CELEX: 61978CC0170(02)
Language: en
Date: 1983-05-10 00:00:00
Title: Opinion of Mr Advocate General VerLoren van Themaat delivered on 10 May 1983. # Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland. # Tax arrangements applying to wine. # Case 170/78.

OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
the taxation arrangements of the United           limits of that discretion are naturally
Kingdom. Furthermore, in relation both            wider, the smaller or more partial the
to wine and to beer there is not always a         possible degree of interchangeability
fixed ratio between the alcoholic content         between the two products.
of those beverages and their price.
                                                  In view of the fact that beer and wine
Those considerations in my view show              are only partly interchangeable and of
that the relatively heavier taxation of           the considerable differences described
wine as opposed to that on beer, which            between those two beverages, it therefore
has been described, does not in itself            seems to me in this case that it has still
justify with sufficient certainty the             not been proved that those limits have
 assumption that those tax arrangements           been exceeded. There is in my view
 are of such a nature as to afford indirect       support for the opposite opinion above
 protection to domestic beer production.          all, in the fact that, both according to the
 In this regard it should not be                  criterion for comparison used by the
 overlooked that, until the taxation of           Commission and on the basis of other
 beer and wine is harmonized throughout           methods of comparison, substantial
 the common market, the requirement               grounds emerge which are still capable
 that there should be an "appropriate tax          of justifying tax arrangements of that
 ratio" offers the Member States in the            kind and that the Commission has not
 framework of autonomy with regard to              succeeded in proving that the tax
 taxation a discretion limited only by the         arrangements in question lead with a
 fact that the tax arrangements in                 certain degree of probability to indirect
 question may not be discriminatory or             protection of British beer production
 protective in nature in relation to               against wine imported from other
  imported interchangeable products. The           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.
                         O P I N I O N OF MR ADVOCATE GENERAL
                                   VERLOREN VAN THEMAAT
                                  DELIVERED O N 10 MAY 1983 '
   Mr President,                                    Commission correctly concluded in its
   Members of the Court,                            application of 7 August 1978 that the
                                                    excise duty on still light wine levied by
                                                    the United Kingdom at that time
   1. State of the procedure                        conflicted with the second paragraph of
                                                    Article 95 of the EEC Treaty. At that
                                                    time the excise duty was UKL 3.250 per
   1.1. Today the Court is once again               gallon, compared with UKL 0.6084 per
   concerned with the question whether the          gallon of beer of standard quality.
   1 — Translated from the Dutch.
   2300
 ---pagebreak---                               COMMISSION v UNITED KINGDOM
  1.2. The material time for purposes of the parties since the Court's interlocutory
        decision                             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
 The relevant situation, according to the    Treaty was infringed. However, such a
 judgment of the Court in inter alia Case    view would conflict with the interpret-
 7/61 (Commission v Italy [1961] ECR         ation of Articles 169 and 171 of the
 317, paragraphs 1 to 7, relating to pigs)   Treaty contained in the judgment cited.
 and the commentaries thereon, is the        In that regard, developments in the
 situation at the time at which the appli-   United Kingdom after the application
 cation is lodged (see H.G. Schermers,       was lodged are of importance solely in
Judicial Protection in the European          so far as they may be helpful in throwing
 Communities, Second Edition, p. 227,        new light on the position at the time at
 and H. A. H. Audretsch, Supervision in      which the application was lodged.
 European Community Law, pp. 29, 36, 38      Secondly, the reference to the earlier
 and 40 to 46). That judgment shows that     case-law of the Court is important in this
 even if the Member State concerned has      case because the Commission clearly
 fulfilled    its obligations during the     takes the view that even since its
procedure the Commission may have an         application was lodged the infringement
interest "in obtaining a decision on the     of the Treaty which it set out has still
issue whether the failure occurred."         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
Mr Advocate General Lagrange, at page        be taken by the United Kingdom under
334 of his Opinion in Case 7/61, cited       Article 171 of the Treaty in order to put
above, reached the same conclusion as        an end to the alleged infringement of the
the Commission, inter alia on the basis      Treaty.
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        1.3. The relevant facts according to the
breach of its obligations."                        application
                                             In its reasoned opinion of 8 November
I consider the foregoing reference to the    1977, the Commission stated that the
earlier case-law of the Court to be of       excise duty on still light wine had been
particular importance in this case for two   increased with effect from 1 January
reasons. First, certain passages of the      1977 from UKL 2.955 per gallon to UKL
written and oral submissions of the          3.250 per gallon, whilst the excise duty
                                                                                   2301
 ---pagebreak---                   OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
on the relevant beer was UKL 0.6084 per      the application of the second paragraph
gallon. Per degree of alcohol, an excise     of Article 95. Moreover, according to the
duty of UKL 0.2955 and UKL 0.2708            United Kingdom, even if such a possi-
per gallon was levied on still light wines   bility of substitution were recognized,
of 11° and         12° respectively, in      the tax system applied to wine was not
comparison with UKL 0.2028 per gallon        protective in nature within the meaning
of beer. In relation to price, the excise    of that provision.
duty on beer represented on average
25% and the excise duty on wine at least
38% of the sale price to the consumer.       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
According to the reasoned opinion, the       Article 95, it was necessary to look not
excise duty on the relevant wines was,       only at the present state of the market
according to the criteria used, approxi-     but also at possible developments within
mately 50% (on the basis of the criterion    the context of free movement of goods
of alcoholic strength or price to the        within the Community and at further
consumer) or even more than 400% (on         possibilities for the substitution of
the basis of the criterion of volume used    products for one another which might be
in the United Kingdom legislation on         revealed by intensification of trade, so as
excise duty) higher than the excise duty     fully to develop the complementary
on beer.                                     features of the economies of the Member
                                             States in accordance with the objectives
                                             laid down by Article 2 of the Treaty.
There was a competitive relationship
between beer and wine so that the             In paragraph 10 of the judgment, the
differential taxation described afforded      Court emphasized that the second
indirect protection to the production of      paragraph of Article 95 (in relation to
beer, such as is prohibited by the second     determining whether there was a
paragraph of Article 95 of the EEC            protective effect) was linked to the
Treaty.                                       "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
 1.4. Judgment of 27 February 1980            application of the second paragraph of
                                              Article 95 for it to be shown that a given
                                              tax mechanism is likely, in view of its
In its interlocutory judgment of 27           inherent characteristics, to bring about
February 1980, [1980] ECR 417, the            the protective effect referred to by the
Court stated first that the United            Treaty."
Kingdom had essentially admitted (had
not called in question) the facts put
forward by the Commission, especially as      In paragraph 14 of the judgment, the
regards the evolution in the rates of         Court stated: "It is impossible to deny
excise duty. The United Kingdom did           that to a certain extent the two beverages
deny the existence of a competitive           in question are capable of meeting
relationship between wine and beer, with      identical needs, so that it must be
the result that there was no possibility of   acknowledged that there is a certain
 substitution, which was the condition for    degree of substitution for one another."
2302
 ---pagebreak---                               COMMISSION v UNITED KINGDOM
 In his first Opinion Mr Advocate              In paragraph 19 of its judgment the
 General Reischl further confirmed that        Court added: "Of the criteria put
 the products were interchangeable by          forward by the parties, the only factor
 stating at page 442 that, from the point     which may enable an appropriate and
 of view of consumers, beer and wine           somewhat objective comparison to be
 were put to the same use and had the          made consists therefore in the appraisal
 same characteristics. Both were produced     of the incidence of the tax burden in
 by fermentation and differed from the        relation to the alcoholic strength of the
 other thirst-quenching beverages listed in   beverages in question." By taking into
 Chapter 22 of the Common Customs             consideration that criterion, the Court
 Tariff in that they contained alcohol.       then ascertained inter alia that wine was
 According to his Opinion, the relatively     at that time subject in the United
 small alcoholic content also distinguished   Kingdom to a tax which was approxi-
 both drinks from spirits covered by tariff   mately 50% higher than that on beer,
 heading 22.09 C of the Common Cus-           assuming that the alcoholic strength of
 toms Tariff and obtained by distillation. I
                                              the beverages was respectively 11° to 12°
 regard paragraph 14 of the judgment, as
                                              and 3° to 3.7°. As appears from the same
 amplified by Mr Advocate General
                                              paragraph, the Italian         Government
 Reischl in his first Opinion on this case,
 as an important starting-point for-my        argued that in the case of normal table
 own Opinion.                                 wines with an alcoholic strength of 9° to
                                              10° the margin of discrimination was
                                              approximately 100% to 125%.
                                              In paragraph 20 the Court stated in
                                              conclusion and subject to the obser-
                                              vations 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, com-
With regard to the basis of calculation to    parison could be made between the rates
be used, in relation to the established       of tax applied to wine and beer, it
competitive relationship, for comparing       seemed that wine was subject in the
the total tax burdens imposed on the two     United Kingdom to a tax burden which
products, the Court stated in paragraph      was heavier than that imposed on beer.
 18: "The explanations supplied show
that neither simply taking into consider-
ation the volume of the two beverages         I shall take paragraphs 18 to 20 inclusive
nor a comparison between the typical          in relation to the criteria to be used for
units of consumption can provide a           comparison as the second starting-point
suitable basis for comparison. The same      for my own analysis. In that regard, I
applies to a comparison based on the         infer from the words which I have
effect of the tax burden on the selling      italicized on the one hand that the Court
price of the two types of beverages in       considers alcoholic strength to be an
view of the fact that although it is         appropriate, although imperfect, cri-
relatively easy to ascertain an average      terion for comparison. On the other
price in the case of beer it is difficult    hand, I infer that the Court did not
to determine a representative basis for      intend also to exclude the supplementary
comparison in the case of wine, a            use of the criteria of volume and price.
characteristic of which is the wide range    At least in relation to the supplementary
of prices."                                  importance of the criterion of price, that
                                                                                   2303
 ---pagebreak---                    OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
also seems to be the logical inference to     the healthy development of breweries.
be drawn from the questions put to the        There is virtually no importation of beer
parties in the Court's subsequent order       in that group of countries, whilst in the
of 15 July 1982.                              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
A third important starting-point for my       127/75 Bobie v Hauptzollamt Aachen-
own analysis is in my opinion to be            Nord [1976] ECR 1079, Case 148/77
found in the view expressed in paragraph      Hansen v Hauptzollamt Flensburg [1978J
24 "that a comparison of the develop-         ECR 1787, Case 21/79 Commission v
ment of the two tax systems in question       Italy [1980] ECR 1, and Case 46/80
shows a protective trend as regards            Vinal v Orbat [1981] ECR 77, a Member
imports of wine in the                United  State may lay down differing tax
Kingdom."                                     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
 1.5. The further course of the procedure      that they are not discriminatory or
                                               protective in nature. The establishment
                                               of a reciprocal relationship between the
For a summary of the supplementary             rates for beer and wine, like the har-
observations of the parties on the basis of    monization of the rates of taxation,
the Court's interlocutory judgment, I          constitutes an essential aim only in the
will at this stage simply refer to the         context of the harmonization            of
second Report for the Hearing. With            legislation and cannot be achieved by
reference to those supplementary obser-        means of the application of Article 95.
vations, the Court in the letter of            For a summary of the remaining
 summons to the re-opened oral pro-            submissions of the parties at the second
 cedure expressly asked the Commission         hearing I refer to the third Report for
 to explain at the hearing its views           the Hearing.
 concerning the appropriate tax ratio
 between wine and beer and also for an
 explanation of the influence of the
 manufacturing processes for wine and          In his Further Opinion of 16 June 1982,
 beer on their price structures. At the         Mr Advocate General Reischl, in
 sitting on 19 May 1982, the Commission         connection with determining whether
 confirmed that in its view a ceiling           products may be substituted for one
 should be established by the Community         another, refers to the judgments in Cases
 for the taxation of wine but there should      45/75 REWE v Hauptzollamt          Landau
 be no fixed reciprocal relationship be-        [1976] ECR 181, and 27/67 Fink-Frucht
 tween rates of taxation applicable to          v Hauptzollamt       München-Landsberger-
 wine and beer. That point of view, to          straße [1968] ECR 223, as well as to the
 which I shall return in my analysis, is        interlocutory judgment of the Court.
 based on the twofold consideration that        With regard to the proper tax ratio
 there are Member States which produce          between wine and beer he considers on
 beer exclusively or almost exclusively but     the basis of the judgments of the Court
 that in the remaining Member States            of 27 February 1980 on the tax
 both beer and wine are produced                arrangements applicable to spirits in
 without its appearing that the heavier         Cases 168/78, 169/78, 171/78, 55/79
  taxation of beer in those countries affects   and 68/79, [1980] ECR 347, 385, 447,
  2304
 ---pagebreak---                                       COMMISSION v UNITED KINGDOM
 481 and 501 respectively, that differential         purpose I have chosen as the starting-
taxation — which he also regards as                  points for the definition of my view the
permissible in principle on the basis of             following points, already referred to, in
the judgment of the Court cited by the               the Court's interlocutory judgment:
Commission — should not dicriminate
or afford protection against imported
products. In his detailed examination of             (a) The interchangeability of wine and
the excise duty applied to wine in                        beer;
relation to the various criteria for
comparison, he questions inter alia
"whether and how far alcoholic content               (b) The comments on the various criteria
has a decisive effect on consumer                         for    comparison,      in the     light,
behaviour, in view of the other                           however, of the statements contained
considerable differences between wine                     in the Court's decision of 15 July
and beer, and whether that is not                         1982 and also in the light of the
ultimately influenced only by the selling                 parties' replies to that decision;
price of the beverages in question."
Finally, he concludes "that the relatively
heavier tax burden on wine in relation to            (c) The protective trend identified in
that on beer . . . does not in itself justify             paragraph 24.
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 infor-                2.2. The interchangeability     of wine and
mation available at that time. In my own                   beer
examination I shall therefore concentrate
on examining the new facts which have
since become available as a result of the           With regard to the interchangeability of
questions put by the Court in its order of          wine and beer, I have nothing to add at
 15 July 1982. As the Court is aware,               this stage to the remarks contained in the
those questions related in particular to            Court's judgment and the two Opinions
the consumer prices and the fiscal                  of Mr Advocate General Reischl. If it is
element therein in the various Member               accepted that there is a competitive
States since 1977 and also to the trend in          relationship, it is at the same time
the consumption of wine and beer in the             recognized that the second paragraph of
various Member States since 1972.                   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. S u p p l e m e n t a r y r e m a r k s
2.1. Summary of the starting-points for my           2.3. The criteria for comparison for the
     own analysis                                          determination of the tax burden
I now pass to my own analysis of the                The Court concluded in paragraphs 19
problems raised by this case. For that               and 20 of its interlocutory judgment that
                                                                                             2305
 ---pagebreak---                    OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
on the basis of the alcoholic strength,       consumption of wine and beer in the
which was regarded by the Court as the        most important wine- and              beer-
most objective, although          imperfect,  consuming countries justifies even a
criterion, the wines considered to be         somewhat lower corrective factor of
relevant for puposes of comparison were       1.35. On the basis of that criterion,
subject to a tax which was approximately      taxation on wine would be more than
50°/o higher than that on the relevant        three times as high as that on beer. The
beer. I shall later return to the question    margin of discrimination would therefore
of the proper tax ratio, which was left       amount to at least 200%.
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.
                                              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
First of all, as the Italian Government       years have now passed since the pub-
has rightly observed in its various obser-    lication of that report. Secondly, with
vations, the use of the criterion of          reference to the Further Opinion of Mr
volume is logical, inasmuch as the United     Advocate General Reischl, I take the
Kingdom's tax arrangements are them-          view that differences in production costs,
selves based on the criterion of volume.      alcoholic strength and other differences
Moreover, Mr Advocate General Reischl         in. cost and quality, together with
rightly observed in his first Opinion that    consumers' preferences, ultimately find
the interchangeability of wine and beer       expression in the price of the various
results in particular from the fact that      products. It is not without reason that
both are thirst-quenching drinks of low       the terms "competitive mechanism" and
alcoholic content and, as is well-known,      "price mechanism" are often regarded as
the volume of a drink is one of the           synonymous. The competive relationship
decisive factors in the quenching of          between wine and beer is in fact
thirst. The Italian Government admits          expressed in their price ratio. If the
that a corrective factor of 1.5 must be        United Kingdom had imposed upon beer
applied here, that is to say that 1 litre of   and wine taxation calculated on the basis
wine must be compared with 1.5 litres of       of the same percentage of their
beer. It rightly remarked in its obser-        respective prices to the consumer net of
vations on the replies given by the            tax, there could in my view be no
 Commission and the United Kingdom             question of an infringement of the
that the information provided on the           second paragraph of Article 95.
 2306
 ---pagebreak---                                  COMMISSION v U N I T E D K I N G D O M
    The difficulties in applying the criterion    to which of the two solutions is chosen
    of price in this case, however, arise out     amounts to UKL 2 p r UKL 3 per litre. '
    of the fact that in its tax system the        The margin of discrimination against
    United Kingdom applies the criterion of       wine thus amounts to between 30 and
    volume as the basis for the taxation of       120% of the price net of tax ( ± 70 to
    wine and beer, rather than that of price.     300% of the excise duty on beer).
    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 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 im-
  The difficulty relating to the structures     ported product. However, I consider
  of the sales markets may be overcome by       that as in cartel law for the purpose of
  comparing prices on one market in             determining whether fair competitive
  which both products are sold, that is to      relationships exist particular products
  say supermarkets and other retail traders     with a negligible share of the market
  which sell both beer and wine to the          may be disregarded and that the calcu-
  consumer. In its reply to the Court's         lation by the Commission of a maximum
  order of 15 July 1982, the Commission         price for cheap table wine therefore
  in my view rightly adopted that basis for     offers a more secure basis for the
  its comparison of prices.                     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
 The difficulty arising out of the wide
 range of wine prices may in my view be        1 — It should naturally be borne in mind that this calcu-
                                                      lation of the margin of discrimination related to 1982.
 overcome either by comparing taxation                The tax ratio between wine and beer at that time was
 on the cheapest table wines with taxation            substantially less unfavourable to wine than at the
                                                      material time for the purposes of the judgment, namely
 on beer (as the Italian Government                   the time at which the application was lodged. On the
 recommended in its observations on                   basis of the criterion of price, at the material time the
                                                     tax mechanism applied in the United Kingdom was, on
the information        furnished   by the            account of the characteristics already referred to,
Commission) or by calculating the                    protective in nature with regard to beer production, as
                                                     defined in paragraph 10 of the Court's interlocutory
maximum price of the cheapest table                  judgment, in relation to all wines with a consumer
wines which together have a share of the             pnce (net of tax) which was less than five times the
                                                     consumer price (net of tax) of beer. The margin of
market considered to be sufficient (as the           discrimination could then, on the basis of the more
Commission in fact suggests). The                    unfavourable tax ratio, certainly rise to far above the
                                                     highest margin of protection for 1982, calculated at
relevant price of table wines, according             120% of the price net of tax.
                                                                                                         2307
 ---pagebreak---                    OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
connection I recall that in the Com-          alcohol per hectolitre. For table wines
mission Notice on agreements of minor         with a lower alcoholic strength pro-
importance in the field of cartel policy      portionately lower guide prices apply as
(Official Journal 1977, C 313, p. 3)          compared with table wines with a higher
restrictions on competition in relation to    alcoholic strength.
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             At the most recent sitting of the Court in
imported into the United Kingdom              this case, the United Kingdom put
indicated by the United Kingdom itself        forward another legal argument which
in Annex E to its reply of 30 September       may not remain unchallenged in this
 1982 makes it unlikely that the two types    connection. From Article 97 of the EEC
 of German wine referred to by the            Treaty it inferred that a Member State
 United Kingdom for the purposes of the       may establish average rates of taxation
 comparison of prices may in fact be          for wine and that for the purpose of the
 regarded as representative. Certainly that    application of Article 95 the taxation
 applies to supermarket chains which           burden on average wine prices must be
 import their own wine.                        compared with the taxation burden on
                                               average beer prices. That argument is
                                               untenable, Article 97 is clearly a dero-
                                               gative provision which, like all such
                                               provisions,      must       be    interpreted
                                               restrictively. Article 97 applies exclusively
 The information set out by the Italian        in relation to turnover taxes calculated
 Government is also of importance              on a cumulative multi-stage tax system.
 inasmuch as it appears from it that the       The discrimination, in particular in
 most relevant Italian wines for purposes      favour of integrated domestic under-
  of assessing appreciable restrictions on      takings, which resulted from Article 97
  competition have an alcoholic strength of    was in fact, together with the oppor-
  only 9 to 10°. As appears from the infor-     tunities of manipulating trade offered by
  mation provided by the Commission at          that provision and the other distortions
  pages 16 and 17 of its report of 1            of competition arising out of the old
  December 1981, the margin of discrimi-        turnover tax system, one of the main
  nation against the most relevant wines at     reasons for replacing turnover tax
  the material time for the determination       calculated on a cumulative multi-stage
  of an infringement of the Treaty              tax system by value-added tax. As a
  amounts to at least 9 0 % for those wines      derogative provision, Article 97 cannot in
  by application of the criterion of             any event be extended to cover excise
  alcoholic strength. Moreover, there is a       duties. Indeed, that article underlines the
  clear connection between the criteria for      fact that in principle Article 95 must be
  comparison of alcoholic strength and           interpreted as meaning that taxation on
  price in so far as, by virtue of the regu-     specific imported products (thus in this
   lation relevant to this case, Regulation      case, for example, on cheap table wines)
   (EEC) N o 816/70 of the Council               must be compared with taxation on
   (Official Journal, English Special Edition    similar domestic products (by application
    1970 (I), p. 234), replaced only in 1979     of the first taxation on similar domestic
   by Council Regulation (EEC) No                products (by application of the first
   337/79 (Official Journal, L 54, p. 1), the    paragraph of Article 95) or with
   guide price is laid down per degree of        competing      substitute    products    (by
   2308
 ---pagebreak---                                     COMMISSION v UNITED KINGDOM
    application of the second paragraph of            affords    indirect protection to the
    Article 95). Thus that argument may in            production of beer in that country, since
    fact be used against the view of the              the burden thereof may, as appears from
    United Kingdom and tends to provide               the information provided, increase the
    support for the view of the Italian               retail price net of tax to as much as
    Government that the cheapest types of             160% of that price.
   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.
                                                     2.5. The question of the proper tax ratio
   2.4. Conclusions based on the application         I agree with the Commission that a
         of the various criteria for comparison      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
   In short, it is clear from an analysis of         Treaty. It will then be possible, if the
  the documents received after the Court's           harmonizing directive is also based on
  decision of 15 June 1982 that the tax             Article 43 of the Treaty, also to take
  burden on the wines most relevant from            account of considerations relating to the
  the point of view of competition, was at          common agricultural policy. Because of
  the material time for the purpose of              the vagueness of the very term "indirect
  determining a possible infringement of            protection" in the second paragraph of
  the Treaty, at least 70 to 100% higher            Article 95 no precise limit can be
 than that on beer on the basis of all the          established on the basis of that provision
 defensible criteria. I, like Mr Advocate           of the Treaty. However, in the case of a
 General Reisçhl (who did not possess               tax burden as high in absolute terms as
 sufficient information on this point at the        that concerned in this case, a difference
 time when he delivered his Further                in the tax burden of at least 70 to 100%
 Opinion), consider that the criterion of          compared with the substitute product,
 the influence on prices is the most               beer, is on the basis of all elementary
 relevant criterion from the point of view         experience concerning the competitive
 of competition. However, I have at the            mechanism bound to result in a very
 same time pointed out that under the              appreciable restriction of competition to
 common organization of the market in              the detriment of wine. Even in the case
wine there is a direct relationship                of a difference in tax burden of 50%, as
 between wine prices and alcoholic                 was accepted by the Court in its interlo-
strength, which also confirms the                  cutory judgment, I would still consider
relevance of the criterion of alcoholic            that to be the case, if, as in this case,
strength, for which the Court expressed            other factors indicate that there is an
a preference in its interlocutory judg-            even greater difference. Thus in my
ment. A difference of 70 to 100% in the           opinion an appreciable restriction on
tax burden is in my opinion, without              competition to the detriment of wine ipso
prejudice to the question of the proper           facto means that there is indirect
tax ratio to be discussed next, itself a          protection of the competing product,
clear indication that the excise duty             beer, within the meaning of the second
levied by the United Kingdom on wine              paragraph of Article 95.
                                                                                          2309
 ---pagebreak---                    OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
Although the question is of course not        comparison of the tax burden different
an issue in these proceedings and there-      from that reached above.
fore 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      2.6. The protective trend
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          The information which became available
 second paragraph of Article 95, I would       after Mr Advocate General Reischl
 add that wine production is not in my         delivered his Further Opinion also
 opinion afforded indirect protection by       clearly confirms the protective trend
 higher taxation on beer provided that the     identified in paragraph 24 of the Court's
 price of beer including tax is no higher      interlocutory judgment. On the basis of
 than the price of the competing wines.        Articles 169 and 171 of the Treaty, as
 Once the price of beer becomes                interpreted in the case-law of the Court
 appreciably higher than the price of          cited above, for the application of that
 comparable wines as a result of the           criterion the way in which the tax ratio
 taxation levied upon it, I would not a        between beer and wine has developed in
 priori exclude the possibility that there is  the United Kingdom between the date of
 an infringement of the second paragraph       accession and the date on which the
 of Article 95. However, I consider that        application was lodged is decisive.
 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        As appears from          the   information
  means of harmonization of legislation.        provided by the Commission and not
  Especially by use of price as the relevant    contested by the United Kingdom in
  criterion, it seems to me in principle that   relation to the trend during the relevant
  the symmetrical application of the            period of 1973 to 1978, the tax ratio
  second paragraph of Article 95 with           between beer and wine rose from 1 : 3.2
  regard to countries producing mainly          on 1 January 1974 to 1 :4.2 on 27
  beer and those producing mainly wine          March 1974 and to 1 : 5.6 on 16 April
   does not, on the grounds given, lead to       1975. On 1 July 1977 the tax ratio began
   consequences which are unacceptable for      to fall slightly to 1 : 5.3, which is the
   the Community. I therefore consider that      decisive tax ratio for purposes of these
   the problem of the proper tax ratio           proceedings. From the information on
   between wine and beer does not call           consumption provided by the provided
   for a conclusion on the basis of a            by the Commission it is clear that the
    2310
 ---pagebreak---                                 COMMISSION v UNITED KINGDOM
   increase in excise duty in 1975 was           material time for the purpose of
   coupled with a fall in the consumption of     determining an infringement of the
  wine per head of the population. The          Treaty, the tax burden on imported
  connection between a rise in the excise       products is so much higher than the tax
  duty and consumption per head of the          burden on domestic substitute products
  population is, however, even more             that it must be assumed that domestic
  clearly demonstrated by the information       production of the substitute products is
  on developments after 1978. In 1980 the       indirectly protected by the taxation on
  tax ratio between beer and wine fell to       the imported products. Conclusions on
   1 :4.9 and in 1981 to the 1974 level         the latter point may certainly be
  of 1 :4.2. At the same time the               supported by a simultaneous increase
  consumption of wine per head of the           over that time in the difference in tax
  population rose substantially (from 5.41      burden.
  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   3. Final r e m a r k s a n d c o n c l u s i o n
  111.5 litres per head of the population.
 The United Kingdom confirms those
 developments by means of its own
 figures. It also recognizes the relation-     3.1. Characteristics of the competitive
 ship which exists between the tax burden            relationship between wine and beer
 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          In relation to the cheap types of wine
  1978 that the protective trend identified    which are relevant from the point of
 in the Court's interlocutory judgment         view of competition, I agree with the
 had now been wholly eliminated. Apart         Commission and Mr Advocate General
 from the fact that that conclusion is         Reischl that differences in the manufac-
 incorrect in comparison with the tax          turing structures of wine and beer are
 ratio on 1 January 1974, I have already       ultimately of no great importance. First,
 observed that in these proceedings the       differences in production costs will, as
 developments between 1973 and 1978           stated above, be expressed in differences
 alone are relevant for the purpose of        in price, so that in the use of the
 determining a protective trend. In           criterion of price they are automatically
 relation to that period, the existence of a  taken into account in the comparison of
 protective trend is also confirmed by the    the tax burden. Secondly, the most
 said report of the United Kingdom.           relevant cheap wines and beer are both
                                              usually       produced       by      large-scale
                                              production processes, as the Commission
                                              and Mr Advocate General Reischl have
To those remarks I would further add          already observed.
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     The great differences in the structures of
paragraph of Article 95, but none the         the markets in wine and beer I also
less such evidence cannot in itself be        consider ultimately to be no impediment
decisive for purposes of the application      to a clear comparison of the tax burdens.
of that provision. Instead it is ultimately   From the very fact that Article 97 is
a question of deciding whether, at the        not applicable it follows that in the
                                                                                             2311
 ---pagebreak---                         OPINION OF MR VERLOREN VAN THEMAAT — CASE 170/78
application of the second paragraph of        3.2. The legal consequences of a finding
Article 95 average rates of taxation may             that the United Kingdom             has
not be applied to all imported wine.                 infringed the Treaty
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       As, for example, is also frequently the
in those products is of itself sufficient     case with the judgments of the Court on
to establish an infringement of that          infringements of Article 30 of the EEC
provision. Such an appreciable share of       Treaty, the precise legal consequences
the market is, as appears from the infor-     which judgment against the United
mation provided by the United Kingdom         Kingdom in this case entails under
itself, already constituted by the fact that  Article 171 of the Treaty cannot be
wine is sold in supermarkets and by           ascertained. In that regard there is
other retailers who sell wine and beer,       certainly a much wider area of uncer-
whereas the market share of the relevant      tainty in relation to a judgment on the
cheap wines in the total supply of wine       second paragraph of Article 95 than a
 may, as appears from the information         judgment on the first paragraph thereof.
 provided by the two parties during            In this case it is in any event in my view
 the proceedings and by the Italian            certain that the United Kingdom may
 Government, be assessed at at least 20%.      not after judgment has been . given
 A market share of only 5 to 10% would,        against it return to a protective trend in
 as has already been stated, in my view        the development of the tax relationship. I
 have been sufficient.                         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
 Finally, the information provided on          refer to the detailed consideration given
 prices and consumption of wine and            to the question of legitimate interest in
 beer confirms that in the competitive         the Opinion of Mr Advocate General
 relationship between wine and beer price      Lagrange in Case 7 / 6 1 , already cited.
  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.
                                                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
  I therefore consider that the uncertainties   parties that there is still indirect
  regarding the competitive relationship        protection of the production of beer at
  between wine and beer referred to in          least as long as the tax burden on the
   paragraph 24 of the Court's interlo-         relevant cheap wines, as measured by
   cutory judgment may now be regarded          reference to the price net of taxation,
   as having been satisfactorily removed.       remains at least 30% higher than the tax
   2312
 ---pagebreak---                               COMMISSION v UNITED KINGDOM
burden on beer. Indeed it cannot in my       Inasmuch as the excess taxation will in
opinion be ruled out that even in the        fact be passed on to the consumer, the
case of a lesser difference in tax burdens   reclaiming of such tax feared by the
there may still be indirect protection of    United Kingdom seems in this case to be
beer, but that would nevertheless have to    ruled out by the exclusion of that
be demonstrated by means of more             possibility in the Court's judgment in
evidence than has been produced up to        Case 68/79 Just v Danish Ministry for
now.                                         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.
                                                                                2313