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Case Note: C-333/14 Scotch Whisky Association and Others v Lord Advocate and Advocate General for Scotland [2016] 2 C.M.L.R. 27 – Jochelle Greaves Siew – King's Student Law Review
Posted on May 18, 2020 May 18, 2020 by Angus Locke
Case Note: C-333/14 Scotch Whisky Association and Others v Lord Advocate and Advocate General for Scotland [2016] 2 C.M.L.R. 27
By Jochelle Greaves Siew
The guarantee of free movement of goods[1] within the European Union (EU) is the result of several core safeguards. One of which is the prohibition of quantitative restrictions (QRs) or measures having equivalent effects (MEEs)[2] in trade between Member States (MS). Scotch Whisky Association and Others[3] is a significant decision in this regard as it illustrates how the Court of Justice (CJEU) pitches legitimate interests[4] against the free movement of goods. Furthermore, the case demonstrates that the CJEU can arguably be seen to favour economic interests over non-economic interests.
This article first outlines the development of the case and its key components, before discussing the significance of EU Regulation No 1308/2013 (Single Common Market Organisation [CMO] Regulation).[5] Next, it examines the status of minimum unit pricing (MUP) considering the free movement of goods and previous case law. It then turns to the CJEU’s application of the proportionality test to the case, before briefly discussing the issue of devolution and drawing a conclusion.
In May 2012, the Scottish Parliament passed the Alcohol (Minimum Pricing) (Scotland) Act aimed at protecting human life and health by means of introducing MUP for alcohol. This decision was taken considering evidence showing an inverse correlation between price and consumption of alcohol.[6] However, the measure was not implemented. The Scotch Whisky Association, together with other alcohol industry representatives,[7] brought judicial review proceedings before the Scottish courts, challenging the compatibility of MUP with EU law.
The challenge was made on the basis of article 34 Treaty on the Functioning of the European Union (TFEU)[8] – which regards the prohibition of QRs on imports and MEEs – and the Single CMO Regulation[9] – which establishes rules and measures to manage the production and trade of most EU agricultural products in order to prevent market disturbances and ensure equal access to goods. The creation of CMOs in the 1980’s constitutes a complete system containing specific rules regulating key features, including pricing and market intervention. By conferring MS’ competence on such questions, CMOs ensure market liberalisation and assist in achieving Common Agricultural Policy (CAP) objectives.[10] Notably, the Single CMO Regulation does not permit retail price fixing at national or EU level, nor does it prohibit MS adopting national measures fixing such prices.[11]
In the opinion of Lord Doherty, the Outer House of the Court of Session (who ruled against the petitioners) distanced itself from their arguments. One key argument concerned the MUP not falling within the list of exceptions in article 36 TFEU,[12] since there is ‘no rule of EU law that precluded justification of minimum pricing by virtue of article 36 or the mandatory requirements’.[13] Upon appeal, a preliminary reference was made by the Inner House of the Court of Session to the CJEU, resulting in questions regarding the common organisation of the agricultural market, the use of health as a justification, minimum pricing and the assessment of proportionality.
In his analysis of Scotch Whisky Association, Advocate General (AG) Bot observed that a ‘complete system’, particularly regarding ‘prices and intervention’, had been established for wine pricing.[14] Thus, the liberalisation of the market concerning wine resulted in a new space where supply and demand no longer created a margin to influence the price through the ‘intervention of measures taken by MS’.[15] This stance shows that the nature of CMOs ‘married the formerly highly regulated CAP with the market opening goal of the fundamental freedoms, paving the way for a legal response to the new competition-driven CAP in the EU.’[16] So long as national measures do not conflict with the principle of free formation of selling prices, there will not be a necessary restriction on national measures. That is, EU law establishes regulatory limits to domestic measures related to free movement of goods. This concerns the limit posed by the principle of free formation of selling prices. Thus, both are ostensibly justified and meet the proportionality requirement.[17] It updates the judicial review of measures within the CMO, aligning the CAP closer to classical internal market law. This thereby has the potential to impact the relationship of the CAP with the fundamental freedoms and the interpretation of article 38(2) TFEU.[18]
The CJEU shared the view of AG Bot, holding that a ‘complete system’ had been established in order to regulate the common market of wine, particularly regarding prices. [19] Nonetheless, the CJEU also found that MS still retained a portion of their competences in setting of national measures fixing such prices, since there was no explicit right or prohibition created on the topic within the Single CMO Regulation. Still, MS would be restricted to act in accordance with the free movement of goods.[20]Furthermore, the CJEU accepted that the pursuit of ‘human life and health’ could justify undermining the Single CMO Regulation and thereby violating the free movement of goods. However, it also stipulated, concurring with AG Bot, such justifications of measures taken by the MS must meet the requirements of proportionality as established by the CJEU’s case law.[21] This ensures that national measures within the CMO are subject to the same standard applied to measures concerning goods which are not found under the CMO.[22] This demonstrates that market liberalisation has allowed for general interest exceptions to CMOs subject to a proportionality assessment.[23] However, this depends on the inherent uncertainties of such an assessment.
Upon referral from the national court, one issue to be considered by the CJEU, alongside the issues relating to the Single CMO Regulation and proportionality, was whether MUP is a MEE (whether or not it is in line with articles 34 and 36 TFEU). The CJEU’s approach is noteworthy given its departure from and subsequent return to considering certain selling arrangements when considering market access cases. In the earlier case of Van Tiggele,[24] MUP was held to fall within the scope of article 34 TFEU to the extent that it prevents the lower price of imported products from being reflected in the final price. After Keck,[25] however, the CJEU held that minimum pricing was a certain selling arrangement and therefore only applies to the extent to which the measure was discriminatory.[26]
AG Bot began his analysis by referring to ‘market access’ case law[27] and Dassonville,[28] and subsequently classified MUP as a market access restriction.[29] He then questioned whether MUP could be classified as a selling arrangement,[30] reiterating the Keck formula.[31] However, he did not favour a particular side, and instead took a hybrid approach for both approaches co-exist. MUP was found to be a market access restriction and violation of article 34 TFEU.[32] The choice between the two interpretations would have no consequences in the case at hand, since the national court had been provided with evidence to indicate that minimum pricing would affect imported wine more than domestically produced wine. However, the distinction is theoretically important as proving discrimination in other cases might not be as straightforward. Furthermore, discrimination might be difficult to prove in those cases; there might be scant statistical evidence available, or it might be impossible to foresee whether rules have had, or might in the future have, a foreclosure effect.[33]
The CJEU easily found that MUP falls under the concept of MEEs within the meaning of article 34 TFEU, as defined in Dassonville.[34] It is possibly for the reasons mentioned above that the CJEU chose not to go down the Keck path by altogether not discussing whether MUP qualified as a certain celling arrangement; rather, it held the rules to be a MEE because they hindered access to the UK market. Despite the CJEU attempting to differentiate itself from the wording of the formula in Dassonville[35]by simply changing the wording from ‘all trading rules’ to ‘all measures’, market access adds nothing more to the principle found in Dassonville.[36] However, it is not stated whether this is a change in the case law on minimum pricing so that those rules are no longer to be considered selling arrangements, or if, since the rules were in any event deemed to be discriminatory by the national court, the CJEU decided not to engage with the issue. Subsequent case law on pricing has since returned to the certain selling arrangement approach, thereby increasing the uncertainty as to the way rules on pricing should be qualified.[37]
In Scotch Whisky,[38] the CJEU broadly applied the proportionality test to determine the scope of the implemented measures. The main question of the proportionality test – which considers the suitability, necessity and strict proportionality of a measure adopted to pursue a specified legitimate objective – was whether an increase in taxation would be similar in effectiveness to MUP[39] while remaining less restrictive of the free movement of goods. AG Bot began his review of proportionality by reiterating the duties held by MS to apply EU law with due consideration to their obligations.[40] MS courts must apply a proper analysis of the ‘suitability and proportionality of the restrictive measure’ and not go beyond their ‘discretion’ in the final assessment.[41] According to AG Bot, if the MUP was seen as one of several tools to combat high alcohol consumption, it would then be qualified as having ‘consistently and systematically’ attained the objective.[42] He further stated that the necessity of MUP is to be decided at the national court’s discretion; however, it appeared ‘to be less consistent and effective than an increased taxation measure and may even be perceived as being discriminatory’.[43]
After examining and considering the Explanatory Notes and an additional study, the CJEU found that the measure’s objectives were ‘twofold’ and included ‘reducing, in a targeted way, both the consumption of alcohol by consumers whose consumption is hazardous or harmful’ and reducing ‘the population’s consumption of alcohol’.[44] The CJEU clearly maintained that such a fiscal measure is likely to be less restrictive of trade within the EU than imposing an MUP. It can be reasoned that since taxation includes all alcoholic beverages, this measure would cover the same products as an MUP. This is unconvincing since taxation would affect all products, whereas an MUP would only affect a limited number of products. Hence, the MUP would be less restrictive than general taxation measures in terms of the volume of trade impacted.[45] Additionally, reliance on existing regulatory tools, such as taxation, as a more proportionate alternative to a new policy can prevent new regulatory tools from being developed. This is solely due to the inevitable uncertainty concerning the effectiveness of a new tool over an existing one.
However, the CJEU subsequently framed how the national court’s proportionality test was executed, venturing unusually deep into national procedural laws.[46] After guaranteeing the MS’ discretion ‘to decide on the level of protection of human life and health which they propose to provide’,[47] the CJEU emphasised that MS must take into account ‘the requirements of the free movement of goods’[48] within the EU when exercising such discretion. This beckoned reactions to the pitfalls of Sunday Trading[49] in which MS were left without guidance on how national authorities should consider the proportionality of Sunday trading measures. Yet, unlike in Sunday Trading, the CJEU removed the burden from national authorities which required them to provide evidence supporting the necessity test.[50] Rather, the obligation was given to the national court when exercising the proportionality review.[51]
Accordingly, the CJEU has slowly developed several requirements that rules which otherwise pursue a legitimate interest must satisfy to comply with EU law, including that there must be some consistency between different policies.[52] Regulators must carry out extensive analysis of alternative policies to ensure that no less restrictive alternative is available, and sufficient time must be left to economic operators to ensure that they can adapt to new regulatory frameworks. If insufficient, the CJEU has made it clear[53] that even if national measures are, in and of themselves, compliant with EU law, they can fall foul of article 34 TFEU.[54]
The CJEU further prescribed the substance of the necessity test, clarifying what type of evidence would be needed. National courts are to take into account: ‘the possible existence of scientific uncertainty as to the effects’[55] of a measure, and ‘the nature and scale of the restriction on the free movement of goods (…), by comparison with other possible measures which are less disruptive of trade’ within the EU.[56] This can be confidently assumed to have been done to avoid repetition of the Sunday Trading cases, given the resultant confusion by domestic authorities in applying the proportionality assessment.
Moreover, regarding which scientific studies are to be considered, the CJEU has been strict in requiring that new evidence which form part of the proportionality assessment must be deliberated consistently and throughout, since ‘the requirements of EU law must be complied with at all relevant times, whether that is the time when a measure is adopted, when it is implemented or when it is applied to the case in point.’[57] The CJEU became even clearer in Deutsche Parkinson[58] where, unlike in Scotch Whisky,[59] national authorities lacked sound evidence to substantiate their claim of the national measure’s suitability. The CJEU did not apply the three-tier proportionality test as it was employed in ANETT,[60] for instance, but rather their application resembled Dassonville.[61]
Scotch Whisky further highlights a different problem. [62] Since the proportionality test requires MS to actively engage with different regulatory frameworks and choose the one which least disturbs intra-EU trade, one must consider the outcome of only certain legislative areas being devolved to regional and local authorities. The question remains whether this should be done when assessing the effectiveness of different regulatory choices, or rather should the unity of the MS in the EU plane prevail. In Scotch Whisky,[63] Lord Carloway referred to this issue as ‘the elephant in the room’.[64] Though the Scottish government attempted to pursue a public health policy over which it has devolved powers, it could not do so through taxation since it lacks devolved powers in that area. Thus, it is unsurprising that the alcohol industry pursued the taxation argument. If the Supreme Court were to find that taxation is a more proportionate response than MUP, fiscal policy would collapse since the Scottish government lacks competence to raise taxes on alcoholic products.
Unfortunately, the Court did not address this since the parties had agreed that, from an EU perspective, internal division of regulatory competences is irrelevant. However, while this may be theoretically valid, if the test to be performed concerns the effectiveness of an alternative policy from an EU law perspective, an element of the test should include whether there is a realistic possibility of said alternative being implemented. Since the purpose of devolution is to allow different regulatory climates within the same national sphere, care should be taken to ensure that internal market rules bolster the regulatory diversity which is key to any devolution settlement.[65]
The CJEU’s judgment in Scotch Whisky[66] could be seen by some MS as the key to addressing public health issues, such as excessive alcohol consumption, without hindering intra-EU trade. In addressing the Single CMO Regulation, the CJEU refined its scope and established MS’ retained competence to regulate prices. Though, this competence is restricted by the free movement of goods. Further, in its application of the proportionality assessment to the MUP, particularly the necessity component, the CJEU fails to adequately compare the effects of the measure compared with general taxation. Finally, the disregard of the issues posed by devolution infringes upon domestic regulatory diversity, thus begging the question of effectiveness of the CJEU’s approach to balancing the free movement of goods and the pursuit of human life and health.
[1] Arts 26, 28–37, Consolidated version of the Treaty on the Functioning of the European Union [2016] OJ C 326/01.
[2] ibid Art 34.
[3] C-33/14 Scotch Whisky Association and Others v Lord Advocate and Advocate General for Scotland, EU:C:2015:845.
[4] In this case, public health.
[5] Regulation (EU) No 1308/2013 of the European Parliament and the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007, [2013] OJ L347/671.
[6] For a review of available scientific evidence, see generally R W Elder and others, ‘The Effectiveness of Tax Policies Interventions for Reducing Excessive Alcohol Consumption and Related Harms’ (2010) 38 American Journal of Preventive Medicine 217.
[7] Other applicants include spiritsEUROPE and the Comité de la Communauté économique européenne des Industries et du Commerce des Vins, Vins aromatisés, Vins mousseux, Vins de liqueur et autres Produits de la Vigne.
[8] TFEU Art 34; A Commission-issued communication detailed how the Order constituted a Measure having Equivalent Effect per Art 34 TFEU and how it did not fall within the list of legitimate exceptions in TFEU article 36; Commission Communication SG (2012) D/52513.
[9] Regulation (EU) No 1308/2013 of the European Parliament and the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007, [2013] OJ L347/671.
[10] An example of CMOs is the CMO in wine; some CAP objectives include increasing agricultural productivity, stabilising market supply and demand, and providing adequate consumer and farmer protections; art 39(1) TFEU; Opinion of AG Bot on C-33/14 Scotch Whisky Association and Others v Lord Advocate and Advocate General for Scotland, EU:C:2015:527, [27]–[34].
[11] Regulation (EU) No 1308/2013 of the European Parliament and the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007, [2013] OJ L347/671.
[12] These include, inter alia, prohibitions or restrictions on trade justified on the grounds of public policy or public security, or the protection of health and life. See, TFEU Art 36.
[13] The Scotch Whisky Association & Others [2013] CSOH 70, [37].
[14] Opinion of AG Bot on C-33/14 Scotch Whisky Association (n 10) [29]; referring to 16/83 Criminal proceedings against Karl Prantl, EU:C:1984:101 [13], [14].
[15] Opinion of AG Bot on C-33/14 Scotch Whisky Association (n 10) [31]–[32].
[16] K P Purnhagen and H Schebesta, ‘A Case moving at the Frontiers of Market Access, Freedom of Goods, the Common Agricultural Policy and Science in Court- Reflections on Scotch Whisky Association’ Wageningen Working Paper Law and Governance 2016/05.
[17] Opinion of AG Bot on C-33/14 Scotch Whisky Association (n 10) [44]–[46].
[18] TFEU Art 38(2).
[19] C-33/14 Scotch Whisky Association (n 3) [16].
[20] ibid [17]–[20], citing Opinion of AG Bot on C-33/14 Scotch Whisky Association (n 10) [31]–[37].
[21] C-33/14 Scotch Whisky Association (n 3) [26]–[29].
[22] Purnhagen and Schebesta (n 16).
[23] AD Macculloch, ‘State Intervention in Pricing: An Intersection of EU Free Movement and Competition Law’ (2017) 42(2) ELRev 190, 201.
[24] C-82/77 Openbaar Ministerie (Public Prosecutor) of the Netherlands v Jacobus Philippus van Tiggele, EU:C:1978:10, [1978] ECR 25.
[25] C-267/91 and 268/91 Criminal proceedings against Bernard Keck and Daniel Mithouard, EU:C:1993:9, [1993] ECR I-6097.
[26] C-63/94 Groupement National des Négociants en Pommes de Terre de Belgique v ITM Belgium SA and Vocarex SA, EU:C:1995:270, [1995] ECR I-2467; C-531/7 Fachverband der Buch- und Medienwirtschaft v LIBRO Handelsgesellschaft mbH, EU:C:2009:276, [2009] ECR I-3717; C-148/15Deutsche Parkinson Vereinigung eV v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, EU:C:2016:776, decided after Scotch Whisky, in relation to minimum pricing of pharmaceutical products where the Court carries out a discriminatory assessment without however qualifying the measure as a certain selling arrangement; In C-221/15 Etablissements Fr Colruyt NVI, EU:C:2016:704, also decided after Scotch Whisky, minimum retail pricing (calculated however by reference to the price declared by the producer for excise purposes) was found to be a certain selling arrangement.
[27] Opinion of AG Bot on C-33/14 Scotch Whisky Association (n 10) [58].
[28] 8/74 Procureur du Roi v Benoît and Gustave Dassonville, EU:C:1974:82, [1974] ECR 837.
[29] Opinion of AG Bot on C-33/14 Scotch Whisky Association (n 10) [62].
[30] ibid [63].
[31] C-267/91 and 268/91 Keck, (n 25) [16]; if provisions concerning selling arrangements ‘affect in the same manner, in law or in fact, the marketing of domestic products and those of other Member States’, then these should not be caught by article 34.
[32] TFEU art 34.
[33] For demonstration of this, see C-110/05 Commission of the European Communities v Italian Republic, EU:C:2009:66, [2009] ECR I-519.
[34] 8/74 Dassonville (n 28); According to it, such measures include ‘all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade’.
[36] LW Gormley, ‘Inconsistencies and Misconceptions in the Free Movement of Goods’ 40(6) ELRev 925.
[37] See C-221/15 Etablissements Fr. Colruyt NVI, EU:C:2016:704, and as mentioned above in C-148/15 Deutsche Parkinson, the Court engaged in a discriminatory assessment without mentioning certain selling arrangements.
[38] C-333/14 Scotch Whisky Association (n 3).
[39] ibid [46].
[40] Opinion of AG Bot in C-333/14 Scotch Whisky Association (n 10) [71].
[41] ibid [87]-[88].
[42] ibid [135].
[43] ibid [151].
[44] C-333/14 Scotch Whisky Association (n 3) [34].
[45] Volume of trade affected has been held as important in other cases regarding Art 34 TFEU, such as the Sunday Trading cases. Currently, the Court is not concerned with reducing the volume of trade impacted but is much more concerned that the measure does not impact ‘fair competition’ within the market.
[46] Purnhagen and Schebesta (n 16) 431.
[47] C-333/14 Scotch Whisky Association (n 3) [52].
[49] Case 145/88 Torfaen Borough Council v B&Q plc 01989] ECR I-3851. For subsequent domestic case-law, see, for example, WH Smith Do-It-All v Peterborough City Council [1990] 2 CMLR 577; B&Q Ltd v Shrewsbury an Atcham Borough Council [1990] 3 CMLR 535; Wellingborough Council v Payless DIY Ltd [1990] 1 CMLR 773; Stoke-on-Trent City Council and Norwich City Council v B&Q Plc [1990] 3 CMLR 31.
[50] C-333/14 Scotch Whisky Association (n 3) [56].
[52] For example, in the context of gambling the very high bar required by the Court both in terms of consistency and in terms of evidence, C-316/07, C-358/07, C-360/07, C-409/07, C-410/07 Markus Stoß, Avalon Service-Online-Dienste GmbH and Olaf Amadeus Wilhelm Happel v Wetteraukreis and Kulpa Automatenservice Asperg GmbH, SOBO Sport & Entertainment GmbH and Andreas Kunert v Land Baden-Württemberg, EU:C:2010:504, [83]; C-347/9 Criminal proceedings against Jochen Dickinger and Franz Ömer, EU:C:2011:582, [57]; C-390/12 Pfleger and Others, EU:C:2014:281.
[53] C-463/01 Commission v Germany, EU:C:2004:797, [2004] ECR I-11705; and C-309/02 Radlberger Getränkegesellschaft mbH & Co and S Spitz KG v Land Baden-Württemberg, EU:C:2004:799, [2004] ECR I-11763. On the difficult issue of reconciling intra-EU trade with environmental protection, see C Hilson, ‘Going local? EU law, localism and climate change’ (2008) 33 ELRev 194.
[54] TFEU Art 34.
[55] C-333/14 Scotch Whisky Association (n 3) [57].
[56] ibid [58].
[57] ibid [62].
[58] C-148/15 Deutsche Parkinson (n 26).
[59] C-333/14 Scotch Whisky Association (n 3).
[60] C-456/10 Asociación Nacional de Expendedores de Tabaco y Timbre (ANETT) v Administración del Estado, EU:C :2012 :241.
[61] C-148/15 Deutsche Parkinson (n 26) [2].
[62] C-333/14 Scotch Whisky Association (n 3).
[64] The Scotch Whisky Association and Others v Lord Advocate, Court of Session, [2016] CSIH 77.
[65] In this respect, it is also interesting to observe how Brexit might affect the devolution question in the UK; see generally C Closa (ed), Secession from a Member State and Withdrawal from the European Union – troubled membership (Cambridge 2017).
[66] C-333/14 Scotch Whisky Association (n 3).
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