those judgments reflect a desire on the part of the Court to give the principle of free competition priority over the fiscal purpose served by Directive 2011/64. It therefore asks the Court whether, notwithstanding the definitions provided in Articles 2 to 5 of that directive, the setting of prices for tobacco products by reference to their packaging falls within the scope of the freedom guaranteed for manufacturers and importers by Article 15(1) of that directive. 

15.      In the second place, in the event that the Court answers that question in the affirmative, the referring court asks it whether Article 572 of the CGI, inasmuch as it prevents the aforementioned operators from varying the retail selling prices for their products according to the quantity contained in their packaging, is compatible with Article 15(1) of Directive 2011/64. In this regard, the referring court notes that the price per 1 000 items rule does not prohibit such operators from passing on primary cost differences on whatever account across the full spectrum of prices presented for approval, but only from varying those prices according to the size of the packaging.

16.      It was in those circumstances that the Conseil d’État (Council of State) decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:
‘(1)      Must Directive [2011/64] be interpreted, as regards the definitions of tobacco products set out in Articles 2, 3 and 4 thereof, as also governing the price of packaged tobacco products?
(2)      If the answer to Question 1 is in the affirmative, must Article 15 of Directive [2011/64], in laying down the principle that the price of tobacco products must be determined freely, be interpreted as prohibiting a rule setting the price of those products per 1 000 items or 1 000 grams which, in effect, prohibits manufacturers of tobacco products from adjusting their prices on the basis of potential differences in the cost of packing those products?’

17.      Written observations were lodged before the Court by the Japan Tobacco companies, the French, Italian and Portuguese Governments and the European Commission.

18.      The Japan Tobacco companies, the French Government and the Commission were represented at the hearing of oral argument held on 5 September 2018.
IV.    Analysis

A.      Preliminary observations

1.      The scope of the questions referred

19.      By its two questions, which I shall examine together, the Conseil d’État (Council of State) seeks to ascertain, in essence, whether national legislation such as Article 572 of the CGI, which compels manufacturers and importers to express the single retail price for each of their products as a value per 1 000 items or 1 000 grams and thus prevents them from varying that price according to the quantity of those products contained in the various unit packets in which they are released for consumption, is compatible with Article 15(1) of Directive 2011/64.

20.      In its first question, the national court asks the Court of Justice whether that directive governs the setting of prices for packaged tobacco products. As is clear from the order for reference, that question has to do more specifically with the scope of the principle, set out in Article 15(1) of that directive, as to the freedom of manufacturers and importers to determine the maximum retail selling price for each of their products.

21.      On the one hand, as all of the interested parties with the exception of the Japan Tobacco companies submit, the freedom conferred on manufacturers and importers in that provision might have as its subject the setting of retail prices for ‘each of their products’ in the sense of each manufactured tobacco of a particular brand and type that satisfies one of the definitions given in Articles 2 to 5 of that directive, irrespective of the quantity thereof contained in its packaging (for example, each cigarette of brand X and type Y). (6)

22.      On the other hand, as the Japan Tobacco companies argue, the expression ‘each of their products’ could be interpreted as referring to each unit packet of such a product (for example, each packet of 20, 25 or 30 cigarettes of brand X and type Y). In that event, Article 15(1) of Directive 2011/64 would guarantee the freedom of manufacturers and importers to determine the retail price of each reference marketed by them.

23.      The second question is referred to the Court only in the event that, in reply to the first question, it elects the interpretations of Article 15(1) of Directive 2011/64 set out in the previous point. The Conseil d’État (Council of State) asks the Court whether national legislation such as the price per 1 000 items rule at issue in the main proceedings would in that event infringe that provision in so far as it deprives manufacturers and importers of the freedom to set the price differential between unit packets of different quantities.

24.      In the converse event that the Court considers that ‘products’ within the meaning of Article 15(1) of Directive 2011/64 refers to manufactured tobacco products as such, irrespective of the quantity contained in their packaging, the referring court takes the view that Article 572 of the CGI does not infringe that provision. This is the case, it argues, because the very wording of Article 572 of the CGI states that the prices of the products so defined are to be freely determined. 

25.      While I share the latter point of view, I shall, in my joint analysis of the questions referred, set out the reasons why national legislation such as the price per 1 000 items rule laid down in Article 572 of the CGI does not, even indirectly, limit the freedom guaranteed in Article 15(1) of Directive 2011/64. It will be important, in particular, to explain how such legislation differs from the previous versions of Article 572 of the CGI that were censured by the Court on the ground that they restrict that freedom. (7)
2.      The effect of the national legislation at issue in the main proceedings with which the questions referred are concerned

26.      It is also worth noting, as a preliminary point, that, although Article 572 of the CGI has a number of restrictive effects on the commercial policy of manufacturers and importers of manufactured tobacco, only one of those effects forms the subject of this reference for a preliminary ruling. The Conseil d’État (Council of State) asks the Court whether Article 15(1) of 2011/64 precludes that provision inasmuch as the latter requires operators to express the retail selling price for each of their products as a value per 1 000 items or 1 000 grams, that price remaining the same irrespective of the quantity of the product contained in the packaging in which it is released for consumption. 

27.      The questions referred are not, however, concerned with whether Article 572 of the CGI is consistent with the principle of the freedom to determine prices inasmuch as that provision also has the effect, first, of requiring that the retailing price for each product must be uniform throughout the territory of metropolitan France, secondly, of imposing a floor price, (8) and, thirdly, of preventing manufacturers and importers from varying, up or down, the retail price approved by the administrative authority.

28.      In their observations, the Japan Tobacco companies nonetheless criticise that provision equally on the ground that it produces the aforementioned threefold effect. In particular, they claim that Article 572 of the CGI is incompatible with the principle of the freedom to determine prices because, once approved, a retail price established in accordance with that provision constitutes not only a maximum price but also a minimum price and, therefore, a fixed price for resale.

29.      For the avoidance of any confusion in this regard, I should say here and now that this pricing-policy aspect of Article 572 of the CGI is of no relevance from the point of view of Article 15(1) of Directive 2011/64. As is clear from the case-law set out below, (9) the latter provision requires only that manufacturers and importers be free to establish the maximum retail selling price for each of their products inasmuch as that price forms the basis of assessment to advalorem excise duty. It does not preclude a national measure requiring manufacturers and importers to adhere to a fixed price which they have themselves freely determined.

30.      In this regard, the Court has held that Directive 2011/64 does not preclude a pricing policy provided that it does not run counter to the objectives of that directive, in particular that of ensuring that competition between the different categories of manufactured tobacco belonging to the same group is not distorted. (10)

31.      On this basis, it held in the judgment in Etablissements Fr. Colruyt (11) that Article 15(1) of that directive does not preclude legislation which prohibits retailers from selling tobacco products at a unit price lower than the price indicated by the manufacturer or importer on the revenue stamp affixed to those products, in so far as that price has been freely determined by the manufacturer or importer. According to the Court, such legislation ‘is not encompassed by the situation referred to in Article 15(1) of Directive 2011/64’. (12)

32.      By the same token, that provision does not prohibit national legislation which provides that the approved retail selling price is uniform (which is to say that it is fixed and, therefore, constitutes the maximum and minimum chargeable), provided that that price is freely determined by manufacturers or importers.
B.      The interpretation of Article 15(1) of Directive 2011/64

33.      As stated above, the Conseil d’État (Council of State) asks the Court to determine whether the expression ‘each of their products’ within the meaning of Article 15(1) of Directive 2011/64 refers to each of the manufactured tobaccos of a given brand or type which are released for consumption by manufacturers and importers, or each unit in which those manufactured tobaccos are packaged. The referring court puts this question to the Court so that it can adjudicate on whether that provision is consistent with the price per 1 000 items rule inasmuch as the latter prevents the retail price for each of those manufactured tobaccos from varying according to the quantity contained in their different styles of packaging.

34.      Since the wording of Article 15(1) of Directive 2011/64 does not clarify the scope of the expression at issue, this must be ascertained by interpreting that provision in the light of the general scheme of that directive and of the purpose served by that provision and by the directive of which it forms part. (13)
1.      Interpretation in the light of the general scheme

35.      For the purposes of the task of harmonising excise duty structures which is performed by Directive 2011/64, the maximum retail selling price for each of a manufacturer’s or importer’s products, as referred to in Article 15(1) of that directive, serves as the basis for calculating the proportional share of the excise duty on manufactured tobacco. (14)

36.      In that context, the ‘products’ referred to in that provision, the maximum retail price for which must be freely set by those operators, are, to my mind, manufactured tobaccos inasmuch as these are subject to excise duty.

37.      In that regard, Article 2(1) of Directive 2011/64 states that ‘manufactured tobacco’ falling within the scope of harmonised excise duty includes, first, cigarettes, secondly, cigars and cigarillos, and, thirdly, smoking tobacco. Articles 3 to 5 of that directive define those three categories of manufactured tobacco according to their characteristics and the uses for which they are intended. (15) Those definitions describe only the ‘primary’ packaging that allows the tobacco to be consumed, (16) but do not distinguish manufactured tobaccos according to their ‘external’ packaging. (17)

38.      The external packaging of tobacco products, on the other hand, as the French Government and the Commission have pointed out, are the subject of harmonisation measures under Directive 2014/40. Article 2(4) of that directive defines ‘tobacco products’. ‘[C]igarette’ and ‘cigar’ are defined in points 10 and 11 of that article by reference to the definitions contained in Article 3 and Article 4 of Directive 2011/64. Those terms are distinguished from the term ‘unit packet’, which Article 2(30) of Directive 2014/40 defines as ‘the smallest individual packaging of a tobacco or related product that is placed on the market’. In that regard, Article 14(1) of that directive governs the minimum quantity of unit packets of certain tobacco products.

39.      The provisions of Directive 2011/64 that deal with the calculation of harmonised excise duty say no more about the unit packet in which manufactured tobacco is sold than Articles 2 to 5 of that directive.

40.      In accordance with Article 7(1) of that directive, cigarettes are subject to an ad valorem excise duty calculated on the maximum retail selling price, including customs duties, and also to a specific excise duty calculated per unit of the product. Contrary to what the Japan Tobacco companies state, the concept of ‘maximum retail selling price’ is not distinct from the concept of ‘unit of the product’ inasmuch as the former refers in this context to unit packets of products. The ‘maximum retail selling price’ is distinguished from ‘the unit of the product’ in so far as the former constitutes the basis of assessment to proportional excise duty that is arrived at by applying to that price an identical rate for all cigarettes, while the latter serves as the basis for calculating the specific excise duty, the amount of which is the same for all cigarettes. (18)

41.      As the French Government has noted, Directive 2011/64 does not contain any provision which establishes the cigarette packet as being the unit of measurement for calculating either of the excise duty components. What is more, because they must be the same for all cigarettes, the rate of the ad valorem excise duty and the amount of the specific excise duty cannot vary according to the quantity contained in unit packets.

42.      To my mind, the Japan Tobacco companies are also wrong to submit that the concept of the ‘weighted average retail selling price’, referred to in Article 8(2) and Article 10 of Directive 2011/64, is of no use unless the unit price of a cigarette may vary according to the size of the packet. After all, that concept serves as a reference for determining the importance of specific excise duty within the total tax burden and the minimum overall excise duty on cigarettes. In that context, the ‘weighted average retail selling price’ is calculated by reference to the total value of all cigarettes (all brands included) released for consumption, based on the retail selling price including all taxes, divided by the total quantity of cigarettes released for consumption during the previous calendar year. The usefulness of that concept is not therefore in any way dependent on the existence of variations in the price of a single cigarette depending on the different unit packets in which it is presented.

43.      Pursuant to Article 14(1) of Directive 2011/64, manufactured tobacco other than cigarettes are subject to excise duty which may be ad valorem (calculated on the basis of the freely determined minimum retail selling prices), specific (expressed per kilogram or by number of items in the case of cigars or cigarillos) or mixed. The unit packet does not constitute a reference for calculating excise duty in this context either.

44.      What is more, that provision says that Member States may establish a minimum amount of advalorem or mixed excise duty, while paragraph 2 of that article lays down certain rates or minimum amounts which the excise duty must satisfy. In accordance with paragraph 3 of that article, those rates or amounts are effective for all products belonging to the group of manufactured tobaccos concerned, (19) without distinction within each group as to, inter alia, presentation. As the French Government has submitted, that provision assumes that the rates and minimum amounts of excise duty will not vary according to the packaging in which the products in a given group are presented.

45.      All of the foregoing considerations indicate that the manufactured tobaccos subject to excise duty are not unit packets of tobacco products but cigarettes, cigars, cigarillos and smoking tobaccos as defined in Articles 2 to 5 of Directive 2011/64, irrespective the quantity contained in their packaging.

46.      To my mind, that definition of the subject of the harmonised excise duty also determines the footprint of the concept of ‘products’ within the meaning of Article 15(1) of that directive. Thus, in so far as the maximum retail selling price which manufacturers and importers freely determine for each of their products constitutes the basis of assessment to ad valorem excise duty, such products refer to manufactured tobaccos as defined in the previous point.

47.      Under the interpretation I am advocating, that provision confers on such operators the freedom only to set the unit price for their cigarettes, cigars and cigarillos or the price per unit of weight for their smoking tobaccos of a given brand or type, but does not guarantee that they will be able to vary those prices according to the quantity of those products contained in the packaging in which they are presented.

48.      The purpose of that directive in general and of Article 15(1) thereof in particular bears out that interpretation.
2.      Teleological interpretation

49.      As Article 1 thereof states, Directive 2011/64 has as its purpose to lay down general principles for the harmonisation of the structure and rates of the excise duty to which the Member States subject manufactured tobacco. As recital 9 of that directive indicates, that harmonisation is intended, in particular, to ensure that ‘competition in the different categories of manufactured tobacco belonging to the same group [is] not distorted by the effects of the charging of the tax and, consequently, [that] the national markets of the Member States [are opened up]’. According to recital 10 of that directive, ‘the imperative needs of competition imply a system of ‘freely formed prices for all groups of manufactured tobacco’.

50.      The Court has accordingly held in its case-law that Article 15(1) of Directive 2011/64 seeks to ensure that the determination of the tax base of the proportional excise duty on tobacco products, that is the maximum retail selling price of those products, is subject to the same rules in all the Member States. That provision is also intended to maintain the freedom of those operators in such a way as to enable them to make effective use of the competitive advantage resulting from any lower cost prices in order to offer more attractive retail selling prices. (20)

51.      The Court has further held that, as part of the machinery for the taxation of tobacco, Article 15(1) of Directive 2011/64 means that the price of each product, once determined by the manufacturer or importer and approved by the public authority, is binding as a maximum price and must be observed as such at every stage of the distribution chain until it is sold to the consumer. That rule ensures that the integrity of tax revenue is not undermined by the exceeding of that price. (21) It ensures that manufacturers and importers do not report a lower price at the time when the tax is levied in order reduce the tax burden, only then to go on and sell the goods at a higher price. (22)

52.      As I see it, the achievement of those objectives requires only that such operators should be free to determine the unit price of cigarettes, cigars or cigarillos or the price per unit of weight for smoking tobacco of a given brand or type which they release for consumption. It does not presuppose that Article 15(1) of Directive 2011/64 be interpreted as also requiring that those operators should be able to vary the retail price for each of the aforementioned products according to the unit packets in which they are presented.

53.      With regard in particular to the objective relating to free competition, the Court has held that Article 15(1) of Directive 2011/64 provides that manufacturers and importers are to be free to determine the maximum retail selling price for each of their products, ‘the aim being to ensure effective competition between them’(my emphasis). (23) The principle of the freedom to determine the maximum retail selling price thus ensures that the form of taxation provided for in Directive 2011/64 does not have the secondary effect of distorting competition and impeding the free movement of goods. (24)

54.      In that context, the competitive advantage that must be maintained refers, in my view, to any advantage in terms of primary costs which a manufacturer or importer enjoys in comparison with other manufacturers and importers. (25) It does not refer to the competitive advantage enjoyed by one unit packet of manufactured tobacco of a given brand or type over another unit packet of the same manufactured tobacco sold by the same operator.

55.      That interpretation is not called into question by the judgments where the Court has held to be incompatible with the principle of the freedom to determine prices compulsory minimum retail selling price schemes for manufactured tobacco which have previously been provided for in a number of Member States including France. (26)

56.      It should be noted here that, in the judgment of 27 February 2002, Commission v France, (27) Article 572 of the CGI, in a version prior to that at issue in the main proceedings, was held to be contrary to Article 9(1) of Directive 95/59/EC (28) (the content of which is reproduced in Article 15(1) of Directive 2011/64). As compared with the version of Article 572 of the CGI that is applicable here, that previous version imposed an additional restriction inasmuch as the price per 1 000 items of a category of cigarettes sold under the same brand could not be lower than the price of the most popular product of the same brand, irrespective of the style of packaging or unit packet. The Court held that the national provision at issue in actual fact imposed a minimum retail selling price for cigarettes, even if that minimum price was set only indirectly. According to the Court, the setting of a minimum retail selling price by public authorities inevitably limits the freedom of manufacturers and importers to determine the maximum retail selling prices for each of their products, since, in any event, those prices cannot be lower than the compulsory minimum price.

57.      In the judgment of 4 March 2010, Commission v France, (29) another previous version of Article 572 of the CGI, which imposed on manufacturers and importers a minimum retail selling price for cigarettes equal to a given percentage, fixed by decree, of the average price of cigarettes on the market, was also held to be contrary to the principle of the freedom to determine prices. The scheme so provided for was liable to eliminate price differences between competing products and to cause prices to converge around the price of the most expensive product. In so doing, that scheme undermined the freedom of manufacturers and importers to determine the maximum retail selling price for their products. The Court censured, on the same day, similar schemes in place in Austria and Ireland, (30) and, in the same year, a compulsory minimum price scheme operated in Italy. (31)

58.      In those four judgments given in 2010, the Court held that a minimum price system structured in such a way as to ensure, in any event, that the competitive advantage which could result for some producers and importers of those products from lower cost prices is not impaired and, thus, competition is not distorted, on the other hand, would be consistent with the principle of the freedom to determine prices. (32)

59.      In this instance, the Japan Tobacco companies submit that the price per 1 000 items rule produces the same effect as a minimum price system such as that sanctioned by the Court in the judgment of 27 February 2002, Commission v France. (33) According to those companies, the manufacturer or importer is compelled to select as the reference price for each product of a given brand and trade name the price for one of the unit packets of that product and to charge the same price for all unit packets of that product. This cancels out the competitive advantage that might accrue to that operator from the lower cost prices of unit packets containing larger quantities of manufactured tobacco. The operator is, after all, prevented from steering consumers towards products the unit price of which is lower because the products are packaged in larger quantities.

60.      I am not convinced by that line of argument.

61.      I would recall in this regard that the objective pursued by Article 15(1) of Directive 2011/64 is not to make it possible for a manufacturer or importer to take advantage of the reduced primary costs from which it benefits by having its products packaged in larger quantities in order to point demand towards the largest packets in which it sells a particular brand and type of product. It matters only that that operator should be able to benefit from any competitive advantage arising from the fact that its primary costs are lower than those of its competitors. (34)

62.      Now, an interpretation of that provision which does not guarantee manufacturers and importers the freedom to vary the prices of their manufactured tobaccos according to the quantity thereof contained in their packaging and which, therefore, authorises national legislation such as the price per 1 000 items rule at issue in the main proceedings does not have the effect of eliminating such a competitive advantage.

63.      As the referring court has emphasised, the only restriction imposed by that rule is that it makes it impossible to report a different retail selling price for a product of the same brand and trade name according to the unit packet in which it is presented. The manufacturer or importer concerned remains free, on the other hand, to determine the price per 1 000 items or 1 000 grams for that product without being constrained by the price of the most popular packet. The price per 1 000 items rule does not limit the ability of manufacturers and importers to reflect across the full spectrum of retail prices for their products any primary costs which are lower than those connected with their competitors’ products.

64.      After all, the price per cigarette, cigar or cigarillo or per unit of weight for smoking tobacco of a particular brand or type, as freely set by those operators, is intended to incorporate a portion of the full primary costs connected with products of that brand and type. Packaging costs are included in that price as components of production costs, which are themselves a component of primary costs. As the Commission has submitted, implicit in the freedom of manufacturers and importers to determine the unit price for each of their manufactured tobaccos is the freedom to pass on in that price the costs associated with the various styles of packaging in which those products are marketed to an extent and by a method of their choice. 

65.      Those operators may elect, for example, to set a price per cigarette of a given brand and type which reflects an average of the packaging costs associated with each of the packets in which that cigarette is sold. They are also at liberty, for example, to determine a price which incorporates the packaging costs of packets with the highest or lowest packaging costs.

66.      Consequently, the price per 1 000 items rule does not prevent manufacturers and importers from passing on in the price for each of their manufactured tobaccos any competitive advantage arising from primary costs, including packaging costs, which are lower than those of their competitors. That competitive advantage must, however, be spread across all unit packets of a product of the same brand and type.

67.      The foregoing submissions make it clear that national legislation such as the price per 1 000 items rule cannot be regarded as having the same effects as a compulsory minimum price system. Legislation of this kind does not restrict the freedom of manufacturers and importers to determine the maximum retail selling price for their products, and does not, therefore, limit effective competition between those operators.
3.      Closing remarks

68.      Account being taken of all the foregoing, I take the view that the freedom provided for in Article 15(1) of Directive 2011/64 has as its subject the setting by manufacturers and importers of the maximum retail selling price for each of their manufactured tobacco products, inasmuch as they are subject to excise duty. The products referred to are cigarettes, cigars or cigarillos and smoking tobacco of a particular brand and type, irrespective of the quantity contained in their packaging.

69.      It follows that that provision does not preclude national legislation, such as Article 572 of the CGI, which provides that the single price of each product of a given brand and type, as freely set by those operators, must be expressed as a value per 1 000 items or 1 000 grams and, consequently, cannot vary according to the quantity of that product contained in the unit packets in which it is released for consumption.

70.      For the sake of completeness, I would point out that that conclusion does not prejudge the question of whether, as the Italian Government and the Commission contend, Article 15(1) of Directive 2011/64 not only does not preclude such legislation but requires that the maximum retail price of each product should, inasmuch as it serves as the basis for assessment to ad valorem excise duty, be the same by unit (or by weight) irrespective of the quantity of the product contained in the packaging in which it is presented. (35)

71.      For the purposes of providing the referring court with an answer that will enable it to settle the dispute in the main proceedings, it is sufficient to make clear that that provision does not guarantee manufacturers and importers the freedom to modulate the prices of their products according to the quantity contained in their packaging and, consequently, does not preclude national legislation which rules out such modulation. There is no need to examine whether or not, in the context of the harmonisation of excise duty structures carried out by Directive 2011/64, the Member States retain the right to authorise such operators to vary the maximum retail price of each of their products, inasmuch as this serves as the basis for assessment to proportional excise duty, according to the unit packet in which those products are released for consumption.
V.      Conclusion

72.      In the light of all the foregoing considerations, I propose that the Court’s answer to the questions referred for a preliminary ruling by the Conseil d’État (Council of State, France) should be as follows:
Article 15(1) of Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco does not preclude national legislation, such as that at issue in the main proceedings, which provides that manufacturers and importers are to be free to determine a single retail selling price for each of their manufactured tobacco products of a particular brand and type, to be expressed as a value per 1 000 items or 1 000 grams, which cannot be modulated according to the quantity contained in the unit packets in which each of those products is released for consumption.

1      Original language: French.

2      Council Directive of 21 June 2011 (OJ 2011 L 176, p. 24).

3      Although the order for reference expressly mentions only Articles 2 to 4 of Directive 2011/64, the national court probably meant to refer to Article 5 of that directive too, which defines smoking tobacco. 

4      Judgment of 27 February 2002, Commission v France (C‑302/00, EU:C:2002:123).

5      Judgment of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111).

6      The terms ‘brand’ and ‘type’, although not expressly used in Article 15(1) of Directive 2011/64 to identify each of a manufacturer’s or importer’s products, appear in Article 5(1) and (6) of Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products (OJ 2014 L 127, p. 1). For example, a cigarette of brand X may be of a ‘light’, ‘blonde’ or ‘brown’ type. It follows from the documents before the Court that the term ‘type’ corresponds to the term ‘dénomination sociale’ (trade name) used in the letter of 22 November 2016 at issue in the main proceedings.

7      See judgments of 27 February 2002, Commission v France (C‑302/00, EU:C:2002:123), and of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111).

8      Article 572 of the CGI provides that the price of manufactured tobacco products cannot be less than the sum of the primary cost and all taxes associated with the product. The conformity of that minimum price with Article 8(6) of Directive 2011/64, which, subject to compliance with certain conditions, authorises Member States to set a minimum tax threshold below which ad valorem excise duty has no proportional effect, is not challenged in this case. See in this regard judgment of 9 October 2014, Yesmoke Tobacco (C‑428/13, EU:C:2014:2263, point 27).

9      See points 50, 51 and 53 of this Opinion.

10      Judgment of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111, paragraph 47).

11      Judgment of 21 September 2016 (C‑221/15, EU:C:2016:704, paragraphs 27 to 31).

12      Judgment of 21 September 2016, Etablissements Fr. Colruyt (C‑221/15, EU:C:2016:704, paragraph 29 and case-law cited).

13      See, in particular, judgments of 1 July 2008, Sweden and Turco v Council (C‑39/05 P and C‑52/05 P, EU:C:2008:374, paragraph 41), and of 16 July 2015, CHEZ Razpredelenie Bulgaria (C‑83/14, EU:C:2015:480, paragraph 55).

14      See Article 7(1), Article 9(2)(b) and Article 14(1)(a) of Directive 2011/64. See also points 40 and 43 of this Opinion.

15      See in this regard recital 4 of Directive 2011/64.

16      For example, Article 3(1)(b) and (c) of Directive 2011/64 includes within the category of cigarette ‘rolls of tobacco which, by simple non-industrial handling, are inserted into cigarette-paper tubes’ and ‘rolls of tobacco which, by simple non-industrial handling, are wrapped in cigarette paper’. According to Article 4(1)(a) of that directive, the category of cigars and cigarillos includes, ‘if they can be … smoked as they are’, ‘rolls of tobacco with an outer wrapper of natural tobacco’.

17      I note, however, that Article 5(1(b) of Directive 2011/64 encompasses within the category of ‘smoking tobacco’ ‘tobacco refuse put up for retail sale’. That reference to packaging serves not to distinguish the various unit packets from refuse but rather to dissociate refuse which is subject to harmonised excise duty, inasmuch as it is put up for retail sale, from other waste. 

18      See Article 7(2) of Directive 2011/64.

19      It follows from Article 13 of Directive 2011/64 that the manufactured tobacco groups other than cigarettes are the cigars and cigarillos group, the group comprising fine-cut tobacco intended for the rolling of cigarettes and the other smoking tobaccos group. 

20      See, in particular, judgments of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111, paragraph 36), and of 21 September 2016, Etablissements Fr. Colruyt (C‑221/15, EU:C:2016:704, paragraph 24).

21      Judgment of 21 September 2016, Etablissements Fr. Colruyt (C‑221/15, EU:C:2016:704, paragraph 25).

22      See judgment of 16 November 1977, GB-Inno-BM (13/77, EU:C:1977:185, paragraph 17), and Opinion of Advocate General Kokott in Commission v Ireland, Commission v France and Commission v Austria (C‑197/08, C‑198/08 et C‑221/08, EU:C:2009:655, point 23).

23      See judgments of 19 October 2000, Commission v Greece (C‑216/98, EU:C:2000:571, paragraph 20); of 4 March 2010, Commission v Austria (C‑198/08, EU:C:2010:112, paragraph 28); of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111, paragraph 36); of 4 March 2010, Commission v Ireland (C‑221/08, EU:C:2010:113, paragraph 39); and of 24 June 2010, Commission v Italy (C‑571/08, not published, EU:C:2010:367, paragraph 38).

24      See Opinion of Advocate General Kokott in Commission v Ireland, Commission v France and Commission v Austria (C‑197/08, C‑198/08 and C‑221/08, EU:C:2009:654, paragraphs 40 and 41). See also judgment of 21 June 1983, Commission v France (90/82, EU:C:1983:169, paragraphs 20 and 21).

25      See also to this effect Opinion of Advocate General Wahl in Etablissements Fr. Colruyt (C‑221/15, EU:C:2016:288, points 23 and 24). Furthermore, the principle of the freedom to determine prices also presupposes, of course, that manufacturers and importers are free to differentiate the prices of their products according to their brand and type (see in this regard point 30 of this Opinion).

26      See judgment of 19 October 2000, Commission v Greece (C‑216/98, EU:C:2000:571, paragraph 21) and the case-law mentioned in points 56 and 57 of this Opinion.

27      C‑302/00, EU:C:2002:123, paragraphs 14 and 15.

28      Council Directive of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (OJ 1995 L 291, p. 40).

29      C‑197/08, EU:C:2010:111, paragraph 55.

30      Judgments of 4 March 2010, Commission v Austria (C‑198/08, EU:C:2010:112, paragraph 45), and Commission v Ireland (C‑221/08, EU:C:2010:113, paragraph 41).

31      Judgment of 24 June 2010, Commission v Italy (C‑571/08, not published, EU:C:2010:367, paragraph 44).

32      See judgments of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111, paragraph 38); of 4 March 2010, Commission v Austria (C‑198/08, EU:C:2010:112, paragraph 30); of 4 March 2010, Commission v Ireland (C‑221/08, EU:C:2010:113, paragraph 41); and of 24 June 2010, Commission v Italy (C‑571/08, not published, EU:C:2010:367, paragraph 40).

33      C‑302/00, EU:C:2002:123, paragraphs 14 and 15.

34      See point 54 of this Opinion.

35      In support of such a position, the Italian Government submits that, because of its impact on the calculation of excise duty, the setting of a different price for each unit packet of the same product runs the risk of undermining the integrity of tax revenue.