Source: https://eutopialaw.com/tag/angus-macculloch/
Timestamp: 2019-04-23 00:13:00+00:00

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Two recent judgments handed down by the CJEU show how difficult it can be for a Member State to involve itself in fixing minimum prices for products. Given the ongoing challenge to minimum alcohol pricing in Scotland it is interesting that in both these cases the Court ruled against the fixing of prices, but for very different reasons. Neither case is directly analogous to the Scots alcohol MUP referred to the Court in Case C-333/14, but there are perhaps lessons that can be learnt.
The first of the Italian cases is the least similar to the ongoing UK dispute, but it does indicate an important aspect of the wider problem with Member States interfering in markets. Cases C-184, 187, 194, 195 & 208/13 API and Others (ECLI:EU:C:2014:2147) concern a request for a preliminary ruling regarding the Italian Ministry for Infrastructure and Transport’s measures which fix minimum operating costs for carriage of goods by road. Charges payable by road haulage customers in Italy could not be lower than the minimum operating costs, and they therefore operated as a minimum price for services. The legislative provisions delegated the setting of the minimum operating costs to the Osservatorio; a group drawn from State, industry and stakeholder representatives. Its role was to ‘ensure the protection of road safety and the proper functioning of the market in the road haulage of goods’. The question the Court addressed was whether the fixing of prices by the Osservatorio could be compatible with EU law on the ground that it ensured road safety standards.
“where legislation of a Member State provides for road-haulage tariffs to be approved and brought into force by the State on the basis of proposals submitted by a committee, where that committee is composed of a majority of representatives of the public authorities and a minority of representatives of the economic operators concerned and in its proposals must observe certain public interest criteria, the fixing of those tariffs cannot be regarded as an agreement, decision or concerted practice between private economic operators”.
“In those circumstances, the national legislation at issue in the main proceedings does not contain either procedural arrangements or substantive requirements capable of ensuring, that, when establishing minimum operating costs, the Osservatorio conducts itself like an arm of the State working in the public interest”.
Having established that Art 101 TFEU applied to the measure, the Court turned to its potential for justification under Art 101(3). It rejected application of the Art 101(3) exception on the basis that while road safety may be a legitimate objective the fixing of costs was not ‘appropriate, either directly or indirectly, for ensuring that the objective is attained’ . The measures also went beyond what was necessary as they did not allow carriers to prove that, although they charged lower prices, they fully complied with safety provisions . The fixing of minimum costs could therefore not be justified.
“The establishment of different minimum tax thresholds according to the characteristics or price of cigarettes would lead to distortions of competition as between different cigarettes and would therefore be contrary to the objective pursued by Directive 2011/64 of ensuring the proper functioning of the internal market and neutral conditions of competition”.
Italy tried to rely on the public health objective to justify the imposition of the duty. The Court noted that the Directive already takes into account public health, at recitals 2, 14, and 16, and that the framework put in place by the Directive ‘does not prevent the Member States from taking measures to combat smoking and to ensure a high level of protection for public health by levying excise duties’ . In that light the Court therefore ruled that the Directive precluded the setting of a differential rate of excise for a class of cigarettes based on their retail price.
It was clear in this case that the EU legislation took into account the health concerns in relation to tobacco and allowed the imposition of excise duty likely to discourage the consumption of tobacco; the Directive therefore did ‘not prevent’ health protection. But the Directive was also designed to ensure ‘neutral competition’ within the remaining market for tobacco products. The differential tax rate, which attempted to subvert normal price competition, was clearly then contrary to the purpose of the Directive.
It is clear that the Scots MUP measure is not a disguised cartel, where the drinks industry’s attempts to set prices is given the protection by the State through legislation. But that does not mean that the API & Others is irrelevant to the ongoing SWA case. There is a clear connection between all three cases.
One of the questions raised in SWA regards the compatibility of MUP with Regulation 1308/2013 which governs, inter alia, the common market in wines. Art 167(1)(b) of the Regulation is particularly relevant as it prohibits Member States from laying down market rules which ‘allow for price-fixing’. On the face it of this could mean that the Scottish Parliament are constrained from introducing a minimum price for wine, in the same way as the Italian State was in relation to the imposition of a differential excise duty in Yesmoke. But if one considers Art 167 in context there is an argument that the apparently stark prohibition is more nuanced. The Regulations recitals make it clear that Producers Organisations and Interbranch Organisations (made up of producers and other industry stakeholders), as recognised in the Regulation, are to play a role in the organisation of the market; much as the Osservatorio did in Italian road haulage. It is not a surprise that the Regulation is clear that the rules in the common market, perhaps promulgated by way of a decision taken by an interbranch organisation (see Art 167(1)), should not relate to pricing. When read in this context it is not clear that the Regulation intends a bar on Member States adopting pricing controls unrelated to the common market organisation rules; i.e. where they are put in place for an entirely separate purpose.
Another interesting distinction between the Yesmoke and the SWA case is the fact that the tobacco Directive clearly has public health concerns at its forefront, and as the Directive had taken those concerns into account Italy was required to stay clearly within the terms of Directive. That is not the case in relation to the common market in wines. Health is mentioned in the Regulation, but only in relation of the production of foodstuffs, not in the wider public health concern that stems from the ‘hazardous and harmful’ consumption of alcohol. It would appear therefore that the Scottish Government may be able to argue that their separate concern for public health is outwith the terms of the Regulation and should be handled under the free movement provisions of the TFEU.
On 20 March 2014 the Court of Justice of the EU (CJEU) handed down two separate, but connected, judgements in Case C-639/11 Commission v Poland and Case C-61/12 Commission v Lithuania. Both cases involve the Commission challenging the Member States’ refusal to register right-hand drive cars within their jurisdiction. Both MSs argued that their refusal to allow the registration of right-hand drive cars was a safety measure as the driver of a right-hand drive car has a field of vision considerably reduced when the traffic is on the right-hand side of the road. It is rather contrary to the usual UK political debate on EU migration, but this issue is essentially a problem caused when former UK residents move to Poland or Lithuania and attempt to register their right-hand drive cars in those States (AG ). The owners of right-hand drive vehicles would have to go through the expensive process of moving the vehicle controls to the left in order to properly register their vehicle in either MS. In the rest of this post references will be to Case C-639/11 unless specifically indicated.
The judgment concerns two separate issues. The first, the registration of new vehicles, is of less general interest and I shall deal with it very briefly. The second, the registration of vehicles previously registered in another MS, is of wider application and I shall deal with it more fully.
The registration process for new vehicles in the EU is comprehensively governed by Type Approval Directives (Directive 70/311/EEC and Directive 2007/46/EC) which are designed to “replace the Member States’ approval systems with a Community approval procedure based on the principle of total harmonisation” (Dir 2007/46, Recital 2). The type approval procedure was amended when the UK and Ireland became members of the, then, Community to make no distinction between left and right-hand drive cars. Both the Directives are internal market measures, but ensure within them a high degree of road safety. Art 2a of Directive 70/311/EC requires MSs not to prohibit the registration of vehicles “on grounds relating to their steering equipment” if the vehicles satisfies the requirements of the Directive. It was therefore not surprising that as the EU harmonising measure had already taken into account the safety issues arising from the differences between the type approval of new left and right-hand drive vehicles it was not possible for an individual MS to require further pre-registration changes through moving the steering equipment from right to left .
As the Directives only apply to approval of new vehicles they were not relevant to the registration of vehicles which had previously been registered in other MSs. That question was governed by the Treaty principles on the free movement of goods, namely Articles 34 and 36 TFEU. Both Poland and Lithuania argued that the use of a right-hand drive vehicle in situations where traffic circulated on the right hand side of the road presented a risk to road safety such as to necessitate the refusal of registration. The Polish Government argued that there was no indirect discrimination in the measure, as right-hand drive vehicles manufactured in Poland were equally effected. Both the Polish and Lithuanian Governments argued that even if the measure was a quantitative restrict on imports, in the terms of Art 34 TFEU, it was justified on the basis of the protection of road safety. The Commission argued that the measure was contrary to Art 34 TFEU, and that the refusal of registration was not suitable for attaining the road safety objective pursued, and the measure was disproportionate.
In October 2012 Christopher Brown posted an interesting blog on AG Kokott’s opinion in Case C-226/11 Expedia. The full judgment was delivered on 13 December 2012 and it seems appropriate to look at whether the Court followed the same line; or whether there was an ‘appreciable’ difference.
In brief the case was a preliminary ruling reference from the French Cour de cassation asking whether a National Competition Authority (NCA), or presumably a domestic court, could impose penalties in relation to an agreement or anticompetitive practice which fell within the terms of the European Commission’s de minimus Notice. The question arose in the context of proceedings brought by the Autorité de la concurrence (the French NCA) against a joint venture ‘Agence VSC’ between SNCF (the French Rail operator) and Expedia (the online travel company) which was to operate travel agency services. There was no dispute before the Cour de cassation that the agreement had the object of distorting competition, potentially contrary to Article 101 TFEU, but there was argument that the agreement fell below the market share thresholds set out in the Commission’s de minimus Notice.
Since the original post, on 28 March 2012, it has become clear that drinks industry organisations are likely to use litigation to challenge any attempt by to introduce minimum alcohol pricing in either Scotland or England.
While competition law is still likely to be a factor in such litigation it has also become apparent that there are specific provisions in some sectors which will probably play an important role in any proceedings. Where an individual sector or industry is subject to detailed European regulation the general Treaty provisions are less likely to be decisive.
An example of this in relation to minimum pricing was seen in Case C-197/08 Commission v France. In this case the French Government were attempting to set a minimum price for tobacco products at 95% of the average price. This was challenged, not as being contrary to the free movement or competition provisions, but as being proscribed by Art 9(1) of Directive 95/59/EC on taxes which affect the consumption of manufactured tobacco. Art 9(1) sets out that manufacturers, of tobacco products, ‘shall be free to determine the maximum retail selling price for each of their products’. The French scheme was deemed to be incompatible with Art 9(1) as it undermined the competition, on the basis of costs, which the Directive was designed to protect [37-38]. The Court made it clear that the France could seek to protect health by increasing the duty on all tobacco products .
The Court of Justice of the EU delivered a controversial judgment on the 3rd July 2012 in Case C-128/11 UsedSoft v Oracle. The case will have a significant impact on a number of developing business models in digital software distribution. The case also highlights to growing tensions in the IP world between those who see greater restrictions as necessary to protect against the ease of digital copyright infringement and those who wish to maintain the ‘traditional’ balance between right-holders and the consumer/public. The two authors hold rather different views and we shall attempt to express both positions.
The case stems from a dispute between UsedSoft, a company specialising the sale of ‘pre-owned’ software licenses, and Oracle, a software company that sold licences and software online. Oracle’s EULA (End User Licence Agreement) barred any transfer of the licence to a third party, but UsedSoft would sell a licence which was no longer being used by one of Oracle’s direct customers onto third parties. Pre-owned software markets are common, and lucrative, in relation to software sold via optical media but are heavily restricted when software is sold directly via digital distribution. Software publishers are increasingly turning to digital distribution as it reduces costs (by reducing packaging and distribution costs and cutting out the retailers’ margin) and allows them to eliminate secondary markets, and therefore increase primary sales, through the EULA. That benefit may be reduced in the EU following this judgment.

References: CJEU 
 Art 101
 Art 101
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 Art 167
 Art 167
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 Art 2
 Art 34
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 Art 9
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