Case C‑209/07, Competition Authority v BIDS

>> Art. 81 infringement must be examined first by looking at object of agreement concerned. Only when analysis not revealing effect on competition sufficiently deleterious should actual effects be considered.

In light of the high overcapacity in the Irish beef processing industry, processors formed the so-called Beef Industry Development Society Ltd (BIDS). BIDS purchased cattle from breeders, slaughters and de-boned them, and then sold the beef in Ireland and abroad.

The processors wished to reduce the overcapacity through agreed arrangements. The standard form of contract provided that the stayers were to compensate the goers, the amount of that compensation to be determined by the parties. BIDS was to pay the compensation to the goers. The stayers were to repay BIDS by means of a levy of EUR 2 per head of cattle up to their traditional cattle kill volume and EUR 11 above that volume.

In return, the goers undertook to decommission or put beyond use their processing plants or sell them only to persons established outside the island of Ireland, or, if necessary, to the stayers on condition that they be used as back-up equipment or spare parts; not to use the land on which those plants were situated for the purposes of beef or veal processing for a period of five years; and not to compete with the stayers in the beef and veal processing market in Ireland for two years.

By its question, the national court asked, in essence, whether agreements with features such as those of the BIDS arrangements were to be regarded, by reason of their object alone, as being anti‑competitive and prohibited by Art. 81(1) EC or whether, on the other hand, it was necessary, in order to reach such a conclusion, first to demonstrate that such agreements had anti-competitive effects.

The Competition Authority, the Belgian Government and the Commission of the European Communities all submitted that the object of the BIDS arrangements was obviously anti-competitive so that there was no need to analyse their actual effects and that those arrangements were concluded in breach of the prohibition laid down in Art. 81(1) EC.

The Court of Justice rejected the argument of BIDS that those arrangements should be analysed in the light of their actual effects on the market. The Court pointed out that to come within the prohibition laid down in Art. 81(1) EC, an agreement must have “as [its] object or effect the prevention, restriction or distortion of competition within the common market”. According to the Court, the alternative nature of that requirement, indicated by the conjunction “or”, led, first, to the need to consider the precise purpose of the agreement, in the economic context in which it was to be applied.

The Court, referring to LTM, held that where, however, an analysis of the clauses of that agreement did not reveal the effect on competition to be sufficiently deleterious, its consequences should then be considered. For it to be caught by the prohibition it was necessary to find that those factors were present which showed that competition had in fact been prevented or restricted or distorted to an appreciable extent (Case 56/65 LTM [1966]).

The Court held that in deciding whether an agreement was prohibited by Art. 81(1) EC, there was therefore no need to take account of its actual effects once it appeared that its object was to prevent, restrict or distort competition within the common market. That examination must be made in the light of the agreement’s content and economic context. (see, inter alia, Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966]).

The distinction between “infringements by object” and “infringements by effect” arose from the fact that certain formed of collusion between undertakings could be regarded, by their very nature, as being injurious to the proper functioning of normal competition.

The Court held that to determine whether an agreement came within the prohibition laid down in Art. 81(1) EC, close regard must be paid to the wording of its provisions and to the objectives which it was intended to attain. In that regard, even supposing it to be established that the parties to an agreement acted without any subjective intention of restricting competition, but with the object of remedying the effects of a crisis in their sector, such considerations were irrelevant for the purposes of applying that provision.

The Court held that an agreement might be regarded as having a restrictive object even if it did not have the restriction of competition as its sole aim but also pursued other legitimate objectives.

It was only in connection with Art. 81(3) EC that matters such as those relied upon by BIDS might, if appropriate, be taken into consideration for the purposes of obtaining an exemption from the prohibition laid down in Art. 81(1) EC (see: Case C‑551/03 P General Motors v Commission [2006]).

According to the Court, the object of the BIDS arrangements was to change, appreciably, the structure of the market through a mechanism intended to encourage the withdrawal of competitors. The BIDS arrangements were intended, essentially, to enable several undertakings to implement a common policy which had as its object the encouragement of some of them to withdraw from the market and the reduction, as a consequence, of the overcapacity which affected their profitability by preventing them from achieving economies of scale.

The Court held that that type of arrangement conflicted patently with the concept inherent in the EC Treaty provisions relating to competition, according to which each economic operator must determine independently the policy which it intended to adopt on the common market. The Court stated that Art. 81(1) EC was intended to prohibit any form of coordination which deliberately substituted practical cooperation between undertakings for the risks of competition.

According to the Court, the means put in place to attain the objective of the BIDS arrangements included restrictions whose object was also anti-competitive.

It followed an agreement with features such as those of the standard form of contract had as its object the prevention, restriction or distortion of competition within the meaning of Art. 81(1) EC.

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Case C-214/07, Commission v France

>> Court articulates criteria absolute impossibility of giving effect to decision

Decision 2004/343 classified as a State aid scheme a scheme of tax exemptions provided for in three provisions of the French General Tax Code. These provisions exempted companies created to take over the activities of industrial firms in difficulty from corporation tax for a period of two years.

Those newly created companies could also benefit, with the agreement of the competent local authorities, from exemption from business tax and property tax for a period of two years.

In the present case, the Commission contended that France, in failing to recover sums accorded to companies taking over the activities of firms in difficulty, had failed to implement the decision within the prescribed time period.

The Commission therefore sought a declaration that France infringed Arts 5 and 6 of that decision, Article 249(4) EC and Article 10 EC.

France’s defence was that its authorities had done all that they could to recover the aid concerned, and that to ask them to recover the aid any faster would be to demand the impossible. It argued that this was particularly the case where the companies which received the aid had subsequently ceased to trade, or had sold their assets.

The Court of Justice reiterated hat the only defence available to a Member State in opposing an application by the Commission under Art. 88(2) EC for a declaration that it had failed to fulfil its obligations was to plea that it was absolutely impossible for it properly to implement the decision (see Case C-177/06 Commission v Spain [2007]).

The Court held that, in the event of difficulties, the Commission and the Member State must, pursuant to the principle of genuine cooperation as laid down in Art. 10 EC, work together in good faith with a view to overcoming those difficulties whilst fully observing the Treaty provisions and, in particular, the provisions on State aid.

The condition that it be absolutely impossible to implement a decision was not fulfilled where the defendant Member State merely informed the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real steps to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome.

Nor could a Member State simply make general and abstract statements without referring to specific individual cases, analysed in the light of all the steps actually taken to implement the decision.

The Court held that, as regards recipients which had ceased their activity and transferred their asset, it was for the national authorities to check whether the financial conditions of the transfer complied with market conditions. The national authorities might take into consideration, in particular, the form of the transfer, for example, public tendering, deemed to ensured that a sale took place under market conditions (see Case C-277/00 Germany v Commission [2004]).

France claimed, in its exchanges with the Commission, an absolute impossibility of implementation vis-à-vis 204 undertakings which had ceased their activity. However, according to the Court, it provided no evidence that it had taken any concrete steps to examine the situation of each of them and to determine whether or not it necessitated recovery pursuant to the criteria set out above.

The Court held that France did not provide evidence even of having taken advantage of the Commission’s acceptance, in the context of cooperation under Art. 10 EC, of a review restricted only to the most significant asset transfers

It followed that there was no absolute impossibility of implementation and that the complaint based on an infringement of Art. 5 of the decision was well-founded. The Court argued it did not need to examine the head of claim based on Art. 6 of the decision and seeking a declaration that France had failed to inform the Commission of the measures taken and to be taken in order to implement the decision, since the Member State did not in fact implement the decision within the prescribed period.

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Case C-324/07, Coditel Brabant

Following a call for tenders, Coditel applied for a concession to operate the cable television network of the Municipality of Uccle. However, the Uccle municipal council (town hall pictured above) subsequently decided to sell the network rather than grant a concession, after which Coditel submitted a purchase bid under the terms of the relevant tender.

The only offer which was in conformity with the tender and permissible, namely the Coditel bid, was the lowest. Brutélé, an inter-municipal cooperative society whose members were municipalities and an inter-municipal association whose members in turn were solely municipalities, also responded to the call for tenders but not with a purchase bid but with an offer of affiliation.

In November 2000, the Municipality of Uccle decided not to sell the municipal cable television network. It furthermore decided that the municipality should become a member of Brutélé. Coditel appealed against these decisions.

The Belgian Conseil d’État asked whether Arts 43 and 49 EC, the principles of equal treatment and of non-discrimination on grounds of nationality and the concomitant obligation of transparency precluded a public authority from awarding, without calling for competition, a public service concession to an inter-municipal cooperative society of which all the members were public authorities, where those public authorities exercised over that cooperative society control similar to that exercised over their own departments and where that society carried out the essential part of its activities with those public authorities.

Furthermore, the referring Court asked whether, subject to verification of the facts by the referring court as regards the degree of independence enjoyed by the inter-municipal cooperative society in question, the control exercised by the public authorities might be regarded as enabling those authorities to exercise over the cooperative society control similar to that exercised over their own departments.

Thirdly, it asked whether, where a public authority joined an inter-communal cooperative of which all the members were public authorities in order to transfer to that cooperative society the management of a public service, it was possible, in order for the control which those member authorities exercised over the cooperative to be regarded as similar to that which they exercised over their own departments, for it to be exercised jointly by those authorities, decisions being taken by a majority, as the case might be.

The Court of Justice first of all held that, by becoming a member of Brutélé, the Municipality of Uccle entrusted it with the management of its cable television network. Brutélé’s remuneration came not from the municipality but from payments made by the users of that network. That method of remuneration was characteristic of a public service concession. The Court reiterated that the application of Articles 12, 43 and 49 EC, as well as of the general principles of which they were the specific expression, was precluded if the control exercised over the concessionaire by the concession-granting public authority was similar to that which the authority exercised over its own departments and if, at the same time, that entity carried out the essential part of its activities with the controlling authority or authorities (see Case C‑107/98 Teckal [1999] and Case C-458/03 Parking Brixen [2005]).

The Court stressed that in order to determine whether a concession-granting public authority exercised a control similar to that which it exercised over its own departments, it was necessary to take account of all the legislative provisions and relevant circumstances. It must follow from that examination that the concessionaire in question was subject to a control which enabled the concession-granting public authority to influence that entity’s decisions. It must be a case of a power of decisive influence over both strategic objectives and significant decisions of that entity (see Case C-340/04, Carbotermo & Consorzio v. Comune di Busto Arsizio [2006], on which I wrote this post).

The fact that the concession-granting public authority held, alone or together with other public authorities, all of the share capital in a concessionaire, tended to indicate – generally, but not conclusively – that that contracting authority exercised over that company a control similar to that which it exercised over its own departments.

The Court held that subject to verification of the facts by the referring court as regards the degree of independence enjoyed by the inter-municipal cooperative society in question, in circumstances such as those of the case before the referring court, where decisions regarding the activities of an inter-municipal cooperative society owned exclusively by public authorities were taken by bodies, created under the statutes of that society, which were composed of representatives of the affiliated public authorities, the control exercised over those decisions by the public authorities might be regarded as enabling those authorities to exercise over the cooperative society control similar to that exercised over their own departments.

The Court furthermore reiterated that where several public authorities controlled a concessionaire, the condition relating to the essential part of that entity’s activities might be met if account was taken of the activities which that entity carried out with all those authorities. The control exercised over the concessionaire by a concession-granting public authority must be similar to that which the authority exercised over its own departments, but not identical in every respect. The control exercised over the concessionaire must be effective, but it was not essential that it be exercised individually. (see Case C-340/04, Carbotermo & Consorzio v. Comune di Busto Arsizio [2006] and Case C-458/03 Parking Brixen [2005]).

The Court concluded that where a public authority joined an inter-communal cooperative of which all the members were public authorities in order to transfer to that cooperative society the management of a public service, it was possible, in order for the control which those member authorities exercised over the cooperative to be regarded as similar to that which they exercised over their own departments, for it to be exercised jointly by those authorities.

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Case C-248/07, Trespa v Nova Haven- en Vervoerbedrijf

>> Court clarifies several concepts of Regulation 2454/93

This reference for a preliminary ruling concerned the interpretation of Arts 1a, 291 and 297 of Regulation 2454/93, which implemented Regulation 2913/92 establishing the Community Customs Code.

The reference was made in proceedings between Trespa and Nova with regard to an action brought by Trespa seeking damages and reimbursement of administrative costs incurred as a result of errors allegedly committed by Nova.

The referring court asked whether Art. 291(1) of the implementing regulation was to be interpreted as meaning that the concept of “person importing the goods or having them imported for free circulation” contained therein referred not only to the importer for whom the goods were destined but also to the customs agent who made the customs declaration.

Secondly, the referring court asked whether Art. 297(1) of the implementing regulation, read in conjunction with Art. 1a of that regulation, was to be interpreted as meaning that in the case where goods were imported into Belgium and then transported to the Netherlands, there was a transfer of goods within the Community. In addition, it wished to know whether, in such a case, the person referred to in Art. 291 of the implementing regulation must held the authorisation referred to in that Article.

Finally, it asked whether the term “transferee” in Art. 297(1) of the implementing regulation referred to a customs agent who carried out customs formalities on behalf of the ultimate importer. The Commission questioned the admissibility of the reference for a preliminary ruling. It submitted that the dispute in the main proceedings concerned the private law relationship between the parties to the main proceedings, which was governed by the Belgian Civil Code, and that the relevance of the questions to the resolution of that dispute was not obvious.

The Court first of all that in the context of Art. 234 EC, it was solely for the national court before which the dispute had 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 submitted to the Court. (See, inter alia, Case C-144/04 Mangold [2005]; Case C‑217/05 Confederación Española de Empresarios de Estaciones de Servicio [2006]; and Case C‑119/05 Lucchini [2007]).

The Court held that questions on the interpretation of Community law referred by a national court, in the factual and legislative context which that court was responsible for defining and the accuracy of which was not a matter for the Court to determine, enjoyed a presumption of relevance.

The presumption that questions referred by national courts for a preliminary ruling were relevant might be rebutted only in exceptional cases, where it was quite obvious that the interpretation which was sought of Community law bore no relation to the actual facts of the main action or to its purpose or where the problem was hypothetical or the Court did not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see Case C-105/03 Pupino [2005]; and Case C-467/05 Dell’Orto [2007], on which I wrote this post).

The Court found that, in the present case, interpretation of the Community customs legislation would enable it to be known whether a customs agent must, in the circumstances of the main proceedings, hold an end-used authorisation. The question was neither hypothetical nor one which bore no relation to the actual facts or purpose of the dispute in the main proceedings.

The Court reiterated that it could not resolve a dispute concerning the facts. Such a dispute, like any other assessment of the facts involved, was within the province of the national court. In the present case, however, the Court had sufficient information to interpret the Community rules concerned and to give useful answers distinguishing, as necessary, the different hypothetical situations. The reference for a preliminary ruling was therefore admissible (see Case C-279/06 CEPSA [2008]).

The Court held that Article 291(1) of the implementing regulation was to be interpreted as meaning that the concept of “person importing the goods or having them imported for free circulation” contained therein referred to the person for whom the goods were destined and who intended to assign them to the prescribed end-use, irrespective of whether he made the customs declaration himself or had that done by a representative within the meaning of Art. 5 of the Customs Code.

That concept did not refer to the representative of that person before the customs authorities, disregarding those cases in which that person was deemed to act in his own name and on his own behalf pursuant to the second subparagraph of Art. 5(4) of that code and who must therefore be considered an importer.

Furthermore, Article 297(1) of the implementing regulation must be interpreted as meaning that there had been no transfer of goods within the Community in a situation where goods were imported into Belgium then transported to the Netherlands, if the person authorised acts on behalf of the ultimate importer, which was for the national court to ascertain.

The mere fact that the goods were imported into and cleared through customs in Belgium then transported to the Netherlands was irrelevant to the establishment of the existence of a transfer within the meaning of that provision. Where goods were transferred, the transferee must hold an authorisation issued in accordance with Art. 291 of that regulation.

Finally, the Court held that the concept of “transferee” contained in Art. 297(1) of the implementing regulation did not refer to a customs agent who carried out customs formalities on behalf of the importer.

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Case T‑69/04 Schunk and Schunk v Commission

>> Court confirms Commission’s decision carbon cartel (II)

For the facts of this case see this post. The applicants of the present case requested the Court to annul the decision of the Commission or, in the alternative, reduce the amount of the fine imposed. In support of their action, the applicants claimed, first, that the Commission erred in law by assuming that the first applicant, SG, which was a finance holding company, was jointly and severally liable for the fine imposed on its subsidiary, the second applicant, SK.

Further, they pleaded that the contested decision had an unlawful legal basis, since Art. 15 of Regulation 17/621 gave the Commission a margin of discretion in relation to the amount of fines and was therefore incompatible with the principle of legal certainty and with higher ranking Community law.

In addition, they argued that the Commission discriminated against the applicants relative to other undertakings in fixing the amount of the imposed fines, incorrectly assessed the deterrent effect of the fines and the cooperation of the applicants, and failed to have regard to material circumstances.

The Commission requested the Court to exercise its unlimited jurisdiction under Article 229 EC and Article 17 of Regulation 17 and to increase the amount of the fine imposed on the applicants, which challenged for the first time before the Court the facts set out in the statement of objections.

The Court first of all held that the principle that penalties must have a proper legal basis was a corollary of the principle of legal certainty, which constituted a general principle of Community law and required, inter alia, that any Community legislation, in particular when it imposed or permitted the imposition of sanctions, must be clear and precise so that the persons concerned might know without ambiguity what rights and obligations flew from it and might take steps accordingly.

The Court held that that principle, which formed part of the constitutional traditions common to the Member States and which had been enshrined in various international treaties, in particular in Art. 7 ECHR must be observed in regard both to provisions of a criminal nature and to specific administrative instruments imposing or permitting the imposition of administrative sanctions.

It applied not only to the provisions which established the elements of an offence, but also to those which defined the consequences of contravening them. (see Case 169/80 Gondrand Frères and Garancini [1981]; Case 137/85 Maizena [1987]; Case C‑143/93 van Es Douane Agenten [1996]; and Joined Cases C‑74/95 and C‑129/95 X [1996]).

The Court held that Article 15(2) of Regulation 17, while leaving the Commission a certain discretion, laid down the criteria and limits to which it was subject in the exercise of its power to impose fines. Although the Commission’s previous practice in taking decisions did not in itself serve as a legal framework for fines in competition matters, the fact remained that, under the principle of equal treatment, which was a general principle of law which the Commission must observe, the Commission must not treat comparable situations differently and different situations in the same way, unless such treatment was objectively justified. (see Case C‑167/04 P JCB Service v Commission [2006]; and Case C‑76/06 P Britannia Alloys & Chemicals v Commission [2007]).

The Court stated that the Commission might at any time adjust the level of fines if the proper application of the Community competition rules so required, since such an alteration of an administrative practice might then be regarded as objectively justified by the objective of general prevention of infringements of the Community competition rules. (see inter alia, Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983]).

The Court furthermore held that the conditions under which SG was made an addressee of the Decision were clearly stated in that decision. The Court held that in the specific case of a parent company holding 100% of the capital of a subsidiary which had committed an infringement, there was a simple presumption that the parent company exercised decisive influence over the conduct of its subsidiary and that they therefore constituted a single undertaking within the meaning of Art. 81 EC. It was for a parent company which disputed before the Community judicature a Commission decision fining it for the conduct of its subsidiary to rebut that presumption by adducing evidence to establish that its subsidiary was independent.

The Court held that the Commission was right in finding that the applicants had infringed Art. 81 EC in participating in a complex of agreements and concerted practices.

With regard to the admissibility of the Commission’s counterclaim, the Court of First Instance held that it n the context of its unlimited jurisdiction accorded to it by Art. 229 EC and Art. 17 of Regulation 17, the powers of the Community judicature were not limited to declaring the contested decision void, as provided in Art. 231 EC, but allowed it to vary the penalty imposed by that decision.

The Community judicature was therefore empowered, in addition to carrying out a mere review of the lawfulness of the penalty, to substitute its own appraisal for the Commission’s and, consequently, to cancel, reduce or increase the fine or penalty payment imposed.

Accordingly, there was nothing preventing the Commission from also referring to the Community judicature the question of the amount of the fine and from applying to have that fine increased. (see inter alia Case C‑3/06 P Groupe Danone v Commission [2007]).

The Court concluded that unlimited jurisdiction could be exercised by the Community judicature only in the context of the review of acts of the Community institutions, more particularly in actions for annulment. The sole effect of Art. 229 EC was to enlarge the scope of the powers of the Community judicature in the context of the action referred to in Art. 230 EC. Therefore, the applicants’s arguments that the application to increase the Commission’s fine was incompatible with Art. 230 EC and failed to have regard to the subject matter of the action defined in the application, was rejected.

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Case T‑68/04, SGL Carbon v Commission

>> Court confirms Commission’s decision carbon cartel (I)

This case concerned a Commission decision imposing fines a number of companies for infringement of Article 81(1) EC and Article 53(1) EEA by taking part in a series of agreements and concerted practices on the market in carbon and graphite-based products for electrical and mechanical applications.

According to the Commission, the six companies, among which where SGL Carbon and Schunk GmbH (see this post) operated a secret cartel between October 1988 and December 1999.

The cartel consisted of fixing, directly or indirectly, sales prices and other trading conditions applicable to customers, sharing markets, in particular by allocating customers, and engaging in co-ordinated actions (quantity restrictions, price increases and boycotts) against competitors which were not members of the cartel.

During October 1988 and December 1999 the companies, which controlled 93% of the European market, held more than 140 meetings to decide price increases for a broad range of products as well as for large individual customers and to ward off outside competition by undercutting the few rivals left.

The top meetings, which they called “summits”, provided strategic direction and solved problems while the detailed price and other arrangements were worked out and agreed in “technical committee” meetings.

SGL Carbon brought the present action against the Commission, requesting the Court to annul the decision of the Commission or, in the alternative, reduce the amount of the fine imposed.

Deterrent effect of in fines
The Court inter alia held that the Commission’s practice in taking decisions did not serve as a legal framework for the fines imposed in competition matters, that framework being constituted solely by Regulation 17, and decisions in other cases could gave only an indication for the purpose of determining whether there might be discrimination, since the facts of those cases, such as markets, products, the undertakings and periods concerned, were not likely to be the same.

The fact that the Commission, in the past, imposed fines of a certain level for certain types of infringement did not mean that it was estopped from raising that level, at any time, to ensured the implementation of Community competition policy and to strengthen the deterrent effect of fines. (see inter alia C‑169/04 P JCB Service v Commission [2006] and Case C‑76/06 P Britannia Alloys & Chemicals v Commission [2007]).

The Court held that the Commission had the power to decide the level of fines so as to reinforce their deterrent effect where infringements of a given type, although established as being unlawful at the outset of Community competition policy, were still relatively frequent on account of the profit that certain of the undertakings concerned were able to derive from them.

The deterrent effect of a fine imposed for infringement of the Community competition rules could not be assessed by reference solely to the particular situation of the undertaking sanctioned. (see, inter alia, Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983]and Case T‑224/00 Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission [2003]).

The complaint of SGL Carbon alleging disproportionate and/or discriminatory treatment of the applicant in relation to the setting of the starting amount of the fine and in light of the Commission’s practice in taking decisions, was therefore rejected.

The Court held that it was open to the Commission to consider it necessary to set the amount of the fine at a sufficiently dissuasive level within the limits laid down in Regulation 17.

Division into categories
The Court also held that the Commission’s division of the undertakings concerned in three categories, namely large, medium and small operators, was not an unreasonable way of taking account of their relative importance on the market in order to set the starting amount, as long as it did not lead to a grossly inaccurate representation of the market concerned.

The Court however stressed that, to check whether a division of the members of a cartel into categories was consistent with the principles of equal treatment and proportionality, it could review whether that division was coherent and objectively justified (see also Case T‑213/00 CMA CGM and Others v Commission [2003] and Joined Cases T‑236/01, T-239/01, T‑244/01 to T‑246/01, T-251/01 and T-252/01 Tokai Carbon and Others v Commission [2004]).

The Court furthermore held the complaint of SGL Carbon alleging disproportionate and/or discriminatory treatment of the applicant in relation to the setting of the starting amount of the fine, and in respect of the duration of the infringement and the Commission’s practice in taking decisions, must be rejected.

The Court stressed that respect for the principle of equal treatment must be reconciled with the principle of legality, according to which a person might not rely, in support of his claim, on an unlawful act committed in favour of a third party. (see Case 134/84 Williams v Court of Auditors [1985])

Since all other complaints were also rejected, the action was dismissed in its entirety.
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Case C-141/07, Commission v Germany

>> German Law on Pharmacies infringing Art. 28 but justified on grounds of public health

By its application the Commission sought a declaration from the Court that, by providing in Paragraph 14(5) and (6) of the German Law on Pharmacies that the conclusion of a contract for the supply of medicinal products was subject to cumulative conditions whose effect was to make it impossible in practice for a hospital in Germany to be supplied on a regular basis by pharmacies established in other Member States, Germany had failed to fulfil its obligations under Arts 28 EC and 30 EC.

In support of its action, the Commission claimed that the cumulative conditions laid down by the contested provisions relating to contracts for the supply of medicinal products constituted a selling arrangement within the meaning of Keck and Mithouard but none the less fell within the scope of Art. 28 EC, given that the effect of those conditions was that access to the market was more difficult for goods from Member States other than Germany than it was for domestic products.

The Commission pointed out that under the contested provisions the contracting pharmacy was responsible for the provision of all of the services associated with the supply of medicinal products. Since some of those services, such as provision of emergency supplies, could only be provided by a pharmacist who had his dispensary in the vicinity of the hospital to be supplied, the choice of such a pharmacy was necessarily restricted to those situated near to that hospital. In this way, goods from other Member States had access to the market which was more restricted than that of domestic products.

The Court first of all held that Community law did not detract from the power of the Member States to organise their social security systems and to adopt, in particular, provisions intended to govern the consumption of pharmaceutical products in order to promote the financial stability of their health-care insurance schemes and the organisation and delivery of health services and medical care.

However, in exercising that power, the Member States must comply with Community law, in particular the provisions of the Treaty on the free movement of goods. Accordingly, this action was restricted to determining whether the Member States had acted in compliance with the rules of that Treaty relating to the free movement of goods. As Community law stood at present, since there had been no harmonisation at Community level of the rules on the provision of medicinal products to hospitals, the Member States continued to be empowered to lay down rules on that subject, subject to compliance with the provisions of the Treaty, in particular the provisions on the free movement of goods (see also Case C‑120/95 Decker [1998] and C‑372/04 Watts [2006]).

Reiterating its Dassonville case law, the Court held that the free movement of goods was a fundamental principle of the Treaty which was expressed in the prohibition, set out in Art. 28 EC, on quantitative restrictions on imports between Member States and all measures having equivalent effect. The prohibition of measures having equivalent effect to quantitative restrictions which was set out in Art. 28 EC covered all legislation of the Member States that was capable of hindering, directly or indirectly, actually or potentially, intra-Community trade.

The Court added that national provisions restricting or prohibiting certain selling arrangements which, first, applied to all relevant traders operating within the national territory and, second, affected in the same manner, in law and in fact, the marketing of domestic products and those from other Member States were not liable to hinder, directly or indirectly, actually or potentially, trade between Member States within the meaning of the Dassonville line of case-law.

The Court held that paragraph 14 of the Law on Pharmacies laid down the requirements which external pharmacies must meet if they were to be eligible to supply medicinal products to hospitals in Germany. However, the contested provisions did not concern the characteristics of the medicinal products, but concerned solely the arrangements permitting their sale. Consequently. Therefore , they had to be regarded as concerning selling arrangements within the meaning of Keck and Mithouard.

Pharmacies established in other Member States, unless they were in a border region and near to the German hospital concerned, which wished to conclude a supply contract with such a hospital must either transfer their dispensary to the vicinity of the hospital concerned or open another pharmacy near to the hospital. Consequently, as regards the supply of medicinal products to German hospitals, those provisions did not affect in the same way products marketed by pharmacies established in the territory of Germany and those marketed by pharmacies situated in another Member State.

For a national measure to be characterised as discriminatory or protective within the meaning of the rules on the free movement of goods, it was not necessary for it to have the effect of favouring national products as a whole or of placing only imported products at a disadvantage and not national products. Equally irrelevant was the circumstance, that a pharmacy established in another Member State had the opportunity to supply medicinal products to the hospital’s internal pharmacy or to an external pharmacy which satisfied the cumulative conditions laid down in the contested provisions.

Since the contested provisions were liable to hinder intra-Community trade, they must be considered as a measure having equivalent effect to a quantitative restriction on imports within the meaning of Art. 28 EC, without it being necessary to prove that they had had an appreciable effect on such trade. (see also Case C‑166/03 Commission v France [2004]).

The Court, however, added that the contested provisions reflected concerns for public health which were within the ambit of Art. 30 EC. Consequently, they were, in principle, capable of justifying a restriction on the free movement of goods. However, legislation which was such as to restrict a fundamental freedom guaranteed by the Treaty, such as the free movement of goods, could be justified only if it was appropriate for securing the attainment of the objective pursued and did not go beyond what was necessary in order to attain it.

The Court held that since Art. 30 EC was an exception, to be strictly interpreted, to the rule of free movement of goods within the Community, it was for the national authorities to demonstrate that those provisions were necessary in order to achieve the declared objective, and that this objective could not be achieved by less extensive prohibitions or restrictions of lesser extent or having less effect on intra-Community trade.

When assessing whether the principle of proportionality had been observed in the field of public health, account must be taken of the fact that a Member State had the power to determine the degree of protection which it wished to afford to public health and the way in which that degree of protection was to be achieved. Since that degree of protection might vary from one Member State to the other, Member States must be allowed discretion. Consequently, the fact that one Member State imposed less strict rules than another Member State did not mean that the latter’s rules were disproportionate.

The Court held that the contested provisions could be seen to be necessary to the achievement of the objective of ensuring a high level of public health protection and clearly did not go beyond what was necessary.

While objectives of a purely economic nature could not justify a restriction on the fundamental principle of free movement of goods, none the less, as regards interests of an economic nature concerning the maintenance of a balanced medical and hospital service open to all, such an objective might also fell within one of the derogations, on grounds of public health, in so far as it contributed to the attainment of a high level of health protection.

In the light of the foregoing, the contested provisions must be considered to be justified on grounds relating to the protection of public health. The Court held that the Commission’s action must therefore be dismissed.

Text of Judgment

Case T‑345/05, Mote v European Parliament

>> Court of First Instance reiterates that it will only review review legality of acts of the European Parliament intended to produce legal effects vis-à-vis third parties

In November 2003, criminal proceedings were brought against Ashley Neil Mote, a British citizen, on the ground that various State benefits he had received between 1996 and 2002 had been obtained on the basis of false declarations.

Following his election to the European Parliament in June 2004, Mr Mote applied for the criminal proceedings pending against him to be stayed, relying on the privileges and immunities that he enjoyed in his capacity as a Member of the European Parliament.

The Attorney General of England and Wales asked the European Parliament to confirm that the prosecution brought against the applicant did not infringe the Protocol on the Privileges and Immunities of the European Communities of 8 April 1965 annexed to the Treaty establishing a single Council and a single Commission, in particular Art. 8 thereof and, in the event that Mr Mote was held to enjoy any privilege or immunity under the Protocol, to waive that privilege or immunity.

By decision of July 5, 2005, the plenary assembly of the Parliament decided to waive Mr Mote’s immunity. He subsequently sought annulment of this decision, arguing inter alia that the Parliament should have determined that the privilege conferred by Article 8 of the Protocol had been infringed.

The Parliament submitted that the application should be declared inadmissible on the ground that the applicant was not directly concerned, for the purposes of Art. 230(4) EC, by the decision to waive immunity, in particular in that such a decision left a discretion to its addressee.

The Court first of all reiterated that the European Community was based on the rule of law inasmuch as neither its Member States nor its institutions could avoid a review of the question whether their acts were in conformity with the constitutional charter, the Treaty, which established a complete system of legal remedies and procedures designed to permit the Court of Justice to review the legality of acts of the institutions. Acts adopted by the Parliament had not, as a matter of principle, been excluded from actions for annulment. (Case 294/83 Les Verts v Parliamen[1986] ;and Case C-314/91 Weber v Parliament [1993]).

The Court of First Instance held that under Art. 230(1) EC, the Court of Justice was to review the legality of acts of the Parliament intended to produce legal effects vis-à-vis third parties. Acts of the Parliament which related only to the internal organisation of its work could not be challenged in an action for annulment.

That class of measures included acts of the Parliament which either did not have legal effects or had legal effects only within the Parliament as regards the organisation of its work and were subject to review procedures laid down in its Rules of Procedure.

By contrast, acts of the Parliament which produced or were intended to produce legal effects in regard to third parties or, in other words, acts whose legal effects went beyond the internal organisation of the work of the institution were open to challenge before the Community judicature. (see, inter alia, the order in Case 78/85 Group of the European Right v Parliament [1986]; and the order in Case C-68/90 Blot and Front national v Parliament [1990]).

Members, elected as representatives of the peoples of the States brought together in the Community, must, with respect to an act emanating from the Parliament and producing legal effects as regards the conditions under which the electoral mandate was exercised, be regarded as third parties within the meaning of Art. 230(1) EC. (see Joined Cases T-222/99, T-327/99 and T‑329/99 Martinez and Others v Parliament [2001]).

The Court stated that a decision by which the Parliament waived the immunity of one of its Members had legal effects going beyond the internal organisation of the Parliament since the decision made it possible for proceedings to be brought against that Member in respect of the matters identified. The contested decision therefore was an act which produced or was intended to produce legal effects with respect to third parties. It followed that it was possible for the Community judicature to review its legality under Art. 230(1) EC.

Mr Mote inter alia submitted that there was a lack of full and adequate reasons for the contested decision without stating the points on which he felt that reasons were lacking. He did not specify the matters of law and fact which, in his opinion, required further explanation on the part of the Parliament. This plea was therefore declared inadmissible.

The applicant made the complaint that the Committee on Legal Affairs failed to examine his requests or suggestions for seeking further information for the first time in his reply. The Court however found, that complaint also to be inadmissible, as it specifically concerned the investigation of the Committee on Legal Affairs in respect of the application for waiver of immunity and not the examination of the factors which should have been taken into account by the Parliament in adopting the contested decision, and therefore could not be regarded as constituting an amplification of the complaints made in the original application.

It followed from all of the above that the application had to be dismissed.

Text of Judgment

See also Judgment of the Court of Justice in Joined Cases C-200/07, C-201/07 Marra [2008], delivered exactly a week later.

Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia

>> Court finds that Greek pharmaceuticals company abused its dominant position by refusing to meet ordinary orders by wholesalers in order to prevent parallel exports

GlaxoSmithKline AEVE was the Greek subsidiary of GlaxoSmithKline, which held the marketing authorisation in Greece for certain prescription-only medicines and imported, warehoused and distributed pharmaceutical products of the GSK group in Greece.

In 2000, GlaxoSmithKline AEVE stopped meeting the orders of the Greek wholesalers who bought the medicines in question for distribution in Greece and export to other Member States, citing a shortage of the products at issue.

The company denied responsibility, and, altering its system of distribution, began itself to distribute those medicines to Greek hospitals and pharmacies.

In February 2001, GlaxoSmithKline AEVE started once more to supply the wholesalers with limited quantities of the medicinal products on the ground that the supply of medicines on the Greek market had to some extent normalised and that stocks had been reconstituted.

The wholesalers brought an action claiming that the sales policy of GlaxoSmithKline AEVE breached both Greek and Community competition law.

The referring court asked whether there is an abuse of a dominant position contrary to Art. 82 EC if a pharmaceuticals company occupying such a position on the national market for certain medicinal products refused to meet orders sent to it by wholesalers on account of the fact that those wholesalers are involved in parallel exports of those products to other Member States.

The Court of Justice reiterated that the refusal by an undertaking occupying a dominant position on the market of a given product to meet the orders of an existing customer constituted abuse of that dominant position under Art. 82 EC where, without any objective justification, that conduct was liable to eliminate a trading party as a competitor. (see Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission [1974] and Case 27/76 United Brands and United Brands Continentaal v Commission [1978]).

The Court held that It was common ground between the parties in the main proceedings that, by refusing to meet the Greek wholesalers’ orders, GlaxoSmithKline AEVE aimed to limit parallel exports by those wholesalers to the markets of other Member States in which the selling prices of the medicinal products in dispute were higher.

The Court reiterated that a practice by which an undertaking in a dominant position aimed to restrict parallel trade in the products that it put on the market constituted abused of that dominant position, particularly when such a practice had the effect of curbing parallel imports by neutralising the more favourable level of prices which might apply in other sales areas in the Community or when it aimed to create barriers to re-importations which came into competition with the distribution network of that undertaking. Indeed, parallel imports enjoyed a certain amount of protection in Community law because they encouraged trade and helped reinforce competition. (see Case 26/75 General Motors Continental v Commission [1975], Case 226/84 British Leyland v Commission [1986], and Case C-373/90 X [1992]).

The Court held that an undertaking in a dominant position for the purpose of marketing a product - which cashed in on the reputation of a brand name known to and valued by consumers - could not stop supplying a long-standing customer who abode by regular commercial practice, if the orders placed by that customer were in no way out of the ordinary. Such conduct was inconsistent with the objectives laid down in Art. 3(1)(g) EC, which were set out in detail in Art. 82 EC, since the refusal to sell would limit the markets to the prejudice of consumers and would amount to discrimination which might in the end eliminate a trading party from the relevant market.

According to the Court, “there could be no escape from the prohibition laid down in Art. 82 EC for the practices of an undertaking in a dominant position which were aimed at avoiding all parallel exports from a Member State to other Member States, practices which, by partitioning the national markets, neutralised the benefits of effective competition in terms of the supply and the prices that those exports would obtain for final consumers in the other Member States.” Para. 66

In order to appraise whether the refusal by a pharmaceuticals company to supply wholesalers involved in parallel exports constituted a reasonable and proportionate measure in relation to the threat that those exports represented to its legitimate commercial interests, it must be ascertained whether the orders of the wholesalers were out of the ordinary. (see Case 27/76 United Brands and United Brands Continentaal v Commission [1978]).

It was for the referring court to ascertain whether the orders were ordinary in the light of both the previous business relations between the pharmaceuticals company holding a dominant position and the wholesalers concerned and the size of the orders in relation to the requirements of the market in the Member State concerned (see Case 77/77 Benzine en Petroleum Handelsmaatschappij and Others v Commission [1978]).

Text of Judgment

Case C-43/07, Arens-Sikken

>> Court finds Dutch rules concerning the assessment of inheritance duties and transfer duties incompatible with Articles 56 and 58 EC

This case is largely similar to Case C-11/07, Eckelkamp (delivered the same day), on which I wrote this post.

The referring court asked whether the combined provisions of Articles 56 and 58 precluded rules concerning the assessment of inheritance duties and transfer duties payable in respect of an immovable property situated in that Member State which, for the assessment of those duties, made no provision for the deductibility of overendowment debts resulting from a testamentary parental partition inter vivos where the person whose estate was being administered was residing, at the time of death, not in that State, in which the immovable property was situated, but in another Member State, whereas provision was made for such deductibility where the person concerned was residing, at the time of death, in the first-mentioned State.

The referring court also asked whether the answer this question might be different if the Member State in which the person whose estate was being administered was residing at the time of death grants, under rules applicable in its territory on the prevention of double taxation, a tax credit in respect of inheritance duties payable in another Member State on asset situated in the territory of that other State.

The Court of justice reiterated that in the absence of a definition in the EC Treaty of “movement of capital” for the purposes of Art. 56(1) EC, the nomenclature annexed to Directive 88/361 had indicative value, subject to the qualification, contained in the introduction to the nomenclature, that the list set out therein was not exhaustive (see Case C-513/03 van Hilten-van der Heijden [2006]; Case C-452/04 FidiumFinanz [2006]; Joined Cases C-463/04 and C-464/04, Federconsumatori and Others [2007]; and Case C-256/06 Jäger [2008]).

The Court of Justice held that an inheritance was a movement of capital for the purposes of Art. 56 EC, except in cases where its constituent elements were confined within a single Member State. The present case clearly did not concern a situation purely internal to a Member State.

The Court reiterated that in order for national tax rules such as those at issue in the main proceedings to be considered compatible with Articles 56 and 58 EC, the difference in treatment must concern situations which were not objectively comparable or be justified by overriding reasons in the general interest. That difference in treatment could not be justified on the ground that it concerned situations which were not objectively comparable (Case C-35/98 Verkooijen [2000]; Case C-319/02 Manninen [2004]).

Where national legislation placed the heirs of a person who, at the time of death, had the status of resident and those of a person who, at the time of death, had the status of non-resident on the same footing for the purposes of taxing an inherited immovable property which was situated in the Member State concerned, that legislation could not, without giving rise to discrimination, treat those heirs differently in the taxation of that property so far as concerned the deductibility of charges secured on it. By treating the inheritances of those two categories of persons in the same way (except in relation to the deduction of debts) for the purposes of taxing their inheritance, the national legislature had in fact admitted that there was no objective difference between them in regard to the detailed rules and conditions relating to that taxation which could justify different treatment. (see, by analogy, in relation to the right of establishment, Case 270/83 Commission v France [1986], and Case C-170/05 Denkavit Internationaal and Denkavit France [2006]).

There was no agreement between the Netherlands and the Italian Republic for the prevention of double taxation of succession duties. According to the Court, a Member State could not rely on the existence of a tax advantage granted unilaterally by another Member State in order to escape its obligations under the Treaty and, in particular, under the Treaty provisions relating to the free movement of capital.

Text of Judgment