European Commission v French Republic.
Date: 2010-03-04
33. It must be recalled as a preliminary point that, as recital 3 in the preamble to Directive 95/59 makes clear, the directive is part of a policy of harmonisation of the structures of excise duty on manufactured tobacco, the objective of which is to prevent the distortion of competition between different categories of manufactured tobacco belonging to the same group and, consequently, to open the national markets of the Member States.
34. To that end, Article 8(1) of the directive provides that cigarettes manufactured in the Community and those imported from non-member countries are to be subject in each Member State to a proportional excise duty calculated on the maximum retail selling price, including customs duties, and also to a specific excise duty calculated per unit of the product ( Commission  v Greece , paragraph 19).
36. In that regard, Article 9(1) of Directive 95/59 provides that manufacturers, or, where appropriate, their representatives or authorised agents in the Community and importers of tobacco from non-member countries are to be free to determine the maximum retail selling price for each of their products, the aim being to ensure effective competition between them ( Commission  v Greece , paragraph 20). That provision seeks to ensure that the determination of the tax base of the proportional excise duty on tobacco products, that is the maximum retail selling price of those products, is subject to the same rules in all the Member States. It also aims, as the Advocate General states in point 40 of her Opinion, to maintain the freedom of the abovementioned economic operators, by which they may make effective use of the competitive advantage resulting from any lower cost prices.
37. The imposition of a minimum retail selling price by the public authorities thus means that the maximum retail selling price determined by manufacturers and importers cannot, in any event, be lower than that obligatory minimum price. Legislation imposing such a minimum price is therefore capable of undermining competition by preventing some of those producers or importers from taking advantage of lower cost prices so as to offer more attractive retail selling prices.
38. Consequently, a system of minimum retail selling prices for tobacco products cannot be regarded as compatible with Article 9(1) of Directive 95/59 unless it is structured in such a way as to ensure, in any event, that the competitive advantage which could result for some producers and importers of those products from lower cost prices is not impaired and, thus, competition is not distorted (see judgments in  Case C-198/08 Commission  v Austria [2010] ECR I-0000, paragraph 30, and Case C-221/08 Commission v Ireland [2010] ECR I-0000, paragraph 41).
43. With regard to that provision, it should be noted, first, that the expression ‘control of price levels’ has been interpreted as applying to national legislation of a general character, for example that intended to check inflation (see, to that effect, Commission  v Greece , paragraph 25 and case-law cited). Second, in relation to the machinery for the taxation of tobacco, the expression ‘observance of imposed prices’ must be understood as referring to a price which, once determined by the manufacturer or the importer and approved by the public authorities, is binding as a maximum price and must be observed as such at every stage of the distribution chain until it is sold to the consumer. That price-fixing machinery performs the function of ensuring that the integrity of tax revenue is not undermined by the exceeding of imposed prices (see, to that effect, Commission  v Greece , paragraph 26 and case-law cited).
49. It should be pointed out, in that regard, that Article 30 EC cannot be understood as authorising measures other than the quantitative restrictions on imports and exports and the measures having equivalent effect envisaged by Articles 28 EC and 29 EC (see, to that effect Case C-302/00 Commission  v France  [2002] ECR I‑2055, paragraph 33). In the present case, the Commission has not alleged any infringement of Articles 28 EC or 29 EC.
52. That recital also explains that the level of taxation is a major factor in the price of tobacco products, which in turn influences consumers’ smoking habits. Equally, the Court has already held that fiscal legislation is an important and effective instrument for discouraging consumption of tobacco products and, therefore, for the protection of public health (Case C-140/05 Valeško  [2006] ECR I‑10025, paragraph 58), and that the objective of ensuring that a high price level is fixed for those products may adequately be attained by increased taxation of those products, the excise duty increases sooner or later being reflected in an increase in the retail selling price, without undermining the freedom to determine prices  (see, to that effect, Commission  v Greece , paragraph 31).
53. Moreover, if the Member States wish to exclude once and for all any possibility for producers or importers to absorb, even temporarily, the impact of taxes on the retail selling price of manufactured tobacco products by selling them at a loss, it is inter alia open to them, while allowing those producers and importers to make effective use of the competitive advantage resulting from any lower cost prices, to prohibit the sale of manufactured tobacco products at a price below the sum of the cost price and all taxes (see Commission  v Austria , paragraph 43, and Commission  v Ireland , paragraph 55).