Selling Arrangements as a Barrier to the Free Movement of Goods - Article Example

Name Tutor Course Date Selling arrangements as a barrier for the free movement of goods-how far do they go? Cinetheque Case 60, 61/84 (1985); Keck C-267&268/91 (1993); Punto Casa C-69 Introduction The European Union (EU) Single Market, also known as the Common Market, or sometimes referred to as the Internal Market seeks out selling arrangements that would allow the free movement of goods rather than enforce a barrier for the free movement of goods and services. Within its twenty seven member states, the EU intends to the integration of the erstwhile separate economies so as to allow a single, harmonised EU wide economy, chiefly through legislation, and indeed half of the business operations within the EU are covered by law (Woods 167). This paper seeks to explore the legislated selling arrangements which enforce a barrier for the free movement of goods, and the extent to which they cover by considering several case laws. The free movement of goods and services within the EU was initiated through the customs union standards among the early six member states. At that time, due to protectionist attitudes, the removal of intangible barriers through the use standards and regulations proved difficult because of a lack of solid structures for making decisions (Maduro 89). Later on, the EU became dependent on jurisprudence of the European Union Court of Justice (ECJ) through case laws. These cases consisted both negative and positive integration which, as opposed to dependence upon exhaustive harmonization of the selling arrangements, they rely upon the minimum, hence restricting the free movement of goods within the economic block, as well as to other states. The negative integration involved restrictions and prohibitions on member states with regard to some customs or activities, while positive integration involved application of approximate laws and standards. In the laws of the ECJ, the member states were thus required to acknowledge those goods which have been legally generated from other member states, except if a given member state imposed and justified a restriction through reference to an obligatory constraint or requisite. This kind of harmonization only ensured basic trading standards were adhered to, so as to enable a healthy and safe market condition. Free movement of goods The member states within the European Union (EU), in order to get rid of trading barriers and restrictions and allow for the free movement of goods, established a common customs policy under the customs union within the Common Market to enable normal competitive conditions which would permit it. Those goods which would be traded across EU member states, whether imported or locally manufactured, would be free from levies and duties which would have otherwise been imposed in the absence of the customs union. According to Barnard (189), the domestic law would not be applicable to such goods. For imported goods from third party countries, as long as the requisite customs duty has been appropriately paid for, post import audit controls would not be in effect at the boarders of member states, except that other physical controls may be charged at the premises of the trader, but not at the territorial boarders (Chalmers 178). Apart from custom duties being abolished at the boarders of member states, the ECJ prohibited, through article 28 whatever pecuniary charges that had an equivalent effect, that is, those wherein local or foreign goods, by reason of crossing a frontier, would be unilaterally imposed as in the case of custom duties. However, the ECJ also provided for three exceptions in later rulings, in that a charge would not be treated as a customs duty of equivalent effect if: it relates to a country’s internal system of general charges imposed on all goods both domestic and imported, if it comprises a compensation or fee charged for services rendered to an economic operator, or if, subject to given conditions, it involves inspections required by Community law to fulfil statutory obligations (in Keck; in Cinéthèque; in Punto). Furthermore, there was legislation provided for by the ECJ which eliminated not only the imposition of internal taxation among member states in excess of the usual domestic taxes, whether directly or indirectly, but also the application of such discriminatory internal taxation that would result in indirect protection of domestic products against other imported products, and hence ensure the free movement of goods among member states and allow for normal conditions of competition (Gormley 168). Moreover, the ECJ has, through various detailed case law interpretations, effected prohibitions on quantitative restrictions and “measures having equivalent effect” (article 28 TFEU). This means that rules that hinder trade, whether discriminatory or non-discriminatory between member states, would be illegal (Hedemann 97). In distinguishing between directly and indirectly discriminatory rules, the ECJ postulates that directly discriminatory rules are those rules that enforce a distinction between national and imported goods in law and in fact, while on the other hand, indirectly discriminatory rules refer to those rules which enforce the distinction only in law but not in fact. Directly discriminatory rules subject imported goods to added difficulties, and thereby put domestic products at an advantage, while indirectly discriminate rules impose a greater burden on an importer, making it in some way difficult to make their products marketable, and thereby favouring domestic producer (Hedemann 90). However, consideration of the requirements of the products of the European Union Market and certain selling arrangements within which allegations on a large number of rules inconveniencing a trader can be made. In dealing with these cases, the ECJ ruled out that only those laws which related to the requirements of the product such as its size, shape and colour, should be illegal, but rules which related to selling arrangements such as the opening hours and the staff training requirements would not be illegal (in Keck; in Punto Casa; in Cinéthèque). This distinction was enforced so as to reduce the number of cases to only those circumstances which would still expose the importer to a disadvantage due to a dual burden even in the absence of discrimination (Connor 72). In addition, there is a provision for a defence when non-discriminatory rules have been unapplied by member states through legislation as well as through case laws such as Keck which provide a list of exceptions in which member countries can justify their discriminative rules. Among the key case laws for the European Union’s economic amalgamation is the Cassis de Dijon which postulates that there can be no obstacle to the easy transfer of goods including discrimination on imports and taxation barriers. Another important case is the Dassonville formula which pushes towards the integration of member states rather than allowing derogations, and then Keck and Mithouard is also a crucial case that asserts that both imported and domestic goods should be treated alike. Articles 28 to 30 of the TFEU, give principal provisions for the free movement of goods (Maduro 106). In Cassis de Dijon, differing regulations and standards were found to impede trade between member states. However, the creation of a single economic area would enable market integration and enhance not only competition, but also a more efficient allocation of resources (Enchelmaier 102). The free movement of goods has enabled the formation of an internal market within the European Union (EU), a project that has resulted in accomplishing one of EU’s policies which is to create a beneficial economy for all its member states. The free movement of goods is one of the economic freedoms established by the European Union Treaty which, from a legal perspective, is a principal element in the development of the internal market. Numerous major prohibitions on the free movement of goods have been abolished, thanks to the introduction of a single European market, or the common market. However, there have been an ongoing stream of complaints from business people and citizens of the member states, hence underscoring the fact that even the best of efforts to do away with trade barriers have not been fully successful. In addition to these, the advancement of modern technology and new innovative products continue to pose newer challenges because trade restrictions that were not clear in certain areas are now surfacing (Enchelmaier 289). Selling arrangements Selling arrangements involves measure which impede commercial trading, though they do not constitute, or may not be classified as trade barriers, such as national rules which apply equally across all goods and to all traders, whether foreign or domestic (Keck and Mithouard), such as those restricting trading on Sundays (Connor 79). In the Joined Cases C-267/91 and C-268/91 Keck and Mithouard, the European Court of Justice found that since most traders were invoking Article 28 of the TFEU – which constitutes prohibitions to measures of equivalent effect – as a means of countering rules which meant to challenge their commercial freedom, whether on not these rules applied to domestic or foreign goods, it would be considered necessary to re-evaluate and make clear its case law on the said matter. This is because the Court wanted to prevent or reduce the number of cases which were geared towards challenging the key pillars of internal provisions that were not initially intended to tamper with the free movement of goods (Chalmers 180). In this case law, while referring to Cassis de Dijon, the ECJ at the outset holds that those rules that amount to requirements to be met by imported goods constitute the measures of equivalent effect which are prohibited by article 28 of the TFEU, but then, by contrast, rules out that certain selling arrangements, which are applied to products from other member states may not directly, indirectly, actually or potentially hamper trade between member states and therefore are exempt from the prohibitions and restrictions (Woods 204). In
Leclerc‐Siplec, Advocate General Jacobs pointed out the importance of including selling arrangements, particularly advertising promotions, in article 28 of the TFEU. With regard to the range of goods affected, the nature of the restriction and the directness or indirectness of the impact of the restriction, an assessment of the exclusion of the said advertising arrangements ought to be made, whether they should be excluded from Article 28 of the TFEU as was proposed in Keck (Gormley 158). Besides, Advocate General Jacobs criticized Keck for the introduction of a discriminative test that justifies all discriminations including the treatment of advertisement as a selling arrangement. However, while the primary goal of the European Union was a single market, Jacobs goes beyond a single market, towards a commercial one, which does not feature among the EU’s goals, however important it may be. It must be put into memory that the free movement of goods is one of the principal freedoms that the Treaty seeks to protect, but this also calls for a balance (Gormley 160). Although rules which lay down requirements that are to be met for goods should be treated as under article 28 which enforces prohibitions and restrictions to these rules, regardless of whether of not they introduce discrimination on the basis of the origin of the products, the selling arrangements are also included therein through the provision for a justification for the violation (Connor 76). When the measures are manifested in a discriminatory manner, then it adds up to discrimination by law. The impression of the types of measures which constitute selling arrangements, as opposed to the comprehension of the types of measures that deal with the characteristics of the products, is not easy to grasp. The measures which constitute the (physical) characteristics of the product are such as the size, shape, composition, the weight, and its identification, but this should be interpreted within the context of what the law holds to be (Connor 89). One of the rulings by ECJ in Commission v Greece demonstrates the position of the court with regard to differences of opinion concerning selling arrangements. Rules which impose conditions that are part of the production process are part of the characteristics of the goods, and therefore, barriers to imports should not be regarded as selling arrangements. In the Commission v Greece case, the Greek law prohibited the setting up and operation of electromechanical and computer games, together with leisure games of skilfulness and all electronic games, on all public or private grounds except for casinos (Commission v Greece). The ECJ had the view that the Greek law was a breach of article 28, because it invoked the said restrictions, and even if the law did not restrict the importation of the said products, or their exhibition on the market, the prohibition was still a breach. This is because with the reduction of the volume of imports of the concerned products from member states was a result of enforcing the law and the stoppage of imports of the machinery was also an effect of enforcing the law. In addition, certain obligations which do not relate to the product or the packaging thereof could be considered as selling arrangements. However, the measures and obligations regarding restrictions of advertisements are a little more complicated. The primary role of advertising is to allow a product from one member state to penetrate into another member state, or into a new market, as viewed by the ECJ (Danusso 165). The ECJ does consider advertising restrictions as selling arrangements since Keck and Mithouard. However, in certain cases, the ECJ appears to link the extent of the restriction of the advertisement with favouritism. In particular, it considers that if the physical characteristics of the product are to be absolutely prohibited in advertisements, which could be an impediment on products in accessing the market, especially for imported products rather than domestic ones, with which the consumers are more accustomed to (Case C-254/98 TK-Heimdienst). Thus, in a recap, the ECJ appears to regard selling arrangements as obligations which are related to the marketing of a good as opposed to the characteristics of the good. But in qualifying the simple distinction of the rule in Keck, the ECJ treats some rules to be relating to products rather than under the category of selling arrangements. On the contrary, as upheld in Keck, rules which concern the packaging of products, which are prima facie, include those which relate to products and have been in other cases beyond the scope of this paper, categorised as selling arrangements after examining its particular contents (Barnard 178). Discriminatory barriers Direct and indirect barriers between domestic and imported goods are involved in numerous types of cases. Article 28 is unkind to national rules that favour domestic goods over imported products, even if the case is confined to products from member states, and also for national measures which prevent imports from another member state. Discriminatory import and export restrictions have particularly received a harsh hand from the ECJ. Moreover, as mentioned before, the ECJ also is harsh to provisions wherein imported goods are subjected to restrictions which are not imposed on local goods (Enchelmaier 201). The EU Treaty is against actions by states which promote or favour local goods, and thus pose a dangerous disadvantage to competing imports. This is well exemplified in Commission v Greece, the Greek law outlawed the installation and operation of computer games, including recreational games of skill and all electronic games, on all communal or personal premises except from casinos, in which the ECJ had the view that the Greek law was a breach of article 28, and this shows that the ECJ is indeed firm and intently committed against national courses wherein domestic products are favoured over imported goods. In addition, article 28 also considers price fixing regulations as discriminatory when a state treats imported products less favourably in relation to domestic goods because they make it difficult for importers to market their goods. The Commission v Greece case further deals with trade barriers. Physical barriers are origin based rules, where the goods are not as important as market integration. In the Commission v Greece case, the state (Greece), promoted a scheme that subsidized the purchases of agricultural equipment, and required that those who purchase them should buy only Greek-made machinery. From this case, it is clear that, as opposed to the promotion of the origin of goods, the underlying idea of competition should be the promotion of quality goods. Moreover, in a well recognized string of cases starting with 8/74 Dassonville, and then 120/78 Cassis de Dijon case, and finally also in Keck and Mithouard, the ECJ, has pointed out that discriminatory and non-discriminatory set of laws of constituent states shall be illegal if they hamper trade. But this does not include actions by individuals or private corporations. In a case concerned with French laws, which promotes the creation of cinematographic works, the ECJ appeared to acknowledge the preservation of culture may in particular conditions be considered as a mandatory requirement which may justify restrictions on imports and exports. In DocMorris, the German Law at that time restricted the use of mail orders in selling pharmaceutical products, which could only be sold in pharmacies, but in recent developments, as a result of the technological advancement, internet sales of medicinal products for use by individuals in member states are in need of review in the Eurpean Union law. Keck and Mithouard were put on trial in the French courts for retailing goods at a price that was less than their exact buying price, that is, they were sold at a loss, which was against the French law of 1963 which was amended in 1986. Selling of goods at a loss by the manufacturer was not outlawed. Keck and Mithouard argued that the French law was opposing the European Union law with regard to, inter alia, free movement of goods. The rationale for the judgment arrived at was partly based upon the distinction between rules that were dual burden and those that were equal burden. The decision appeared to have a reference to Cinéthèque an earlier case which would be judged differently in light of Keck, because the challenged rules involved selling arrangements which affected domestic importers as well as importing traders, hence resulting in a decreased volume of sales within member states (Hedemann 109). Extent of the selling arrangements The ECJ did not desire to include selling arrangements in article 28 of the TFEU as exemplified in some case laws which are considered in this paper. In Keck, the ECJ reiterated its verdict concerning selling arrangements, concluding that the rules thereof are to apply equally to all traders, without regard to the source of the products. In Punto Casa and Semeraro Casa, the ECJ arrived at the same final ruling concerning Italian laws on the closing of vending stores on Sundays, equally for both imported and domestic goods, which meant that this was not an inclusion of article 28. In yet another case law, the same idea is apparent. In TK-Heimdienst, the ECJ held an order which prohibited pharmacists from conducting advertisement of para-pharmaceutical products which they were selling. This ruling was not considered in article 28, because of three major reasons. Firstly, the ECJ considered the ruling as not directed towards trade within member states. Secondly, that the ECJ did not exclude traders, but only pharmacists from advertising such products, and lastly, the rule did apply equally between all traders (Hedemann 79). And in spite of the fact that such a ruling would have some effect on the ultimate volume of sales, it would not suffice to be rendered as an MEQR for the purpose of Article 28 (Danusso). Furthermore, the ECJ held national provisions requiring a restricting on the number of outlets that a given product held, or enforcing license requirements to be outside article 28, either for the reason that the ruling related to selling arrangements or because the effect was uncertain and especially indirect (Hedemann 95). The division brought about in Keck involving rules that refer to the nature of the goods themselves and those that concern selling arrangements make it difficult for ECJ to limit article 28 because of the ambiguity in the definition of the term selling arrangements. Connor distinguishes two types of selling arrangements: static selling arrangements and non-static or dynamic selling arrangements. Static selling arrangements relates to the time in which retailers operate their shops, or keep them open, the hours in which the traders work, or the kind of premises in which some given products would be sold. Non-static or dynamic selling arrangements refer to rules which relate to ways in which a manufacturer decides to market a particular good, whether through advertising, free offers or the like (Connor 106). However, the rejection of the latter from article 28 is because it concerns more on the definition of the good itself and thus, the limitation of trade between member states because of the legislation restricting certain forms of advertisement or sales promotions, even if the rules were indistinctly applied (Woods 49). This means that non-static selling arrangements also relate to composition, labelling or presentation, because they form an integral character of the product. But from Keck, it is clear that the Court considered certain rules as selling arrangements and therefore not under article 28, although the prohibition of sales-promotion resulted in decreased volume of sales. Again, in TK-Heimdienst Sass and Leclerc-Siplec, there was a limited veto on advertisement which was classified as a method of sales promotion and hence held outside article 28. Under Keck, and as confirmed in Leclerc‐Siplec, the ECJ considered advertising restrictions to have the same impact on domestic as well as imported goods, hence applying equal advertising restriction or similar suppression both to local and imported goods. However, since advertising played a crucial role in allowing other players to gain access to foreign markets, as well as being inconsistent with packaging rules, this case law was found to be inadequate ECJ later discovered the fact that advertising restrictions affected importers more than domestic traders, and the prohibition of certain forms of advertising prevented the entrance of new traders into the market (Maduro 187). The case law preceding Keck and Mithouard exemplify the difficulties encountered in curving out the extent of article 28. The ECJ was required to apply this article to a wide range of its pre-Keck jurisprudence, although the effect was quite minor. However, from the discussion so far, it is obvious that Keck and Mithouard itself was found to be too formal, and was criticized widely for this, by establishing distinctions between rules relating to characteristics of the products and those concerning selling arrangements, which were not satisfactory. This lack of satisfaction showed the need for focusing on market access as opposed to what was the previous focus. Conclusion Having discussed extensively the contents and requirements of Article 28, it is important to emphasize that as adjudication continued, the litigants and judges, as it has been widely reviewed, were able to refine and build the doctrine on order to counter particular inconveniences from rulings with situations that were inconsistent. With consideration of the selling arrangements as a barrier for the free movement of goods, the cases considered in this discussion lead to varying conceptions. On the one hand it is possible to say that the ECJ has tried its best in addressing the pressing disputes, but on the other hand, the solution is far from being realized chiefly because protectionist attitudes still persist. The free movement of goods has enabled the formation of an internal market within the European Union (EU), a project that has resulted in accomplishing one of EU’s policies which is to create a beneficial economy for all its member states. With reference to article 28, the Court prohibited whatever pecuniary charges that had an equivalent effect, that is, those wherein local or foreign goods, by reason of crossing a frontier, would be unilaterally imposed as in the case of custom duties. However, the ECJ also provided for three exceptions in later rulings, in that a charge would not be treated as a customs duty of equivalent effect if: it relates to a country’s internal system of general charges imposed on all goods both domestic and imported, if it comprises a compensation or fee charged for services rendered to an economic operator, or if, subject to given conditions, it involves inspections required by Community law to fulfil statutory obligations. The court has also effected prohibitions on quantitative restrictions and “measures having equivalent effect, and rules that hinder trade, whether discriminatory or non-discriminatory between member states, have been made illegal (Barnard). The second choice would assess the consideration of significant obstruction, considering presumptions relying upon the kind of case, to access the market. The ECJ does consider advertising restrictions as selling arrangements since Keck and Mithouard (Hedemann). However, in certain cases, the ECJ appears to link the extent of the restriction of the advertisement with favouritism. In particular, it considers that if the physical characteristics of the product are to be absolutely prohibited in advertisements, which could be an impediment on products in accessing the market, especially for imported products rather than domestic ones, with which the consumers are more accustomed to. Thus, in a recap, the ECJ appears to regard selling arrangements as obligations which are related to the marketing of a good as opposed to the characteristics of the product. But in qualifying the simple distinction of the rule in Keck, the ECJ treats some rules to be relating to products rather than under the category of selling arrangements. A substantial impact is considered to occur when the measure affects the goods themselves, rather than the contested measure which affects the selling arrangements (Connor). Works Cited Barnard, Catherine. The Substantive Law of the EU: The Four Freedoms (3rd ed.). Oxford, New York: Oxford University Press, 2010. Cases C–267 and 268/91 Criminal Proceedings against Keck and Mithouard [1993] ECR I–609. Cases C–69 and 258/93 Punto Casa SpA v. Sindaco del Commune di Capena [1994] ECR I– 2355. Case C–254/98 Schutzverband gegen unlauteren Wettbewerb v. TK-Heimdienst Sass GmbH [2000] ECR I–15. Cases 60 and 61/84 Cinéthèque SA v. Fédération Nationale des Cinémas Français [1985] ECR 2605. Case C- 332/94 Semeraro Casa Uno Srl v. Sindaco del Commune di Erbusco [1996] ECR I– 2975. Case C–391/92 Commission v. Greece [1995] ECR I–1621, 1628–1629. Case C–412/93 Société d’Importation Edouard Leclerc-Siplec v. TFI Publicité SA [1995] ECR I–17. Case C–322/01 Deutscher Apothekerverband v. 0800 Doc Morris NV and Jacques Waterval [2003] ECR I–14887. Chalmers, Drake. European Union Law: Text and Materials (2nd ed.). New York: Cambridge University Press, 2010. 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