The Court of Justice of the European Union (CJEU) has found that legislation in France, Austria and Ireland fixing minimum prices for tobacco products including cigarettes infringes European Union law.
France, Austria and Ireland introduced legislation which imposed minimum prices corresponding to a certain percentage of the average prices of the manufactured tobacco concerned. The European Commission brought infringement actions, alleging that such legislation undermined the freedom of manufacturers and importers to determine the maximum retail selling prices of their products and, correspondingly, free competition and such legislation was therefore contrary to Directive 95/59 (on taxes affecting the consumption of manufactured tobacco).
The CJEU held that such legislation cannot be regarded as compatible with Article 9(1) of Directive 95/59 unless it is structured in such a way that a manufacturer with lower cost prices does not lose its competitive advantage.
Arguments put forward by France, Austria and Ireland included citing the health protection objective laid down in Article 30 EC Treaty (now Article 36 of the Treaty on the Functioning of the EU (TFEU)). The CJEU rejected this because the Article 30 objective can only be relied upon to justify the quantitative restrictions on imports envisaged by Articles 28 and 29 EC Treaty (now article 34 and 35 TFEU), which the Commission did not allege in this case.
The CJEU considered that Directive 95/59 does not prevent Member States taking action to combat smoking, including the use of higher taxation of tobacco products which would be reflected in an increase in the retail selling price and which does not undermine the freedom to determine prices.
The full text of the judgments can be found here (http://tinyurl.com/ye48bdg).
Similar legislation setting minimum retail prices in England and Scotland for the sale of alcohol has been suggested in the last year. Whilst none of the major political parties has adopted this as policy, the types of issues raised in these judgments suggests that similar provisions for alcoholic products could be subject to challenge on competition or other European Union law grounds.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 09/03/2010.
