The establishment of the single market in 1992 led to another chapter for the European Community. The aim of it was to create more jobs, bring competition for businesses and strengthen Europe in political and economic ways against the challenges of the world economy. The idea of free movement of capital, goods, services and workers without internal frontiers or tax duties within the EU became central in achieving this. It is important to note that even though the single market was officially introduced in 1992, it took many years before and big efforts afterwards in order to set up properly functioning single market that would be competitive with other world economies (European Commission statistics website, 2013).
Nowadays, most of the monetary and tax restrictions have been abolished due to obvious and direct contradiction in respect to the existing regulations (e.g. Schottle v Finanzmt Freudenstadt (Case20/76) the imposed tax on long-distance road transport was putting in a privileged position national car vehicles comparing to the foreign). Instead, non-monetary restrictions or measures having an equivalent effect (MHEE) that hinder trade still raise concerns due to the difficulties of identifying such restrictions. In this article, we will concentrate on the topic of non-monetary restrictions and issues concerning the hindrance of trade between Member States in the light of the Keck and Mithouard, 1993 case and the changes that have been introduced by the ECJ ruling.
Current legislation directly prohibits any restrictions (quantitative or measures having equivalent effect) on imports, as Article 34 of the TFEU states, and exports, found in Article 35 of the TFEU. In most cases, restrictions on imports are more often rather than on exports. This can be explained by the fact that countries try to protect national producers.
The definition of measures having equivalent effect (MHEE) was introduced for the first time by the European Court of Justice in the case of Procureur du Roi v Dassonville (1974) in which Belgian law required certificate of authenticity from the country of origin. This certificate was not required in any other EU country. Moreover, issuing such certificate was a lengthy process. As a result, the court came up with the following definition of MHEE: ‘All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions’ (Woods & Watson, 2009).
This case became the first landmark in solving the problem of application of the TFEU articles concerning MHEE. It was later used in all further cases and was named by academics as the ‘Dassonville formula’. Even more, it became obvious that if the measure can hinder the trade without even making any actual effects, it is still considered to be a measure having equivalent effect. The next step towards correct application of the TFEU Articles was made in the key case of ECJ, Rewe-Zentral AG v Bundesmonopolverwaltung fur Branntwein, 1979 (also known as the Cassis de Dijon case). The German law restricted the sale of spirits (liquor) with the content of alcohol lower than 25%. The explanation for this measure was that it protects the health of the population, because lower content of spirits would lead to alcohol tolerance. The law applied equally for domestic goods and imports, in other words, it was an indistinctly applicable measure, although Germany had no producers who sold spirits with such low alcoholic content. On the other hand, it was common in France to produce and sell such liquor. Even though the law applied equally for imported and domestic goods, The Court of Justice was very strict concerning the Dassonville formula. In this case, it was held that if the product is lawfully made in one of the Member States, then the producer is allowed to sell it without any obstacles in any other country within the common market.
However, the matters that remained unclear were the national rules regulating the internal market. In the light of recent cases, concerning, for instance, Sunday trading rules and opening hours, importers started to rely heavily on Article 34 of the TFEU (formerly Article 30 of European Economic Community), trying to challenge any rule that could limit their commercial activity and lower their potential income. Such example was Torfaen BC v B and Q plc (Case 145/88) were retail premises in the UK were opened in violation to the Shops Act 1950 which prohibited such actions. The Court held for defendant since most of these rules were aimed not to limit the importers, but to regulate the market and to make sure that it functions properly. This issue was later raised in the joined cases of ECJ, Keck and Mithouard, 1993, the significance of which being undoubtedly great on the development of the European common market.
In the case of Keck and Mithouard, 1993, the French law had prohibited selling goods at a price lower than the actual purchase price. Its purpose was to prevent ‘predatory pricing’, in the interest of free trade within the internal market. Mr. Keck and Mr. Mithouard, who were selling goods (coffee and beer) at a lower price were prosecuted for this. They argued that this measure breaches free trade rules within the EU market.
Deciding on this case, the ECJ has introduced a whole new approach in interpreting Articles 34-35 of TFEU. The judges tried to define the difference between the laws that regulate the packaging, presentation or composition of the goods (for example Walter Rau Lebensmittelwerke v De Smedt PVBA, 1982 and the Clinique case, 1994, and national selling arrangements that regulate the market only and deal with when, how, where and by whom the goods may be sold. It was explained by the judges that internal rules might influence the free trade between Member States because each law has a certain influence. However, in our case, the law makers had an intention not to limit the importers or hinder the trade but to settle the ground rules on how the market should function, taking in account cultural and historical traditions of each and particular country.
A good example of the early Keck case judgment application is Commission v Greece, 1995). Greece (the defendant) had issued a law requiring the processed milk for infants to be sold only in pharmacies. The Commission (the plaintiff) brought actions against Greece arguing that this law is contrary to Article 34 of TFEU (formerly Article 30 of EEC) which constituted an MHEE. The defence stated that the only commercial freedom which was limited was an obligation for producers to sell processed milk in arranged places in order to protect the health of infants during the critical first five months of life. This requirement, in the defendant’s opinion, was a national selling arrangement, the principle of which had already been used in the earlier cases (namely the Keck case). In addition, Greece itself did not produce any processed milk at all which showed genuine purpose of the imposed law. The ECJ held for Greece. On this case example, the division between MHEE measures and national selling arrangement within the Keck prospective is clearly notable.
The positive change that has been introduced by the Keck ruling is that the idea of division the trading rules into two categories has made a certain balance. Keeping in mind that EU consists of different countries with completely different backgrounds, the Keck case judgment has given the power to governments in setting the ground rules on the internal market in respect to the cultural, historical and other traditions of each and particular country.
At the same time, the judgment of the Keck case has brought additional confusion and need of further explanations in the future. Steiner & Woods (2009) criticise the approach mentioned above as a return towards open discrimination which ruins the whole idea and purpose of the interstate trade in goods. According to the summarised academic opinion, the Keck case has raised the following issues:
1. The problem of defining the notion of ‘selling arrangements’, which has not been explained in the joined cases of Keck and Mithouard
The selling arrangement itself cannot be universally defined and used for every case. It consists of a number of case judgments that make the idea of this principle clearer and possible to ‘frame’. For example, Verinigte Familiapress Zeitungsverlags- und Vertriebs GmbH v Heinrich Bauer Verlag, 1997, in which the general rule is that if the government imposes the dual burden on domestic and imported goods, no extra costs should be paid by the importer in order to comply with these standards. This idea was later summed up in Tommaso Morellato v Comune di Padova,2003) which stated that the requirement of additional packaging, or labelling of imported products falls under Article 34 of TFEU, not for the Keck case judgment. In other words, if the importer needs to pay extra costs or put more effort in order to enter a market of a particular country rather than a national producer, then these measures cannot be considered as a selling arrangement and shall be prohibited by Article 34 of TFEU (Konsumentombudsmannen v Gourmet International Products AB, 2001).
2. Certain contradiction to the Dassonville formula
If in the Dassonville case the biggest emphasis was put on the question of what effects the measure causes, later on, in the Keck case the judges concentrated on the problem of whether the imposed measure is discriminatory itself. As noted by Horsley (2012), the Keck ruling, which is aimed to differentiate between ‘product rules’ and ‘certain selling arrangements’, is generally viewed as an excessively formalistic approach that requires purely mechanical application. This change of direction shows that the European Court of Justice is not fully sure about the approach it has taken in regulating the free trade market. This means that further explanation is required in cases and some unsolved questions are left to debate
The change that the Keck ruling has brought is seen in retrospect of the problems that it has raised. It has influenced the whole idea of free trade within the EU. No doubt, this became controversial, because it has changed directions, the principles of the free trade and the whole approach that has derived from Dassonville and Cassis de Dijon cases. On the one hand, the division of the trading rules into two categories has given EU Member States an instrument that would help manage the internal market of each particular country. On the other hand, the interpretation of ‘national selling arrangements’ has gotten the ECJ into a standstill, not being able to find a clear solution. This is happening because the Keck ruling has led to more confusion, rather than solutions, by not answering what are national selling arrangements in particular.
The academics have been arguing until this day about the outcome and influence that has been brought. This situation will not be solved rapidly at least until the Court of Justice finds a solution that is beneficial for both parties: the opponents and those who are in favour. The ECJ is trying to achieve this goal by making some progress in the recent cases of ECJ, Commission v Italy, 2009 and ECJ, Aklagaren v Micklesson, 2006.
The shift of the ECJ from the Keck rule to a completely brand new concept of the market access test is evident. Eleanor Spaventa, (2012) argues that Courts are trying to supplement the overbroad interpretation of both, measures having equivalent effect and national selling arrangements by the universal test of market access which is based on a simple idea and is more narrow and precise. However, these steps are not that confident and straightforward and it is only up for the future cases to show the intentions and ideas the ECJ is trying to develop. If to be more abstract: the good played performance named ‘national selling arrangements’ is in the intermission. And every spectator is waiting for the second part of the play to begin...
By Andrii Hubai
This article was originally published in issue 4.2 of the magazine, which can be accessed here.
