Court of Justice 24-09-1986 ECLI:EU:C:1986:333

Opinion of Mr Advocate General Mischo

delivered on 24 September 1986^(*)

Mr President,

Memben of the Court,

In two sets of proceedings against Edah BV — interlocutory civil proceedings before the Arrondissementsrechtbank, Almelo, and criminal proceedings before the Arrondissementsrechtbank,'s-Hertogenbosch — the Court has been asked to give a preliminary ruling on the compatibility with Articles 7 and 30 of the EEC Treaty of national legislation prescribing a minimum retail price for bread.

In the case of bread produced in the Netherlands, Netherlands legislation provides for a minimum price of a set amount to be fixed by a competent authority. This is intended to avoid excessive competition, in the form of price discounts, between the big supermarkets and traditional bakeries.

Originally, until 1982, the price of imported bread was not regulated. Then certain big supermarkets began to attract new customers by selling imported bread at very low prices, and a new provision was inserted into the existing legislation. Under the terms of that provision a compulsory distribution margin must be added to the purchase price of imported bread.

A further amendment, which came into force on 23 March 1985, provides that the compulsory margin for imported bread does not apply where the imported bread is sold at a price equal to or above the minimum price ruling for bread produced in the Netherlands.

Before examining the questions submitted by the two Netherlands courts, it is necessary to establish whether legislation of the kind in force in the Netherlands constitutes one measure applying to domestic products and imported products alike or whether it consists of different sets of rules for the two groups of products.

According to the judgments of the Court a different approach must be taken according to whether the legislation falls into the former or the latter category.⁽¹⁾

In this case the ‘margin equal to the total distribution costs’ to be added to the ‘shop delivery price’ of the imported bread (HFL 0.17 for an 800 g loaf at the time of the judgments for reference) is the same as that included ‘in respect of total distribution costs’ in the minimum price for bread produced in the Netherlands (HFL 1.86).

On the other hand, the price of the bread itself is laid down by the competent authority in the case of bread produced in the Netherlands, while the price of imported bread is based on the ‘free-at-factory price equal to the total purchase price actually paid or payable’, which means that the price is freely determined by the (foreign) manufacturer of the bread.

The legislation therefore contains different rules for the national product and the imported product.

I now come to the four questions submitted in the judgments for reference. It should first be noted that there are in fact only three questions because question 2 in each case is identical.

That question deals with Article 7 of the Treaty and the question of reverse discrimination. I shall consider it in the third and last place.

I shall examine first the question put in Case 159/85, which relates to the legislation in force before23 March 1985, and secondly the question put in Case 80/85, which concerns the current legislation.

1. The question of the compatibility with Article 30 of legislation requiring an increase in the price of imported bread even where the result is a retail selling price higher than the minimum price prescribed for national products

The first question submitted by the Arrondissementsrechtbank, 's-Hertogenbosch (Case 159/85), reads as follows:

1. Is a provision on prices which under the legislation of a Member State is applicable to sales to consumers by retailers established in that State contrary to the prohibition of measures having an effect equivalent to quantitative restrictions on imports laid down in Article 30 of the EEC Treaty, where for imported products that provision requires that there be added to the purchase price a fixed margin of a specified sum of money which constitutes a relatively small part of the final retail price, when for domestic products there is a set minimum price fixed by the Member State?’

As the Court has consistently held, any national measure which is capable of hindering intra-Community trade, directly or indirectly, actually or potentially, is to be considered a measure having an effect equivalent to a quantitative restriction.

That is the case, for instance, where national legislation treats domestic products differently from imported products or disadvantages, in any manner whatsoever, the marketing of imported products in relation to domestic products.⁽²⁾

It is evident that national legislation disadvantages the sale of imported bread in relation to domestically produced bread if its effect is in certain circumstances to require an increase in the total price of imported bread above the minimum price applicable to domestically produced bread.

If, for instance, the cost price of both imported bread and domestically produced bread were HFL 1.80, domesticallyproduced bread might be sold at HFL 1.86 (even though that might entail squeezing the profit margin), whereas imported bread would have to be sold at HFL 1.97 (HFL 1.80 plus HFL 0.17).

The legislation in force until 23 March 1985 was therefore capable of creating discrimination between imported bread and domestically produced bread.

I therefore propose that the Court reply to the Arrondissementsrechtbank, 's-Hertogenbosch, that a system of rules such as that described in question 1 is contrary to the prohibition of measures having an effect equivalent to quantitative restrictions on imports contained in Article 30 of the EEC Treaty.

2. The question of the compatibility with Article 30 of pricing rides requiring the addition of a margin on imported products wherever their final retail price does not exceed the minimum selling price for the same product produced nationally

The first question submitted by the Arrondissementsrechtbank, Almelo, in Case 80/85 reads as follows:

‘Is a legislative provision of a Member State which prescribes a margin constituting a relatively small part of the final retail price contrary to the prohibition of measures having an effect equivalent to quantitative restrictions on imports laid down by Article 30 of the EEC Treaty in so far as that provision applies to imported products sold to the consumer by a retailer in the Member State concerned at a price lower than the minimum price laid down for that product by that State, if a national product may not be sold on those terms in any circumstances?’

I should first clear up a point of terminology, namely what is meant by a price lower than, equal to or higher than the minimum price.

The Arrondissementsrechtbank, Almelo, speaks of a price for an imported product lower than the minimum price, whereas Article 2 (a) of the Netherlands legislation provides that ‘the prohibition laid down in paragraph 1’ — namely the prohibition on the sale of imported bread at a price lower than the purchase price plus a margin equal to the total distribution costs — ‘shall not apply to bread sold at a price equal to or higher than the minimum price’.

That means that if the purchase price of the imported product is lower than the minimum price the distribution margin must be added to it in so far as the total price (purchase price plus margin) does not exceed the amount of the minimum price, so that that total price may itself be less than the minimum price if the purchase price is particularly low.

Although this is not a case of legislation which is applicable without distinction, I think that the Court's judgment in Van Tiggele⁽³⁾ provides the appropriate criteria for resolving this question.

Paragraph 17 of the decision in that judgment reads as follows:

‘Furthermore the fixing of the minimum profit margin at a specific amount, and not as a percentage of the cost price, applicable without distinction to domestic products and imported products is likewise incapable of producing an adverse effect on imported products which may be cheaper, as in the present case where the amount of the profit margin constitutes a relatively insignificant part of the final retail price.’

The margin in this case is not a profit margin but a distribution margin, but in my view that does not affect the issue. The distribution margin is indeed fixed at a set amount and not as a percentage of the cost price. It is applicable without distinction to domestic products and imported products (even though the rules for each group of products are not identical in other respects), and its amount constitutes a relatively insignificant part of the final retail price.

The competitive advantage created where the cost price of the imported product is lower may therefore be reflected in the retail selling price (paragraph 18 of the decision in Van Tiggele).

Where the cost price of the imported product is lower than that of the domestically produced product (HFL 1.86 minus HFL 0.17 equals HFL 1.69), that advantage is reflected in the total price charged to the consumer.

Imported products are not therefore disadvantaged in comparison with identical national products, and for that reason this is not a measure having equivalent effect.

The Court will have understood that I do not share the argument put forward by Edah to the effect that the prohibition in Article 30 applies not only to cases of discrimination, that is to say legislation which treats domestic products better than imported products, but to any provisions which may have an adverse impact on imports.

Like Mr Advocate General Reischl I take the view that ‘only such national measures are to fall within the scope of Article 30 of the EEC Treaty as are likely to be an obstacle to international trade so that imported products, on marketing, are placed at a disadvantage as against domestic products’.⁽⁴⁾

Nor, therefore, am I impressed by Edah's argument that the legislation prevents the imported product from being marketed ‘on the best possible terms’ because in certain circumstances a Netherlands bread producer ‘might be satisfied with’ a margin lower than HFL 0.17 (where his cost price is more than HFL 1.69), whereas a foreign producer must always apply the margin of HFL 0.17 (unless the final retail price exceeds the minimum price).

In such a case the Netherlands producer's lower margin is merely the result of the fact that his cost price is higher than that assumed by the national authorities and cannot be reflected in the price to be paid by the consumer. The imported product is therefore not placed at a disadvantage by the fact that that margin is smaller.

I therefore propose that the Court answer the first question submitted in Case 80/85 in the negative.

3. The question of reverse discrimination

The two national courts both ask an identical question, namely:

‘Is a legislative provision of a Member State which prohibits a retailer established in that State from selling a particular product to a consumer below a certain minimum price contrary to the prohibition of discrimination on grounds of nationality laid down in Article 7 of the EEC Treaty, where that prohibition applies (in all circumstances) to the national product, but not to the imported product?’

Edah maintains that the legislation at issue constitutes reverse discrimination to the detriment of Netherlands producers and that the pricing rules are therefore contrary to Article 7.

The Nederlandse Bakkerij Stichting, the Netherlands Government and the Commission deny that that is the case.

In my opinion too the legislation at issue does not constitute a breach of the principle prohibiting any discrimination on grounds of nationality contained in Article 7 of the Treaty, for two reasons:

1. The different rules for imported products and domestically produced products ‘are applicable not on the basis of the nationality of traders, but on the basis of their location’ (see the Court's judgments in Case 31/78 Bussone v Italian Ministry of Agriculture, [1978] ECR 2429, at p. 2445; Case 155/80 Oebel[1981] ECR 1993, at p. 2007). As the Court has stated on several occasions, in such cases there is no breach of the principle contained in Article 7.

   In this case a foreign baker established in the Netherlands must comply with the minimum price in just the same way as a baker of Netherlands nationality, and a Netherlands bread producer established in Germany who exports his bread to the Netherlands enjoys the more favourable treatment applied to imported products by the Netherlands legislation.

2. Secondly, Article 7 does not preclude Member States from laying down legislation affecting the competitiveness of the traders who are subject to it, provided that that legislation makes no distinction between them on grounds of nationality either directly or indirectly (see paragraph 8 of the decision in Oebel, cited above).

   The Netherlands Government would have been free to adopt solely the system of minimum prices applicable to domestically produced bread without laying down any rules at all as regards imported products. As far as Community law is concerned, the considerable competitive advantage which it would thereby have conferred on imported products would not have constituted unlawful discrimination to the detriment of its own nationals.

A fortiori, the rules on imports subsequently introduced, which limit the competitive advantage enjoyed by imported products, do not constitute unlawful discrimination under Community law.

The Member States remain free to introduce legislation imposing restrictions on their own producers even where less stringent provisions are applicable in the other Member States.

At paragraph 9 in the decision in Oebel, the Court stated that ‘it cannot be held contrary to the principle of nondiscrimination to apply national legislation merely because other Member States allegedly apply less strict rules’.

As the Court stated in Van Dam,⁽⁵⁾ a fisheries case, ‘it cannot be held contrary to the principle of nondiscrimination to apply national legislation, the compatibility of which with Community law is moreover not contested, because other Member States allegedly apply less strict rules’ (at paragraph 10).

The same principle was affirmed in Smit,⁽⁶⁾ a transport case, at paragraph 27.

Finally, at paragraph 23 of the decision in Jongeneel Kaas,⁽⁷⁾ the Court states: ‘A Member State may legitimately pursue a policy based on quality in order to promote sales even if that policy exposes its producers to the risk of price competition from the producers of other Member States who are not bound by the same standards of quality’.

I might also cite the Court's judgment in Peureux,⁽⁸⁾ the operative part of which states: ‘Whether or not a domestic product — in particular certain potable spirits — is subject to a commercial monopoly, neither Article 37 nor Article 95 of the EEC Treaty prohibits a Member State from imposing on that domestic product internal taxation in excess of that imposed on similar products imported from other Member States’.

It may be asked, however, whether the reverse discrimination in this case is unlawful because it does not arise from the difference between Netherlands legislation and the legislation of other Member States but from Netherlands legislation alone.

In Smit, cited above, the Court stated: ‘The aim of Article 7 of the Treaty is to eliminate any discrimination on the ground of nationality resulting from the legislation or administrative practices of a given Member State rather than any disparity in the way in which undertakings of different Member States are treated as a result of differences between the legislation of the Member States, in the absence of a common transport policy’ (paragraph 27; emphasis added).

In my view, however, even in that case the argument referred to at (a) above remains valid: there cannot be discrimination within the meaning of Article 7 if the difference of treatment is based, not on the nationality of the persons concerned, but on the location of the undertakings.

On the other hand it is for the Netherlands courts to examine whether the legislation at issue is contrary to the principles of the Netherlands legal system.

For the sake of completeness I would also point out that in my view the fact that the two sets of rules are contained in the legislation of a single Member State does not nevertheless mean this is one of those cases where it may be objected that there is no ‘factor linking them with any of the situations governed by Community law’.⁽⁹⁾

I say this because the defendant in the main actions criticizes not only the provision in the Netherlands legislation dealing with products produced and sold in the Netherlands but the difference between that aspect of the Netherlands legislation and the rules which it lays down for imported products. Importation is unquestionably one of the ‘situations governed by Community law’.

Another argument which is unacceptable in my view is that Article 7 of the EEC Treaty is not directly applicable. The judgments of the Court would appear to show the contrary.⁽¹⁰⁾

I therefore propose that the Court reply in the negative to the second question submitted by the national courts only for the reasons given above at (a) and (b).

Allow me, however, to make one final remark.

Reverse discrimination is clearly impossible in the long run within a true common market, which must of necessity be based on the principle of equal treatment.

Such discrimination must be eliminated by means of the harmonization of legislation.

In the meantime it must be ensured that Article 30 is not interpreted in such a way as to confront a Member State with the dilemma of either practising reverse discrimination or abandoning the attempt to give practical effect to an objective which is legitimate in the general interest.

In conclusion I propose that the Court answer the questions submitted to it as follows :

1. A provision on prices which under the legislation of a Member State is applicable to sales to consumers by retailers established in that State is contrary to the prohibition of measures having an effect equivalent to quantitative restrictions on imports laid down in Article 30 of the EEC Treaty, where for imported products that legislation requires that there be added to the purchase price a fixed margin of a specified sum of money which has the effect that the final retail price of the imported product is increased above the minimum price laid down by that Member State for products produced in that State.

2. A legislative provision of a Member State which prescribes a margin constituting only a relatively small part of the final retail price is not contrary to the prohibition of measures having an effect equivalent to quantitative restrictions on imports laid down by Article 30 of the EEC Treaty in so far as that provision applies to imported products sold to the consumer by a retailer established in the Member State concerned at a price lower than the minimum price laid down for that product by that State, if a national product may not be sold on those terms in any circumstances.

3. A legislative provision of a Member State which prohibits a retailer established in that State from selling a particular product to a consumer below a certain minimum price is not contrary to the prohibition of discrimination on grounds of nationality laid down in Article 7 of the EEC Treaty, where that prohibition applies (in all circumstances) to the national product, but not to the imported product.