CELEX: 62000CC0053
Language: en
Date: 2001-05-08 00:00:00
Title: Opinion of Mr Advocate General Tizzano delivered on 8 May 2001. # Ferring SA v Agence centrale des organismes de sécurité sociale (ACOSS). # Reference for a preliminary ruling: Tribunal des affaires de sécurité sociale de Créteil - France. # State aid - Tax benefit granted to certain undertakings - Wholesale distributors. # Case C-53/00.

Important legal notice

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62000C0053

Opinion of Mr Advocate General Tizzano delivered on 8 May 2001.  -  Ferring SA v Agence centrale des organismes de sécurité sociale (ACOSS).  -  Reference for a preliminary ruling: Tribunal des affaires de sécurité sociale de Créteil - France.  -  State aid - Tax benefit granted to certain undertakings - Wholesale distributors.  -  Case C-53/00.  

European Court reports 2001 Page I-09067

Opinion of the Advocate-General

1. By decision of 11 January 2000, the Tribunal des affaires de sécurité sociale de Créteil (hereinafter the national court) referred to the Court of Justice for a preliminary ruling three questions on the interpretation of Article 92 of the EC Treaty (now, after amendment, Article 87 EC), Article 90(2) of the EC Treaty (now, after amendment, Article 86(2)) and Article 59 of the EC Treaty (now, after amendment, Article 49 EC). By those questions, the national court in essence asks whether a provision of the law on social security funding for 1998 (Loi de financement de la sécurité sociale pour 1998 No 97-1164 of 19 December 1997, hereinafter the Law of 19 December 1997), which introduced a special tax on medicines sold directly by pharmaceutical laboratories to pharmacies, is compatible with Community law on State aid and the free movement of services.I - Legal frameworkThe system for distributing medicines in France2. In France, medicines are supplied to pharmacies in one of two ways, either by wholesale distributors or by pharmaceutical laboratories which sell directly.3. Article R. 5106-5 of the Code de la santé publique (Public Health Code) defines wholesale distributor as any undertaking that purchases and stocks medicines other than those intended for testing on humans, for the purpose of their wholesale distribution in their unaltered state.4. In carrying on their business, wholesale distributors must discharge certain public service obligations which are imposed by the French authorities in order to ensure an adequate supply of medicines in France. Until February 1998, those obligations were governed by a Decree of 3 October 1962, which provided:Article 1 Every pharmaceuticals wholesaler covered by the fourth subparagraph of Article R. 5115-6 of the Public Health Code and any branches it may have must keep a permanent stock of medicinal products sufficient to ensure a month's supply to the pharmacies in its distribution area which it regularly serves as customers.The stock of medicines must amount to a "range" of medicines, including at least two thirds of all forms of medicines currently sold, and must represent in value the equivalent of the average monthly turnover for the preceding year.Article 2 Every pharmaceuticals wholesaler and any branches it may have must be able to guarantee delivery of every medicine sold on the market to the pharmacies in its distribution area which it regularly serves as customers and, in the case of medicines in their "range", within 24 hours of receipt of the relevant order. They must manage their stock of medicines so as to ensure availability at all times.Article 3 The distribution area referred to in Article 2 shall comprise the geographical area in which the pharmacist responsible for the pharmaceuticals wholesaler or branch thereof declares that he conducts business. That declaration must be made to the central pharmacies office of the Ministry of Public Health and the Population within two months of the opening of the pharmaceuticals wholesaler or branch thereof. The distribution areas shall be supplemented, where necessary, by areas designated by the Minister for Public Health and the Population which are not supplied by any other wholesaler.5. Those rules were amended by two subsequent decrees (No 98-79 of 11 February 1998 and No 99-144 of 4 March 1999 ) following the adoption of Council Directive 92/25/EEC of 31 March 1992 on the wholesale distribution of medicinal products for human use. Those decrees, in particular, amended the Public Health Code, Article R. 5115-13 of which now provides:Every pharmaceuticals wholesaler must make a declaration to the Director-General of the French agency responsible for the safety of health products specifying the distribution area of each of its establishments. That declaration must be made by the date on which the establishment in question opens and must be amended whenever there is a change in its distribution area.Every municipality in which the establishment ordinarily serves at least one pharmacy shall form part of its distribution area.The establishment shall, within its distribution area, discharge the following public service obligations:1. It must keep in stock a range of medicines comprising at least nine tenths of all forms of medicines currently sold in France;2. It must be able:(a) to satisfy at all times the needs of its regular customers for a period of at least two weeks;(b) to deliver any medicine in its range within 24 hours of receipt of the relevant order;(c) to deliver any medicine or any other product, item or article referred to in Article L. 512 which it distributes in the circumstances set out in Article R. 5108-1, or any split pharmaceutical product referred to in the fourth subparagraph of Article L. 511-1 that is sold in France to any pharmacy requesting it. These provisions do not prevent any establishment from supplying a pharmacy outside its distribution area, exceptionally, in an emergency.By way of exception and in the absence of any other source of supply, the Director-General of the French agency responsible for the safety of health products may, of his own motion or at the request of the State representative in the département concerned and after hearing the views of the Regional Director of Health and Social Affairs, require an establishment to supply a pharmacy located outside its distribution area.6. It should be emphasised that the abovementioned public service obligations are imposed only on wholesale distributors and do not apply to pharmaceutical laboratories that decide to market their own products by way of direct sales made either autonomously (by an internal division or by a branch) or through appointed agents.Law of 19 December 19977. Article 12 of the Law of 19 December 1997 inserted into the Social Security Code Article L. 245-6-1 which provides:A contribution based on pre-tax turnover achieved in France from wholesale sales to general pharmacies, mutual pharmacies and pharmacies serving mines of medicinal products included in the list mentioned in Article L. 162-17, with the exception of generic medicinal products defined in Article L. 601-6 of the Public Health Code, shall be payable by undertakings dealing in one or more medicinal products within the meaning of Article L. 596 of the Public Health Code.The rate of that contribution shall be 2.5%.8. The tax in question, introduced to finance the National Sickness Insurance Fund, was purposely designed to apply only to direct sales by pharmaceutical laboratories (thereby excluding sales made by wholesale distributors), with the aim of restoring the balance of competition between the different medicine distribution channels.9. That is quite clear from the report accompanying the draft Law of 19 December 1997, which states:The margins taken by wholesalers and pharmacists, applicable to reimbursable medicines, are currently controlled. When pharmaceutical laboratories make direct sales, they take the same margin as that reserved in principle for wholesalers and so the price to the insured person remains the same irrespective of the distribution channel. However, that practice appears inequitable since laboratories are not under the same duty of public service as wholesalers and therefore do not have to bear the costs connected with it, and in particular with the obligation to keep a permanent and sufficient stock of medicines and to guarantee delivery of those medicines at extremely short notice.The volume of direct sales has increased sharply over recent years, threatening to throw the distribution system for reimbursable medicinal preparations out of balance.The aim of the present provision is to restore equivalence of treatment between distribution channels permitting an a posteriori recovery of part of the wholesaler's margin from pharmacies. The rate is set at 6.63%, which corresponds to roughly two-thirds of the wholesaler's margin, the remaining third being attributable to distribution costs which pharmaceutical undertakings must, in any event, bear....The tax, paid quarterly, is calculated by reference to turnover in the preceding quarter and is collected and controlled by the Central Agency for Social Security Bodies. Lastly, receipts are payable to the National Sickness Insurance Fund for Employees (CNAMTS).10. Before its adoption, the Law of 19 December 1997 was submitted to the Conseil constitutionnel, which was asked, inter alia, to consider whether the tax at issue was consistent with the fundamental principle of equality. By decision of 18 December 1997, the Conseil constitutionnel held that the principle of equality was not breached. In particular, it found that:- it is apparent from the preparatory documents that the tax at issue is intended not only to help finance the National Sickness Insurance Fund for Employees, but also to restore the balance of competition between the distribution channels for medicines since wholesale distributors of medicines are under a duty of public service which is not imposed on pharmaceutical laboratories;- the difference in treatment which arises by law is based on criteria which are objective and rational in relation to the aim of the legislature, and- the complaint that the rate is excessive must be rejected.Council Directive 92/25/EEC11. As noted above, the wholesale distribution of medicines for human use is partially governed, at Community level, by Directive 92/95. The introductory part of that directive contains the following recitals in particular:- certain Member States impose on wholesalers who supply medicinal products to pharmacists and on persons authorised to supply medicinal products to the public certain public service obligations;- those Member States must be able to continue to impose those obligations on wholesalers established within their territory;- they must also be able to impose them on wholesalers in other Member States on condition that they do not impose any obligation more stringent than those which they impose on their own wholesalers and provided that such obligations may be regarded as warranted on grounds of public health protection and are proportionate in relation to the objective of such protection.12. Next, as regards the definition of public service obligation, Article 1 of the directive clarifies that what is meant by this is the obligation placed on wholesalers to guarantee permanently an adequate range of medicinal products to meet the requirements of a specific geographical area and to deliver the supplies requested within a very short time over the whole of the area in question.II - Facts and procedure13. Ferring SA is a company governed by French law. It belongs to a multinational pharmaceuticals group and, in so far as concerns the present case, distributes in France Lutrelef (a medicine produced in Germany by another company in the group) through a system of direct sales to pharmacies. In respect of that activity, it was assessed to the tax introduced by the Law of 19 December 1997 and required to pay FRF 40 155 to the Central Agency for Social Security Bodies (hereinafter ACOSS) by demand dated 6 March 1998.14. However, Ferring took the view that the tax was illegal and, on 17 September 1998, brought an action before the Social Security Court, Créteil, seeking reimbursement of the sum paid to ACOSS. It argued that the tax at issue was illegal, maintaining that restricting the tax to direct sales by pharmaceutical laboratories amounted to a grant of State aid to wholesale distributors and infringed the obligation to give advance notice laid down in Article 93(3) of the EC Treaty (now Article 88(3) EC) and that the tax restricted the freedom to provide services, in breach of Article 59 of the Treaty.15. ACOSS opposed Ferring's claim, arguing, essentially, that the tax at issue was not State aid within the meaning of Article 92(1) of the Treaty, that it was at any rate justified by the character and structure of the French system for the distribution of medicines and that, even if it were to be classified as aid, it would be covered by the exemption laid down in Article 90(2) of the Treaty. As regards the alleged infringement of Article 59 of the Treaty, ACOSS maintained that the provision did not apply in the present case, which involved a purely domestic situation within a Member State and that, in any event, the tax did not contravene the Community rules on the freedom to provide services.16. Faced with those questions of Community law, the national court considered it necessary to refer the following questions to the Court of Justice for a preliminary ruling under Article 234 EC:1. Can the contribution introduced by Article L. 245-6-1 of the Social Security Code be regarded as public aid within the meaning of Article 87 EC (ex Article 92 of the EC Treaty)?If so, is it justified by the character and structure of the system?2. Are wholesale distributors entrusted with the operation of a service of general economic interest within the meaning of Article 86(2) EC (ex Article 90(2) of the EC Treaty)?If the contribution at issue can be classified as public aid, must it be exactly offset by the additional costs attributable to the obligations imposed on wholesale distributors in order for the derogation provided for in Article 86(2) EC to apply?3. Must Article 49 EC (ex Article 59 of the EC Treaty) be interpreted as precluding national legislation of the kind embodied in the Law of 19 December 1997?17. In the proceedings subsequently commenced before the Court of Justice, in addition to the parties to the main action, which essentially repeated the arguments which they had put before the national court, France and the Commission also intervened.18. France essentially supported the arguments of ACOSS, albeit at the same time expressing serious reservations about the jurisdiction of the Court of Justice. The Commission, on the other hand, supported the argument that the tax at issue amounts to State aid, stating, however, that it might be justified on the basis of Article 90(2) of the Treaty if it were limited to offsetting the extra burden on public service obligations borne by wholesale distributors. As regards the third question, the Commission submitted that Article 59 of the Treaty does not preclude a national measure of the type in question.19. Finally, I think it helpful, for the purposes of the analysis which will follow, to point out that, as Ferring notes in its observations, the Social Security Court, Lyon, was also called upon, at almost the same time, to rule on the same question. However, by contrast with the Social Security Court, Créteil, the Lyon court resolved the case more expeditiously. Starting from the premiss that the Law of 19 December 1997 amounted to an illegal grant of State aid in that it had not been notified to the Commission, the Lyon court in fact ruled that sums paid by a pharmaceutical laboratory in the form of the tax at issue must be reimbursed.III - Legal analysisThe jurisdiction of the Court of Justice20. Before dealing with the substance of the questions referred for preliminary ruling, it is necessary to consider the objection raised at the hearing by France, which was that the Court of Justice has no jurisdiction to rule on the first two questions. In fact, according to the French Government, even if the Court were to conclude that the tax at issue constitutes illegal aid, there could only be two consequences of that finding: a retrospective obligation to recover such aid from wholesale distributors and a future obligation to abolish the contested tax or extend it to wholesale distributors. In neither case, according to France, would the Court's ruling entail the reimbursement of the money paid by Ferring by way of the tax in question. For that reason, France alleges, the questions referred for a preliminary ruling are irrelevant and consequently the Court has no jurisdiction.21. In my opinion the objection is not founded. I note, at the outset, that according to settled case-law, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Only exceptionally may the Court decline jurisdiction, namely where it is quite obvious that the ruling sought [by the national court] on the interpretation or validity of Community law bears no relation to the actual facts of the main action or its purpose.22. In the instant case, however, it does not appear to me quite obvious that the first two questions referred bear no relation to the actual facts of the main action or its purpose. On the contrary, it seems clear to me that the ruling of the national court will turn on precisely the questions which it has raised, that is to say, whether the tax at issue amounts to State aid and whether the measure can be justified on the basis of the exemption laid down in Article 90(2) of the Treaty.23. Nor does it appear quite obvious that the national court could not accede to Ferring's demand should it emerge that levying the tax at issue constitutes an illegal grant of State aid. Above all, the illegality of the aid would lead to the illegality of any national measures putting it into effect, such as receiving payment of the tax from Ferring. Moreover, reimbursement of the sums paid by way of the tax at issue could be an effective way of re-establishing the status quo ante, thereby eliminating the distortions of competition allegedly arising from asymmetrical imposition of the tax. Furthermore, the fact that the national court may classify the contested measure as State aid also seems to follow from the ruling of the Social Security Court, Lyon, which, on the very basis of such classification, ordered money paid by a pharmaceutical laboratory by way of the tax introduced by the Law of 19 December 1997 to be reimbursed.24. In light of the foregoing considerations, I take the view that the Court does have jurisdiction to consider all the questions raised by the national court.The questions: introduction25. There is an apparent overlap, at least in part, between the first and second questions and I therefore think it appropriate to clarify, as a preliminary step, the scope of each of them and any connection between them.26. The first question actually falls into two parts: first, it asks whether the tax introduced by the Law of 19 December 1997 constitutes State aid to wholesale distributors; if so, it then asks whether the tax is justified by the nature and structure of the French system for the distribution of medicines, which is characterised by the imposition of particular public service obligations intended to guarantee effective coverage of the national territory.27. By the second question, the national court asks whether wholesale distributors are entrusted with the operation of a service of general economic interest within the meaning of Article 90(2) of the EC Treaty and whether the additional burden of pubic service borne by them justifies application of the exemption laid down in that article.28. Both the second part of the first question and the second question thus refer to the pubic service role entrusted to wholesale distributors and ask whether that can justify granting them tax advantages, in the first case, by reason of the character and structure of the system, in the second, by virtue of the exemption laid down in Article 90(2) of the Treaty. In both cases, however, the premiss is that the tax at issue constitutes State aid in relation to which the existence of possible justifications must therefore be assessed.29. This approach should, in my view, be corrected in part. As noted by the Commission, if the measure in question can be justified on the basis of the character and structure of the system, it cannot be classified as State aid; the difference in treatment of the two distribution channels would be objectively justified and could not be considered as granting a selective advantage to wholesale distributors. If that is the case, as I believe it is, then the assessment which the national court is asking the Court of Justice to make by the second part of its first question is not really concerned with examining possible justifications for a measure taken as aid, but with whether there actually is State aid in the present case; that is to say, whether the tax benefits reserved to wholesale distributors in order to compensate the additional burden of public service imposed on them by the French system can be classified as State aid.30. Having clarified that point, I shall proceed to examine, first of all, whether, leaving aside the public service obligations laid down by French law, exempting wholesale distributors from the tax at issue may, in principle, amount to State aid for the purposes of Article 92(1) of the Treaty [first part of the question; infra sub (a)]. If I may, I shall consider whether the specific public service obligations imposed on wholesale distributors in France precludes the tax from being State aid [second part of the question; infra sub (b)]. If they do not, I shall proceed to examine (second question) whether the aid thus granted may be regarded as compatible with the common market by virtue of the exemption laid down in Article 90(2) of the Treaty for undertakings entrusted with the operation of services of general economic interest.31. For reasons of clarity, I would immediately emphasise that classifying the tax at issue as not aid or as aid compatible with the common market for the purposes of Article 90(2) of the Treaty is not merely a formal distinction, but one which goes to the substance of the matter. In particular, in so far as is relevant to the present case, the distinction determines whether or not the duty to give advance notice of a State measure provided for by Article 93(3) of the Treaty - the alleged breach of which gave rise to the present case - arises. As I have already mentioned, Ferring's action is based on an allegation of just such a breach. Similarly, it was precisely because the absence of notice was indisputable that the Social Security Court, Lyon, in the judgment mentioned earlier, classified the tax in question as illegal aid without even considering whether it might be compatible with Article 90(2) of the Treaty.32. However, if it is considered that that solution is - at least in cases like the one at hand - too simplistic and the Court of Justice does not wish to answer the Social Security Court, Créteil, in the same terms, given that it evidently referred the questions now under consideration precisely because it rejected that short cut, the matter must be gone into further, as the Commission itself recognises. For that reason, after examining the first two questions in the manner just mentioned, I shall make some observations about the consequences which, from the point of view of the legality of a State measure that has not been notified, may result from its being classified as not aid, as aid not covered by the exemption laid down in Article 90(2) of the Treaty or as aid compatible with Article 90(2).The first question: Whether the tax introduced by the Law of 19 December 1997 may be regarded as State aid(a) Whether exempting wholesale distributors from the tax at issue can amount to State aid33. I will begin by considering whether - leaving aside for the moment the particular public service obligations imposed on wholesale distributors - exempting such operators from the tax at issue may be regarded as a State aid within the meaning of Article 92(1) of the Treaty.34. As we know, Article 92(1) provides in principle (save for the application of specific exemptions laid down in the Treaty) that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods and affects trade between Member States is incompatible with the common market. Consequently, in order to determine whether a public measure constitutes State aid it is necessary, in accordance with settled Community case-law, to ascertain: (i) whether the measure confers a selective advantage on certain undertakings or the production of certain goods; (ii) whether such advantage is provided through public resources; (iii) whether it can distort competition, and (iv) whether the measure in question can affect trade between Member States. I shall now examine those aspects with reference to the case at hand.(i) Does the Law of 19 December 1997 confer a selective advantage on wholesale distributors?35. This question is not an easy one to resolve. As we have seen, the Law of 19 December 1997 does not provide direct financing for wholesale distributors, nor does it exempt them from paying a tax previously levied on them. On the contrary, it introduces a new tax that affects other economic operators, namely pharmaceutical laboratories that distribute their products by means of a system of direct sales. However, in view of the competitive relationship between the two distribution channels, the national court asks whether the imposition - or rather the non-imposition - of a tax on one of them indirectly confers a selective advantage on the other.36. The difficulty and subtlety of the question arise from the fact that any new tax imposed on a given category of economic operators may be viewed in theory as an advantage conferred upon all operators who are not subject to that tax but are in more or less close competition with the first category. To give just a few examples, a tax that affects beer producers could be regarded as indirect aid to wine producers; a tax imposed on road hauliers could be seen as aid to rail freight undertakings; a tax on cinema operators could imply aid to theatres, and so on.37. A broad interpretation of the concept of aid, one that encompasses the levying of a tax on third parties whose competitive relationship with the presumed beneficiaries of the aid is no more than tenuous, risks transgressing the letter and spirit of the law. Indeed, such an interpretation would also include as aid indirect advantages that are difficult to ascertain and arise from different tax regimes being applied to economic activities that are only partly comparable, rather than from State intervention designed to alter significantly the conditions of competition. That does not take into account the fact - which would be of no little consequence - that such an interpretation would entail a risk of unjustified interference in the fiscal policy of Member States by means of the improper use of Community instruments designed for quite different purposes.38. Yet, neither is it possible to consider satisfactory a solution which, by contrast, excluded a priori any possibility of identifying a selective advantage in the non-imposition of a new tax on certain economic operators. An interpretation of that sort would in fact provide Member States with a simple mechanism for circumventing Community rules on State aid by means of discriminatory taxation. An example would be the introduction of a tax levied on private air carriers but not on public ones, or a tax levied on automobile manufacturers in good economic condition, but not on those in difficulty. In such cases it would obviously be difficult to distinguish between non-imposition of the tax and tax exemption, since the effect produced would be absolutely identical, and it hardly need be recalled that the Court of Justice has consistently held that Article 92 defines measures of State intervention as State aid according to their effects.39. My view, in short, is that it can neither be accepted nor excluded a priori that failure to levy a tax on certain parties is tantamount to conferring a selective advantage within the meaning of Article 92 of the Treaty. The solution must be sought on a case by case basis, with regard being had to the particular circumstances of the case and, above all, to the competitive relationship between the operators concerned, the reason for the tax and its effects.40. Adopting those criteria, I am inclined to take the view that the tax at issue in the present case does confer on wholesale distributors a selective advantage within the meaning of Article 92 of the Treaty for the following reasons:- in France there are two distribution channels for medicines: wholesale distribution and direct sales by pharmaceutical laboratories. The two are in direct competition. That close competitive relationship has been pointed out, albeit in order to draw different arguments, by all the parties to these proceedings and was also referred to in the preparatory work for the Law of 19 December 1997, in the abovementioned ruling of the Conseil constitutionnel concerning that law and in the order for reference itself;- the parties to the present proceedings also agree that the asymmetrical levying of the tax at issue (which, I would repeat, is designed to finance the National Sickness Insurance Fund) is intended to restore the balance of competition between the two medicine distribution channels, which, according to the French legislature, had been distorted by the imposition of a duty of public service solely on wholesale distributors. As is also clear from the preparatory work for the Law of 19 December 1997 and from the ruling of the Conseil constitutionnel, levying the tax solely on direct sales is therefore intended to eliminate that competitive disadvantage by introducing a tax regime that benefits wholesale distributors;- Ferring and ACOSS are, in the end, agreed that the tax at issue has produced the effects sought by the French legislature. In fact, both note that, following the adoption of the Law of 19 December 1997, the growth in direct sales recorded in the immediately preceding years not only ceased, but the trend even reversed, with wholesale distributors recovering market share.41. It therefore seems obvious to me that, in this case, the French authorities deliberately granted wholesale distributors a tax advantage over their direct competitors and that that advantage was immediately reflected in the market position of the two distribution channels. In other words, the non-imposition of the tax introduced by the Law of 19 December 1997 had the practical effect of granting tax relief to wholesale distributors.42. Moreover, I do not think that that conclusion is affected by the point made by the French government and ACOSS that wholesale distributors have not in fact been exempted from a tax which they would normally have had to bear, because the sole aim of not levying the tax at issue on them was to compensate the additional burden of their duty of public service. That argument confirms, if anything, that it was purely and simply with that objective in mind that the tax at issue, albeit intended to finance the National Sickness Insurance Fund, was imposed on only one of the two distribution channels for medicines, otherwise, it would have been imposed equally on both distribution channels. It is therefore clear that, leaving aside the need to compensate wholesale distributors, the non-imposition of the tax confers on them a selective advantage similar to actual tax relief.(ii) Is the advantage granted through State resources?43. I will now consider whether the selective advantage granted to wholesale distributors is financed by State resources since, according to the Court's settled case-law, only advantages granted directly or indirectly through public resources are to be regarded as aid within the meaning of Article 92(1) of the Treaty.44. The case at issue is somewhat perplexing on this point also. As we have seen, the Law of 19 December 1997 did not provide for any direct transfer of funds to wholesale distributors, but introduced a tax (levied on pharmaceutical laboratories) designed to generate new resources for the State. Accordingly, the advantage conferred on the wholesale distributors seems not to have been financed through public resources.45. However, like Ferring and the Commission, I do not think that that conclusion is correct. As I observed under heading (i), in the present case the non-imposition of the tax at issue is tantamount to granting tax relief to wholesale distributors, who have essentially been exempted from paying the tax introduced by the Law of 19 December 1997 to help finance the National Sickness Insurance Fund. That means that the French authorities have in practice refrained from collecting taxes entirely for the benefit of wholesale distributors and have thereby given them an obvious economic advantage. It must therefore be inferred that that advantage was granted through State resources.(iii) Can the tax advantage conferred on wholesale distributors distort competition?46. As regards the criterion of possible distortion of competition, the case at hand, in my view, allows no room for doubt. Leaving aside the alleged need to compensate the additional burden on public service, which I will consider later, it is clear from the foregoing that the unequal imposition of the tax at issue was bound to affect, and in fact did affect, the competitive position of the two distribution channels.(iv) Can the direct sales tax affect trade between Member States?47. Finally, as regards the effect of the measure in question on intra-Community trade, I note at the outset that, according to settled case-law, even aid of a relatively small amount is liable to affect trade between Member States where ... there is strong competition in the sector in which the recipient operates. Moreover, it is clear from Community case-law that, in order for a given measure to be defined as aid, it is sufficient that it be capable of affecting trade between Member States, without it being necessary to prove its real effect.48. In the case of the measure under consideration, I note that, although it is concerned solely with the distribution of medicines in France, it may nevertheless have a certain effect on intra-Community trade. Indeed, it is well-known that pharmaceutical markets are characterised by intense international competition and a high volume of trade between Member States, which is carried on, for the most part, by large multinationals (such as Ferring) which distribute their products throughout numerous European countries. In those circumstances, the contested measure may, in my view, affect intra-Community trade and it may do so for two reasons:- first, it may affect the volume of cross-border direct sales achieved, possibly through appointed agents, by pharmaceutical laboratories established in other Member States;- second, it may affect the distribution strategies of large multinationals who could be dissuaded from establishing sales offices in France, leading to possible repercussions also on the volume of pharmaceutical products sold in that country.(v) Conclusion49. In light of the foregoing considerations, I take the view that the first part of the first question may be answered by saying that, leaving aside the public service obligations provided for by French law, the non-imposition of the tax at issue on wholesale distributors should be regarded as a State aid within the meaning of Article 92(1) of the Treaty.(b) Whether the public service obligations provided for in France preclude the direct sales tax from being State aid50. Turning now to the second part of the first question, it falls to be considered whether the tax at issue is justified by the fact that it is intended to compensate the burden of public service borne by wholesale distributors and whether, despite the preceding argument, it may consequently be precluded from being aid.51. In that regard, I must state at the outset that, in principle, it is for the Member States to define the services of general economic interest that they intend to entrust to certain public or private undertakings. In fact, it is clear from case-law that, in the absence of any harmonised rules governing the matter, the Community institutions are not entitled to rule on the basis of the public service tasks assigned to the public operator [in the case in point, the national postal service], such as the level of costs linked to that service, or the expediency of the political choices made in this regard by the national authorities or ... [the] economic efficiency of the undertaking. As also pointed out in the recent communication from the Commission on services of general interest in Europe, the Community institutions must limit themselves to minimal control, with the sole aim of ensuring that the Member States do not abuse the powers conferred on them by Community law.52. In the present case, as we have seen, by Decree of 3 October 1962 the French legislature imposed specific public service constraints on wholesale distributors consisting essentially in an obligation to keep a permanent and adequate stock of medicinal products and to guarantee delivery of those products at short notice in a given territory. Those obligations were subsequently further defined in Decree No 98-79 of 11 February 1998 and Decree No 99-144 of 4 March 1999, which placed even stricter constraints on wholesale distributors. Those constraints are justified by the fundamental need to guarantee at all times an adequate supply of medicines for the population as a whole and there is therefore no reason to call into question the legitimacy of the choice made by the French authorities. The reason for not doing so is all the stronger because Directive 92/25 itself acknowledges that the Member States have the power to impose on wholesalers within their territory the obligation to guarantee permanently an adequate range of medicinal products to meet the requirements of a specific geographical area and to deliver the supplies requested within a very short time over the whole of the area in question.53. Naturally, meeting those obligations entails additional costs for wholesale distributors who, unlike pharmaceutical laboratories, are burdened by obligations which they would not have to bear were it not for the public service constraints imposed on them. That inevitably leads to an artificial alteration in the conditions of competition between the two distribution channels and it is precisely to offset the additional burden of public service obligations imposed on them that the French legislature has exempted wholesale distributors from paying the tax at issue.54. Whether the tax is proportionate to the stated purpose or, conversely, is too generous towards wholesale distributors is clearly not a question for the Court of Justice to decide. In fact, the Court does not have the necessary information to do so, as it is aware of neither the exact economic benefit which wholesale distributors derive from exemption from the tax nor precisely what additional burden they bear as a result of their public service obligations. The appraisal is clearly a matter for the national court, which, to that end, may employ all the procedural instruments at its disposal and, if necessary, call for expert evidence.55. Accordingly, leaving that appraisal to the court hearing the main proceedings, it nevertheless remains to be established what implications are to be drawn as regards the classification of the tax in the event that there is a positive outcome to the appraisal and it is confirmed that the tax is in fact necessary to compensate the additional net cost of the public service obligations and that it also meets the criterion of proportionality just mentioned. In other words, the question must be asked whether such an outcome would directly affect the status of the tax in the sense that it would not be regarded as compatible aid, but would not in fact be State aid.56. I will begin by pointing out that the Commission has long held the view that financial benefits granted by Member States to compensate the additional burden of extra public service duties do not constitute State aid. That follows, to give just one example, from the Community guidelines on State aid to maritime transport, where it is stated that the Commission's practice in assessing contracts relating to PSOs [public service obligations] is generally to consider the reimbursement of operating losses incurred as a direct result of fulfilling certain public service obligations is not State aid within the meaning of Article 92(1) of the Treaty.57. However, the Commission's practice has been undermined by recent rulings of the Court of First Instance, starting with the judgment in FFSA, which concerned a Commission decision that certain tax concessions granted to the French postal service in order to offset its public service obligations were not State aid. In that decision the Court of First Instance took the opposite approach to the Commission and concluded that the measures in question did constitute State aid, even though they could be deemed compatible with the common market under Article 90(2) of the Treaty. The Court of First Instance adopted the same position in its subsequent judgment in SIC, which concerned the financing of public television in Portugal. There the Court held that the fact that a financial advantage is granted to an undertaking by the public authorities in order to offset the cost of public service obligations which that undertaking is claimed to have assumed has no bearing on the classification of that measure as aid within the meaning of Article 92(1) of the Treaty.58. The ruling by the Court of First Instance was based, in particular, on the consideration that Article 92(1) of the Treaty does not distinguish between measures of State intervention by reference to their causes or aims but defines them in relation to their effects with the result that the concept of aid is an objective one, the test being whether a State measure confers an advantage on one or more particular undertakings. According to that case-law, therefore, the fact that certain financial advantages are granted to offset extra public service obligations merely represents the purpose or aim of the measure in question, but does not impinge on its effects and, for that reason, has no bearing on its objective status as aid.59. However, albeit without understating the relevance of that case-law, the French Government and ACOSS point out that it has not been expressly confirmed by the Court of Justice. On the other hand, the two parties refer to an earlier ruling of the Court of Justice, that in ADBHU, in which it held that compensating public service obligations does not constitute State aid. In that case the Court was asked to rule on the compatibility with Article 92 et seq. of the Treaty of a directive authorising Member States to pay indemnities to undertakings entrusted with the collection and/or disposal of waste oils and held that the Commission and the Council, in their observations, rightly argue that the indemnities do not constitute aid within the meaning of Articles 92 et seq. of the EEC Treaty, but rather consideration for the services performed by the collection or disposal undertakings. France and ACOSS take that to mean that financial compensation for public service obligations is not State aid, but is simply consideration for services provided to the public.60. Clearly, this is a fine point. However, without wishing to treat the judgment in ADBHU as decisive, I have the impression that it contains valid arguments for not classifying as aid public measures intended exclusively to offset the additional net cost arising from the performance of a service of general economic interest. In particular, the fact that such measures do not confer any real advantage on an undertaking entrusted with a service of general interest and therefore are not likely to alter the conditions of competition appears a decisive argument to me.61. It seems obvious to me that if the State imposes certain public service obligations on an undertaking, then covering the additional costs arising from the performance of those obligations confers no advantage on the undertaking in question, but serves, if anything, to ensure that it is not unjustly disadvantaged vis-à-vis its competitors. In other words the imposition of the obligation and the provision of compensation cannot be considered as separate matters as they are two sides of the same public measure which is intended, as a whole, to guarantee that public interests of primary importance are satisfied. If that is the correct analysis, the conclusion that must be drawn in the situation under consideration is that the measure taken by the public authorities ends up having an economically neutral effect on the undertaking concerned, which derives from it neither advantage nor disadvantage. Thus, despite the divergent views on the judgment in SIC, the requirement of compensating the additional burdens of public service is not limited to the purpose or aim of a measure, but is necessarily reflected in its effects, because it must keep public intervention economically neutral and preclude such intervention distorting competition unjustifiably.62. Accordingly, normal conditions of competition will only be altered where any compensation exceeds the additional net costs attributable to the performance of public service obligations. In such a case, State intervention will contain an element of aid equal to the surplus over and above the additional cost of the public service obligations, in so far as it confers an unwarranted advantage on the undertaking concerned and may thus distort competition in the market where the public service constraints apply or, where there are cross-subsidies, in other markets in which the undertaking operates.63. In conclusion, I take the view that public measures which are strictly necessary to offset the additional net costs arising from the performance of public service obligations do not constitute State aid within the meaning of Article 92(1) of the Treaty. Accordingly, in the present case, the contested measure should not be classified as aid, provided that the national court establishes that the benefit derived by wholesale distributors from exemption from the direct sales tax satisfies the often mentioned criterion of proportionality; that is to say, it does not exceed what is strictly necessary to compensate the additional net costs which they incur in performing the public service obligations imposed on them.The second question: application of the exemption laid down in Article 90(2) of the Treaty.64. In the event that the contested measure is classified as State aid, on the other hand, the national court asks, by its second question, whether wholesale distributors may be regarded as having been entrusted with the operation of a service of general economic interest within the meaning of Article 90(2) of the Treaty and whether, in order to benefit from the exemption laid down by Article 90(2), the aid granted to them must be limited to offsetting the additional expenditure resulting from their public service obligations.65. Having previously stated that the measure in question does not constitute aid, inasmuch as it is intended to offset the additional costs of public service, I will examine the second question only in the alternative and refer back, where possible, to the observations I made in the preceding paragraphs.66. I would state at the outset that wholesale distributors have undoubtedly been entrusted with the operation of a service of general economic interest within the meaning of Article 90(2) of the Treaty. On this point I need only refer to my observations in paragraphs 51 and 52 regarding the autonomy of the Member States to define the services of general economic interest which they intend to entrust to certain undertakings and the public service obligations imposed on wholesale distributors who must guarantee at all times an adequate supply of medicines for the general public.67. Moreover, I have already noted that the performance of such public service obligations entails for wholesale distributors a burden that they would not have to bear were it not for these public law constraints. I have also stated that, according to the recent judgment in FFSA, State measures intended to offset such public service obligations, although classifiable as aid, may be exempted under Article 90(2) of the Treaty. In fact, according to the Court of First Instance the grant of State aid may, under Article 90(2) of the Treaty, escape the prohibition laid down in Article 92 of the Treaty provided that the sole purpose of the aid in question is to offset the additional costs incurred in performing the particular task assigned to the undertaking entrusted with the operation of a service of general economic interest and that the grant of the aid is necessary in order for that undertaking to be able to perform its public service obligations under conditions of economic equilibrium.68. Should the Court therefore wish to adopt the approach adopted by the Court of First Instance and classify the offsetting of the additional costs of public service as State aid, it should, for the sake of consistency, acknowledge that such aid may be compatible with the common market on the basis of the exemption laid down by Article 90(2). It may of course proceed directly to consider whether the specific conditions required for exemption, which I have indicated above, are satisfied, if it is in possession of all the necessary facts. Alternatively, it may leave that to the national court, especially since Article 90(2) is directly applicable and the national court is competent to apply the derogation.The legality of the contested measure69. Having clarified the terms of and possible solutions to the first two questions referred for a preliminary ruling, I now turn to the question to which I alluded earlier concerning the alleged illegality of the contested measure on the ground that, in breach of Article 93(3) of the Treaty, it was not notified to the Commission. Indeed, it will be recalled that Ferring's action is founded on precisely that allegation and that, in the judgment to which I have referred a number of times, the Social Security Court, Lyon, declared the tax therein at issue illegal on precisely that basis, without even making an application to the Court of Justice. On the other hand, the French Government and ACOSS take the view that, even if the direct sales tax were to be classified as State aid, application of the exemption laid down in Article 90(2) of the Treaty would render it lawful with the result that the Court should not order reimbursement of sums paid by pharmaceutical laboratories by way of that tax.70. It is therefore necessary to clarify what consequences may ensue from failure to notify a State measure and, in particular, whether failure to notify in all cases renders the measure illegal or whether the consequences vary according to how the measure may be classified, that is, as not aid, aid not covered by the exemption laid down by Article 90(2) or aid compatible with Article 90(2).71. I will start with the observation that if one accepts the argument, which is a plausible argument advanced by the national court, that the measure at issue is not State aid, the problem of its legality would obviously not arise as there would be no obligation to give prior notification in such case.72. The solution would be equally easy if the Court were to rule that the contested measure could not be justified on the basis of the exemption laid down in Article 90(2) of the Treaty. Indeed, in that case, even if the measure could theoretically be declared compatible on the basis of the exemptions laid down in Article 92 of the Treaty, it would nevertheless constitute illegal aid on the ground that it was implemented without prior authorisation from the Commission. It is clear from Community case-law that the validity of measures giving effect to aid is affected if national authorities act in breach of the last sentence of Article 93(3) of the Treaty and that any decision on the compatibility of such measures on the basis of the exemptions laid down in Article 92 of the Treaty does not have the effect of regularising ex post facto the implementing measures which were invalid because they had been taken in breach of the prohibition laid down by the last sentence of Article 93(3) of the Treaty.73. However, uncertainty would arise if the Court were to conclude that the measure in question does in fact constitute aid, but may be justified on the basis of the derogation provided for in Article 90(2) of the Treaty and, of course if it were to be confirmed that the French authorities in fact limited themselves to offsetting the additional net costs incurred by wholesale distributors in performing the public service obligations imposed on them.74. According to the Commission, this being aid, France would nevertheless be in breach of its obligation to give prior notification under Article 93(3) of the Treaty because, as with aid declared compatible under Article 92 of the Treaty, application of the exemption laid down in Article 90(2) cannot retrospectively cancel out the breach of that obligation. It seems to me that the necessary inference is that the contested measure, although justified by the need to offset the additional costs of public service, should none the less be regarded in the same way as illegal aid, with all the consequences following therefrom, particularly as regards its recovery.75. On this point, the Commission refers to the recent judgment in CELF, wherein the Court held that even aid covered by the exemption laid down in Article 90(2) must be the subject of prior notification. According to the Commission, that would entail application to the present case of the law expounded in the Salmon case, according to which the validity of measures giving effect to aid is affected if national authorities act in breach of the last sentence of Article 93(3) of the Treaty. National courts must offer to individuals in a position to rely on such breach the certain prospect that all the necessary inferences will be drawn, in accordance with their national law, as regards the validity of measures giving effect to the aid, the recovery of financial support granted in disregard of that provision and possible interim measures.76. However, in my opinion, the conclusions that the Commission draws from the Salmon case regarding the situations covered by Article 90(2) of the Treaty are not the only ones possible. In particular, by adopting an apparently orthodox approach, it disregards the diversity of possible situations and ends up by lumping together, without any real or justifiable need to do so, consequences which are too often excessive in comparison with the breach of an obligation whose scope is essentially formal, such as notification of the measures in question.77. I would observe at the outset that the Salmon case concerned provisions which do not have direct effect in the Member States (namely the exemptions laid down in Article 92 of the Treaty) and which, as such, do not confer on the national court jurisdiction to establish directly whether aid is compatible with the common market. The conclusion which the Court reached in that case was based specifically on that aspect and consequently on the fact that application of the exemptions laid down in Article 92 of the Treaty is at the exclusive discretion of the Commission, while the national courts may only rule on compliance with the obligation to give prior notification laid down in Article 93(3) of the Treaty, that being a directly applicable provision. In short, it seems to me that the logical and coherent explanation for the ruling in the Salmon case is to be found in the fact that the Commission has exclusive jurisdiction to decide, at its discretion and with constituting effect, on the compatibility of aid on the basis of the exemptions laid down in Article 92 of the Treaty. Unless and until such time as the Commission decides to authorise aid, it is incompatible with the common market and consequently any aid granted prior to the Commission's authorisation is illegal. It is for those reasons that the Court concluded, as noted, that authorisation does not have the effect of regularising ex post facto the implementing measures which were invalid because they had been taken in breach of the prohibition laid down by the last sentence of Article 93(3) of the Treaty.78. In the present case, the situation is quite different because the exemption laid down in Article 90(2) is directly applicable. So much is clear from the settled case-law of the Court, which has on a number of occasions made clear that the national courts do have jurisdiction to establish whether the exemption under Article 90(2) enables certain undertakings to be given special or exclusive rights otherwise in breach of the combined provision of Article 90(1) (now Article 86(1) EC) and Article 86 (now Article 82 EC) of the EC Treaty or whether it can justify a national rule that conflicts with the principle of the free movement of services guaranteed by Article 59 of the Treaty.79. Moreover, it also seems to me that there are no valid reasons for precluding the jurisdiction of national courts where the issue is justification of the grant of aid intended to offset the additional costs of public service obligations incurred by certain undertakings, for even in such a case, application of the exemption laid down in Article 90(2) does not entail any specific discretionary assessment on the part of the Commission. On the contrary, it requires mere factual verification of the absence of unjustified financial support and the national courts are undoubtedly in a position to verify - in accordance with the judgment in FFSA - whether the sole purpose of the aid in question is to offset the additional costs incurred in performing the particular task assigned to the undertaking entrusted with the operation of a service of general economic interest and [whether] the grant of the aid is necessary in order for that undertaking to be able to perform its public service obligations under conditions of economic equilibrium.80. If that is the correct analysis there is no reason to constrain national courts to declare illegal aid which it has found to be compatible with the common market in accordance with Article 90(2) simply because the aid was implemented without prior notification being given to the Commission under Article 93(3) of the Treaty. If the conditions for applying the exemption exist, the aid is de jure compatible with the common market without there being any need for Commission authorisation. Furthermore, even if there were a subsequent decision confirming the compatibility of the aid under Article 90(2), that decision would merely have declaratory effect as it would be limited to a statement that the national authorities had not applied the exemption in an abusive manner.81. Thus, according to the approach outlined here, the purpose of notifying the aid under discussion in this case, pursuant to Article 93(3), is not to enable the Commission to exercise any exclusive discretionary power, as in the case of application of the exemptions laid down in Article 92. The sole purpose of notification here is to inform the Commission so that it can establish in sufficient time whether the aid has in fact been granted to offset the additional costs of public service obligations and whether the compensation exceeds what is strictly necessary for that purpose. However, because prior notification in this case is not instrumental in the issue of any discretionary authorisation, its omission, whilst of course amounting to a separate breach of the procedural rules, cannot automatically render illegal aid which in fact was compatible from the outset with the common market under Article 90(2). It could, as such, attract sanctions under an appropriate infringement procedure, as happens, for example, in cases where notification of the transposition of a directive is not given or is given out of time.82. I think it also appropriate to point out that this solution would not lead to any weakening of Community control in the area. Indeed, aid ought to be found to be lawful only where it is proved before the national court that it has been granted to undertakings entrusted with a service of general economic interest within the meaning of Article 90(2) and does not exceed what is strictly necessary to offset the additional costs arising from the performance of that service. Conversely, if there is any overcompensation, the portion of aid in excess of the additional net costs incurred in performing the public service should obviously be declared illegal, since such portion is not covered by the exemption under Article 90(2) of the Treaty.83. Furthermore, it must be understood that if national authorities (including courts) apply the exemption in question to aid which is in fact not eligible, the Commission may always exercise the powers conferred on it by the Treaty to re-establish compliance with Community law, including its power to adopt interim measures such as those mentioned in Boussac. On the other hand, it seems to me to be highly debatable, even as regards the functionality and coherence of the system, that a merely formal irregularity should cause a national court to declare illegal aid which (possibly after seeking clarification from the Commission or even following a Commission decision) it has itself regarded from the outset as compatible with the common market on the ground that it is necessary in order to guarantee public services of primary importance to the general public.84. In conclusion, I take the view that if the Court finds that the measure at issue is aid that can be justified on the basis of the exemption laid down in Article 90(2) of the Treaty and the national court confirms in point of fact that the French authorities have limited the amount of compensation to the additional net costs incurred by wholesale distributors in performing the public service obligations imposed on them, the aid in question cannot be treated as illegal solely because it was not first notified to the Commission under Article 93(3) of the Treaty.The third question: the compatibility of the Law of 19 December 1997 with Article 59 of the Treaty85. Finally, by its third question the national court asks whether Article 59 of the Treaty precludes national legislation of the type introduced by the Law of 19 December 1997. In essence, it wishes to know whether levying the direct sales tax might constitute a hinderance to pharmaceutical laboratories established in other Member States that wish to market in France, under the rules for the provision of services, the medicines which they produce.86. The question, as I understand it, arises out of Ferring's argument that, as a result of the French system under discussion, pharmaceutical laboratories established in other Member States would be subject to both the public service obligations and the direct sales tax and that this unjustly restricts their freedom to provide services and consequently infringes Article 59 of the Treaty.87. However, Ferring's argument is disputed by ACOSS, which objects that in reality pharmaceutical laboratories established in other Member States are - like those in France - solely obliged to pay the tax at issue, without having to perform the public service obligations imposed on wholesale distributors.88. I would say at once that these points were made, rather fleetingly, with reference to a legal framework that seemed and remains extremely unclear. However, I see no need to go into the argument more deeply in these proceedings for the simple reason that, in this case, there are, in my opinion, no grounds for applying Article 59 of the Treaty. It should be noted - as has been made clear on several occasions throughout the case - that Ferring is a company governed by French law and carries on its business in France, obviously not under the rules governing the freedom to provide services. It cannot therefore be adversely affected by any obstacles created by French law to hinder pharmaceutical laboratories established in other Member States.89. Nor does it appear relevant to me, for present purposes, that Ferring belongs to a multinational group and distributes medicines produced in Germany. As regards the freedom to provide services, that fact does not alter the conclusion I reached earlier since, being established in France, Ferring is not subject to the public service obligations that it says would be imposed, in addition to the direct sales tax, on pharmaceutical laboratories established in other Member States.90. Nor can I accept Ferring's objection that the German branch of the group could decide to sell its own products directly in France if French law did not hinder the freedom to provide services. It is quite clear that that mere possibility cannot of itself provide grounds for the French branch of the group to invoke a Community provision that is manifestly not applicable to the facts of the case. If anything, the situation could have implications in terms of the Community rules on the free movement of goods, but those rules have not been referred to in the order for reference and have only been mentioned in passing by the Commission.ConclusionIn light of the foregoing considerations, I therefore suggest that the questions referred by the Social Security Court, Créteil, for a preliminary ruling be answered as follows:(1) Levying the tax referred to in Article L. 245-6-1 of the Social Security Code solely on direct sales by pharmaceutical laboratories must be regarded as State aid to wholesale distributors where the benefit to them in not being assessed to that tax exceeds what is strictly necessary to offset the additional net costs incurred by them in discharging the public service obligations imposed on them.In the alternative, should the Court find that that measure in any case constitutes State aid, it would nevertheless be compatible with the common market under Article 90(2) of the EC Treaty, provided that it is strictly necessary to compensate the additional net costs incurred by wholesale distributors in performing the public service obligations imposed on them.In such case, failure to notify the aid under Article 93(3) of the Treaty would not cause the aid to be illegal.(2) Article 59 of the EC Treaty does not apply to the case of a company established in a Member State which does not operate in that State under the rules for the free provision of services.