1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 16 MARCH 1982 THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION , PURSUANT TO ARTICLE 169 OF THE EEC TREATY , FOR A DECLARATION THAT THE FRENCH REPUBLIC , BY FIXING RETAIL SELLING PRICES OF MANUFACTURED TOBACCO AT A DIFFERENT LEVEL FROM THAT DETERMINED BY THE MANUFACTURERS OR IMPORTERS , HAD FAILED TO FULFIL ITS OBLIGATIONS UNDER THE EEC-TREATY , AND , IN PARTICULAR , UNDER THE PROVISIONS OF COUNCIL DIRECTIVE NO 72/464/EEC OF 19 DECEMBER 1972 ON TAXES OTHER THAN TURNOVER TAXES WHICH AFFECT THE CONSUMPTION OF MANUFACTURED TOBACCO ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION , 1972 ( 31 DECEMBER ), L 303 , P . 1 ).
THE BACKGROUND TO THE DISPUTE
2 BY LAW NO 76-448 , OF 24 MAY 1976 , ON THE ORGANIZATION OF THE MONOPOLY IN MANUFACTURED TOBACCO ( JOURNAL OFFICIEL DE LA REPUBLIQUE FRANCAISE , P . 3083 ), THE FRENCH REPUBLIC ADOPTED A SERIES OF MEASURES DESIGNED TO COMPLY WITH ITS OBLIGATIONS UNDER ARTICLE 37 OF THE EEC TREATY ON THE ORGANIZATION OF NATIONAL MONOPOLIES OF A COMMERCIAL CHARACTER . THAT LAW WAS IMPLEMENTED BY DECREE NO 76-1324 , OF 31 DECEMBER 1976 , ON THE ECONOMIC AND TAX ARRANGEMENTS APPLICABLE TO MANUFACTURED TOBACCO IN THE DEPARTMENTS OF METROPOLITAN FRANCE ( JOURNAL OFFICIEL DE LA REPUBLIQUE FRANCAISE , P . 189 ).
3 IN ACCORDANCE WITH THOSE PROVISIONS , THE IMPORTATIONS AND WHOLESALE DISTRIBUTION OF MANUFACTURED TOBACCO FROM MEMBER STATES OF THE COMMUNITY WERE LIBERALIZED , WHILST THE IMPORTATION AND WHOLESALE DISTRIBUTION OF MANUFACTURED TOBACCO ORIGINATING IN NON-MEMBER COUNTRIES , AS WELL AS THE MANUFACTURE AND RETAIL SALE OF MANUFACTURED TOBACCO , WERE RESERVED TO THE FRENCH STATE . THE MONOPOLY AFFECTING THE IMPORTATION AND WHOLESALE DISTRIBUTION OF MANUFACTURED TOBACCO ORIGINATING IN NON-MEMBER COUNTRIES AND THE MANU FACTURING MONOPOLY ARE ENTRUSTED TO THE SERVICE D ' EXPLOITATION INDUSTRIELLE DES TABACS ET ALLUMETTES ( TOBACCO AND MATCHES ( INDUSTRIAL EXPLOITATION ) ORGANIZATION , KNOWN AS ' ' SEITA ' ' ), WHILST THE RETAIL SALE MONOPOLY IS GRANTED TO THE REVENUE AUTHORITIES , WHICH ADMINISTER IT THROUGH RETAILERS NOMINATED AS ITS AGENTS .
4 UNDER ARTICLE 6 OF LAW NO 76-448 , THE RETAIL PRICE OF EACH PRODUCT IS THE SAME THROUGHOUT THE COUNTRY . THAT PRICE IS FIXED UNDER CONDITIONS LAID DOWN BY DECREE . IN CONFORMITY WITH ARTICLE 10 OF DECREE NO 76-1324 , RETAIL SELLING PRICES OF TOBACCO ARE FIXED BY ORDER OF THE MINISTER FOR ECONOMIC AFFAIRS AND FINANCE .
5 AFTER THOSE PROVISIONS WERE PUT INTO EFFECT THE COMMISSION , FOLLOWING THE PUBLICATION OF VARIOUS ORDERS FIXING THE SELLING PRICES OF TOBACCO UNDER THE AFOREMENTIONED PROVISIONS , DREW THE ATTENTION OF THE FRENCH AUTHORITIES TO THE FACT THAT THE SYSTEM DESCRIBED ABOVE WAS NOT COMPATIBLE WITH THE PRINCIPLE OF THE FREE DETERMINATION OF MAXIMUM RETAIL SELLING PRICES BY MANUFACTURERS AND IMPORTERS EMBODIED IN ARTICLE 5 ( 1 ) OF DIRECTIVE NO 72/464 . SINCE ITS COMMUNICATION CALLED FORTH NO REACTION FROM THE FRENCH AUTHORITIES , THE COMMISSION ON 7 JUNE 1979 SENT THE FRENCH GOVERNMENT A LETTER IN WHICH IT CALLED ATTENTION TO THE FACT THAT THE FIXING BY COMPULSORY POWERS OF A PRICE FOR IMPORTED TOBACCO DIFFERENT FROM THAT DETERMINED BY THE MANUFACTURERS AND IMPORTERS CONSTITUTED A BREACH OF THE FRENCH REPUBLIC ' S OBLIGATIONS UNDER THE EEC TREATY AND IN PARTICULAR UNDER DIRECTIVE NO 72/464 .
6 BY LETTER OF 16 JULY 1979 , THE FRENCH GOVERNMENT INFORMED THE COMMISSION THAT IT CONSIDERED ITS LEGISLATION AND THE ADMINISTRATIVE PRACTICES DEVELOPED ON THE BASIS OF THAT LEGISLATION AS BEING IN CONFORMITY WITH THE PROVISIONS OF THE DIRECTIVE REFERRED TO , POINTING OUT THAT THE PRINCIPLE OF THE FREE DETERMINATION OF PRICES BY MANUFACTURERS AND IMPORTERS IS LIMITED BY THE EFFECT OF THE SECOND SENTENCE OF ARTICLE 5 ( 1 ), WHICH MAKES A RESERVATION AS REGARDS THE APPLICATION OF NATIONAL LEGISLATION ON THE CONTROL OF PRICE LEVELS OR THE OBSERVANCE OF IMPOSED PRICES . IN THE SAME LETTER , THE FRENCH GOVERNMENT STATED THAT THE FRENCH LEGISLATION HAD BEEN ADOPTED TO ALLOW THE PUBLIC AUTHORITIES TO INCLUDE THE DEVELOPMENT OF TOBACCO PRICES UNDER THE GENERAL OBJECTIVES OF ECONOMIC POLICY , AND IN PARTICULAR THE PROGRAMME FOR THE CONTROL OF INCREASES IN THE PRICE OF GOODS AND SERVICES . IT EMPHASIZED THAT , IN PRACTICE , THE APPLICATION OF THOSE LEGAL RULES WAS VERY FLEXIBLE AND THAT , IN PRINCIPLE , REQUESTS FOR THE FIXING OF PRICES FOR PRODUCTS WHICH WERE PUT ON THE MARKET FOR THE FIRST TIME WERE CONSISTENTLY ACCEPTED .
7 ON 31 OCTOBER 1980 THE COMMISSION SENT THE FRENCH GOVERNMENT A REASONED OPINION , PURSUANT TO ARTICLE 169 OF THE EEC TREATY , IN WHICH IT EXPRESSED THE VIEW THAT THE OBSERVATIONS SUBMITTED BY THE FRENCH GOVERNMENT WERE NOT SATISFACTORY , IN VIEW OF THE FACT THAT THEY DID NOT ENSURE THE NECESSARY LEGAL CERTAINTY FOR MANUFACTURERS AND IMPORTERS IN THE FREE EXERCISE OF THE RIGHT TO DETERMINE SELLING PRICES FOR THEIR PRODUCTS .
CONSEQUENTLY , THE COMMISSION STATED THAT IT WAS ESSENTIAL FOR THE FRENCH LEGISLATION TO BE AMENDED IN ORDER FORMALLY TO ALLOW MANUFACTURERS AND IMPORTERS OF TOBACCO THE RIGHT FREELY TO DETERMINE THE SELLING PRICE OF THEIR PRODUCTS . FINALLY , IT INVITED THE FRENCH REPUBLIC TO ADOPT THE NECESSARY MEASURES TO COMPLY WITH THE REASONED OPINION WITHIN A PERIOD OF ONE MONTH FROM THE DATE OF ITS NOTIFICATION .
8 THE FRENCH GOVERNMENT REFUSED TO COMPLY WITH THOSE REQUIREMENTS AND THE COMMISSION SUBMITTED ITS APPLICATION TO THE COURT ON 16 MARCH 1982 .
THE SUBSTANCE OF THE DISPUTE
9 THE COMMISSION CLAIMS THAT THE FRENCH LEGISLATIVE PROVISIONS , INASMUCH AS THEY RESERVE TO THE GOVERNMENT COMPULSORY POWERS FOR THE FIXING OF THE PRICE OF IMPORTED TOBACCO , IN CERTAIN CASES BY ALTERATION OF THE PRICES DETERMINED BY THE MANUFACTURERS OR IMPORTERS , ARE CONTRARY TO THE PROVISIONS OF DIRECTIVE NO 72/464 AS IT MUST BE INTERPRETED IN THE LIGHT OF ARTICLES 30 AND 37 OF THE TREATY AND IN ACCORDANCE WITH THE CASE-LAW OF THE COURT RELATING TO THOSE PROVISIONS . ACCORDING TO THE COMMISSION THE PURPOSE OF DIRECTIVE NO 72/464 IS TO PREVENT THE TAX ARRANGEMENTS FOR TOBACCO FROM DISTORTING COMPETITION IN THAT SECTOR OR FROM PREVENTING THE FREE MOVEMENT OF THOSE PRODUCTS WITHIN THE COMMUNITY .
10 THE TWO SENTENCES OF ARTICLE 5 ( 1 ) MUST BE INTERPRETED IN SUCH A WAY AS TO COMPLEMENT EACH OTHER AND NOT TO CONTRADICT EACH OTHER . THE COMMISSION DOES NOT DISPUTE , HOWEVER , THE RIGHT OF MEMBER STATES TO APPLY TO TOBACCO GENERAL MEASURES INTENDED TO RESTRICT THE INCREASE OF PRICES ; HOWEVER , APART FROM SUCH MEASURES , THE FREEDOM OF MANUFACTURERS AND IMPORTERS MUST REMAIN UNTRAMMELLED SO FAR AS THE DETERMINATION OF THEIR SELLING PRICE IS CONCERNED . ON THIS POINT THE COMMISSION RECALLS THE CASE-LAW OF THE COURT RELATING TO THE CONTROL OF PRICES , AS SET OUT IN PARTICULAR IN THE JUDGMENTS OF 23 JANUARY 1975 ( CASE 31/74 , GALLI , ( 1975 ) ECR 47 ), 26 FEBRUARY 1976 ( CASE 65/75 TASCA ( 1976 ) ECR 291 AND JOINED CASES 88 TO 90/75 SADAM AND OTHERS V COMMISSION ( 1976 ) ECR 323 ) AND 24 JANUARY 1978 ( CASE 82/77 OPENBAAR MINISTERIE OF THE NETHERLANDS V VAN TIGGELE ( 1978 ) ECR 25 ) IN WHICH THE COURT STATED THAT ANY MEASURE WHOSE PURPOSE WAS TO FIX PRICES AT A LEVEL SUCH THAT THE MARKETING OF IMPORTED PRODUCTS BECAME EITHER IMPOSSIBLE OR MORE DIFFICULT THAN THAT OF NATIONAL PRODUCTS WAS INCOMPATIBLE WITH THE TREATY . SUCH AN EFFECT MAY DERIVE EITHER FROM THE FIXING OF A MAXIMUM PRICE , IF IT IS SET AT A LEVEL SO LOW THAT IT PREVENTS IMPORTERS FROM MARKETING THEIR PRODUCTS PROFITABLY , OR FROM THE DETERMINATION OF A MINIMUM PRICE , FIXED AT A LEVEL SO HIGH THAT IT CANCELS OUT THE COMPETITIVE ADVANTAGE ARISING FROM THE LOWER COST PRICE OF THE IMPORTED PRODUCT .
11 THE COMMISSION FURTHER REFERS TO THE JUDGMENT OF 13 MARCH 1979 ( CASE 91/78 , HANSEN GMBH & CO . V HAUPTZOLLAMT FLENSBURG ( 1979 ) ECR 935 ) IN WHICH THE COURT EMPHASIZED THAT ARTICLE 37 REMAINS APPLICABLE , EVEN AFTER THE ADJUSTMENT OF THE MONOPOLIES PRESCRIBED BY THE TREATY , TO THE EXTENT TO WHICH THE EXERCISE BY A STATE MONOPOLY OF ITS EXCLUSIVE RIGHTS ENTAILS ANY FORM OF DISCRIMINATION OR RESTRICTION PROHIBITED BY THAT ARTICLE . IT NOTES THAT , IN THAT JUDGMENT , THE COURT DECLARED THAT THE PURPOSE OF ARTICLE 37 WAS TO SUBJECT THE SALES POLICY OF A PUBLIC MONOPOLY TO THE REQUIREMENTS OF THE FREE CIRCULATION OF GOODS AND OF THE EQUALITY OF OPPORTUNITY WHICH MUST BE ENSURED FOR PRODUCTS IMPORTED FROM OTHER MEMBER STATES . THOSE OPPORTUNITIES FOR MARKETING ARE ADVERSELY AFFECTED WHERE THE SUPERVISING AUTHORITY OF THE MONOPOLY FIXES ALL TOBACCO PRICES , NOT ONLY THOSE COVERED BY THE MONOPOLY BUT ALSO THOSE OF ITS COMPETITORS , PURSUANT TO A SALES POLICY WHICH IT DEEMS SUITABLE FOR THE MARKETING OF ITS OWN PRODUCTS . ON THIS POINT THE COMMISSION DRAWS ATTENTION TO THE FACT THAT THE LEGISLATIVE MEANS USED TO FIX TOBACCO PRICES , INCLUDING THOSE OF IMPORTED TOBACCO , DERIVE FROM THE NATIONAL LEGISLATION RELATING TO THE MONOPOLY AND NOT FROM GENERAL LEGISLATION RELATING TO THE CONTROL OF PRICE LEVELS .
12 IN THE COURSE OF THE PROCEEDINGS , THE COMMISSION REFERRED TO VARIOUS COMPLAINTS MADE TO IT BY IMPORTERS , FROM WHICH IT APPEARS THAT , ACCORDING TO THE VARIATIONS IN THE POLICY APPLIED BY THE FRENCH GOVERNMENT , THE SALE PRICES SUGGESTED BY MANUFACTURERS OR IMPORTERS WERE SUBJECT SOMETIMES TO REDUCTIONS AND AT OTHERS TO INCREASES WHICH , IN THE VIEW OF THE PARTIES CONCERNED , WERE TO THE DETRIMENT OF THEIR COMPETITIVE POSITION AS AGAINST THE TOBACCO OF THE FRENCH MONOPOLY .
13 IN ITS DEFENCE , THE FRENCH GOVERNMENT POINTS OUT THAT THE EXPRESSION ' ' CONTROL OF PRICE LEVELS ' ' IN ARTICLE 5 ( 1 ) OF DIRECTIVE NO 72/464 DOES NOT MEAN ONLY ' ' TO VERIFY ' ' BUT ALSO , WHERE NECESSARY , ' ' TO CURB ' ' THE LEVEL OF PRICES . IT DRAWS ATTENTION TO THE FACT THAT THE PROVISIONS CRITICIZED BY THE COMMISSION ARE MERELY THE TRANSPOSITION TO THE FIELD OF THE MARKETING OF TOBACCO OF THE PRINCIPLES OF ORDER NO 45-1483 OF 30 JUNE 1945 ON PRICES , WHICH ALLOW THE GOVERNMENT TO FIX PRICES OR PRICE-LIMITS ON PRODUCTION AND , WHERE NECESSARY , AT ALL STAGES OF DISTRIBUTION , IN PARTICULAR BY THE DETERMINATION OF THE PRICE ITSELF OR BY PRESCRIBING AN INCREASE OR A REDUCTION . AS THOSE POSITIONS ARE NOT APPLICABLE TO THE ' ' MONOPOLY PRODUCTS ' ' , IT WAS NECESSARY TO INTRODUCE THEIR EQUIVALENT IN THE LEGISLATION RELATING TO THE ORGANIZATION OF THE TOBACCO MONOPOLY .
14 ACCORDING TO THE FRENCH GOVERNMENT , THE SYSTEM OF FIXING PRICES FOR MANUFACTURED TOBACCO , WHICH IS APPLIED WITH GREAT FLEXIBILITY BY THE ADMINISTRATION , HAS THREE PURPOSES , NAMELY COMBATING INFLATIONARY TENDENCIES , OBTAINING THE BEST RETURNS FOR THE PUBLIC REVENUE AND THE ADOPTION OF MEASURES AGAINST ABUSE OF TOBACCO .
15 THE FRENCH GOVERNMENT IN ITS TURN REFERS TO THE JUDGMENTS CITED BY THE COMMISSION , EMPHASIZING THAT THEY RECOGNIZE , IN PRINCIPLE , THE COMPATIBILITY WITH COMMUNITY LAW OF NATIONAL MEASURES ADOPTED IN RELATION TO PRICE CONTROL .
16 THE COMPATIBILITY OF THE FRENCH PROVISIONS RELATING TO THE FIXING OF THE PRICE OF MANUFACTURED TOBACCO WITH COMMUNITY LAW MUST BE CONSIDERED IN RELATION TO THE PROVISIONS OF ARTICLE 5 ( 1 ) OF DIRECTIVE NO 72/464 , AS THEY APPEAR IN THE LIGHT OF THE SYSTEM AND PURPOSE OF THAT DIRECTIVE AND OF ARTICLES 30 AND 37 OF THE TREATY .
17 THE PURPOSE OF THE DIRECTIVE IS TO ESTABLISH GENERAL PRINCIPLES FOR THE HARMONIZATION OF THE SYSTEM OF TAXATION OF TOBACCO WHICH , BY REASON OF ITS SPECIAL CHARACTERISTICS , HAS THE EFFECT OF IMPEDING THE FREE MOVEMENT OF TOBACCO AND THE ESTABLISHMENT OF NORMAL COMPETITIVE CONDITIONS ON THAT SPECIAL MARKET , AS IS RECOGNIZED BY THE SECOND RECITAL IN THE PREAMBLE . ACCORDING TO THAT RECITAL , TAXES ON THE CONSUMPTION OF MANUFACTURED TOBACCO ' ' ARE NOT NEUTRAL FROM THE POINT OF VIEW OF COMPETITION AND OFTEN CONSTITUTE SERIOUS OBSTACLES TO THE INTERPENETRATION OF MARKETS ' ' . IT IS THEREFORE WITH A VIEW TO ESTABLISHING ' ' HEALTHY COMPETITION ' ' WITHIN THE COMMON MARKET ( FIRST RECITAL ), TO ELIMINATING ' ' FROM THE PRESENT SYSTEMS THOSE FACTORS WHICH ARE LIKELY TO HINDER FREE MOVEMENT AND DISTORT THE CONDITIONS OF COMPETITION , WHETHER AT NATIONAL LEVEL OR AT COMMUNITY LEVEL ' ' ( THIRD RECITAL ), AND TO EFFECTING THE ' ' OPENING OF THE NATIONAL MARKETS OF THE MEMBER STATES ' ' ( FIFTH RECITAL ) THAT THE DIRECTIVE STATES , AS THE FOUNDATION AND BASIS OF THE SYSTEM , ' ' A SYSTEM OF FREELY FORMED PRICES FOR ALL GROUPS OF MANUFACTURED TOBACCO ' ' ( EIGHTH RECITAL ).
18 IT IS TO THAT END THAT ARTICLE 5 ( 1 ) PROVIDES AS FOLLOWS : ' ' MANUFACTURERS AND IMPORTERS SHALL BE FREE TO DETERMINE THE MAXIMUM RETAIL SELLING PRICE FOR EACH OF THEIR PRODUCTS . THIS PROVISION MAY NOT , HOWEVER , HINDER IMPLEMENTATION OF THE NATIONAL SYSTEMS OF LEGISLATION REGARDING THE CONTROL OF PRICE LEVELS OR THE OBSERVANCE OF IMPOSED PRICES . ' '
19 THE COMPATIBILITY WITH THAT PROVISION OF THE FRENCH LEGISLATION ON THE ORGANIZATION OF THE MONOPOLY THEREFORE DEPENDS ON THE MEANING WHICH IS TO BE ATTRIBUTED TO THE DOUBLE RESERVATION SET OUT IN THE SECOND SENTENCE OF ARTICLE 5 ( 1 ) RELATING TO THE APPLICATION OF NATIONAL LEGISLATION ON THE CONTROL OF PRICE LEVELS OR THE OBSERVANCE OF IMPOSED PRICES .
20 THOSE RESERVATIONS MUST BE INTERPRETED IN SUCH A WAY AS TO RECONCILE THEIR CONTENT WITH THE RULE OF THE FREE DETERMINATION OF SELLING PRICES BY THE MANUFACTURER OR IMPORTER INASMUCH AS THAT RULE CONSTITUTES , IN THE AREA TO WHICH THE DIRECTIVE RELATES , THE EXPRESSION OF THE PRINCIPLE OF THE FREE MOVEMENT OF GOODS UNDER NORMAL CONDITIONS OF COMPETITION REFERRED TO IN THE PREAMBLE TO THE DIRECTIVE .
21 FROM THAT POINT OF VIEW , THE EXPRESSION ' ' CONTROL OF PRICE LEVELS ' ' CANNOT BE INTERPRETED AS RESERVING TO THE MEMBER STATES A DISCRETION TO FIX THE PRICE OF TOBACCO , AS THE EXERCISE OF SUCH EXTENSIVE POWER WOULD CONSTITUTE THE VIRTUAL DENIAL OF ANY EFFECTIVENESS TO THE PRINCIPLE OF THE FREE DETERMINATION OF PRICE SET OUT IN THE FIRST SENTENCE OF ARTICLE 5 ( 1 ).
22 IT FOLLOWS FROM THE USUAL MEANING OF THE EXPRESSION ' ' CONTROL ' ' , AS WELL AS FROM A COMPARISON OF THE DIFFERENT VERSIONS OF THE DIRECTIVE IN THE VARIOUS LANGUAGES AND OF THE REFERENCE , IN MANY OF THOSE VERSIONS , TO THE ' ' LEVEL ' ' OF PRICES , THAT THE EXPRESSION ' ' CONTROL OF THE PRICE LEVELS ' ' CAN REFER ONLY TO NATIONAL LEGISLATION OF A GENERAL NATURE INTENDED TO CHECK THE INCREASE IN PRICES .
23 AS TO THE EXPRESSION ' ' OBSERVANCE OF IMPOSED PRICES ' ' , THE COURT HAS ALREADY HAD OCCASION , IN ITS JUDGMENT OF 16 NOVEMBER 1977 ( CASE 13/77 , GB-INNO-BM V VERENIGING VAN DE KLEINHANDELAARS IN TABAK , ( 1977 ) ECR 2115 ) TO EXPLAIN THAT , WITHIN THE CONTEXT OF THE SYSTEM FOR TAXATION OF TOBACCO , THAT EXPRESSION MUST BE UNDERSTOOD AS REFERRING TO A PRICE WHICH , ONCE DETERMINED BY THE MANUFACTURER OR IMPORTER AND APPROVED BY THE PUBLIC AUTHORITY , IS COMPULSORY AS A MAXIMUM PRICE AND MUST BE OBSERVED AS SUCH AT ALL STAGES OF THE DISTRIBUTION NETWORK , UP TO THE SALE TO THE CONSUMER . THE EFFECT OF THAT MECHANISM APPEARS WITH PARTICULAR CLARITY IN THE APPLICATION OF TAX LABELS BEARING THE SELLING PRICE , AS IS THE PRACTICE IN SEVERAL MEMBER STATES .
24 THE PURPOSE OF THAT MECHANISM FOR THE FIXING OF PRICES IS TO PREVENT ANY DETRIMENTAL EFFECT UPON THE INTEGRITY OF FISCAL RECEIPTS BY THE CHARGING OF A PRICE IN EXCESS OF THE IMPOSED PRICE AND IT IS IN THE LIGHT OF THAT PURPOSE THAT THE MEANING OF THE EXPRESSION USED IN THE DIRECTIVE MUST BE INTERPRETED .
25 IT THUS APPEAR THAT , IN THE SYSTEM PROVIDED FOR BY THE DIRECTIVE , THERE IS NO CONTRADICTION BETWEEN THE RULE OF THE FREE DETERMINATION OF PRICES BY THE MANUFACTURER OR IMPORTER AND THE POWER RESERVED TO MEMBER STATES TO ENSURE THE OBSERVANCE OF IMPOSED PRICES , THE SECOND PRICE BEING NOTHING OTHER THAN THE IMPORT PRICE DETERMINED BY THE MANUFACTURER OR IMPORTER INVESTED WITH THE APPROVAL OF THE STATE AND AS SUCH COMPULSORY FOR ALL TRADERS .
26 THOSE CONSIDERATIONS REGARDING THE SYSTEM AND THE OBJECTIVE OF THE DIRECTIVE AND THE INTERPRETATION , IN THAT CONTEXT , OF ARTICLE 5 ( 1 ) REVEAL THAT THE POWER RESERVED TO THE GOVERNMENT BY THE FRENCH LEGISLATION ON THE FIXING OF PRICES FOR MANUFACTURED TOBACCO IS INCOMPATIBLE WITH COMMUNITY LAW TO THE EXTENT TO WHICH THAT POWER , BY ALTERING THE SELLING PRICE DETERMINED BY THE MANUFACTURER OR IMPORTER , ALLOWS THE COMPETITIVE RELATIONSHIP BETWEEN IMPORTED TOBACCO AND TOBACCO DISTRIBUTED BY THE NATIONAL MONOPOLY TO BE ADVERSELY AFFECTED .
27 THE EXERCISE OF THAT POWER IS ALSO CONTRARY TO ARTICLE 30 OF THE TREATY , INASMUCH AS IT ALLOWS THE PUBLIC AUTHORITY , BY A SELECTIVE INTERVENTION AS REGARDS TOBACCO PRICES , TO RESTRICT THE FREEDOM OF IMPORTATION OF TOBACCO ORIGINATING IN OTHER MEMBER STATES . IT IS FURTHERMORE CONTRARY TO ARTICLE 37 INASMUCH AS THE FIXING OF A PRICE OTHER THAN THAT DETERMINED BY THE MANUFACTURER OR IMPORTER CONSTITUTES AN EXTENSION TO IMPORTED TOBACCO OF A PREROGATIVE TYPICAL OF THE NATIONAL MONOPOLY , OF SUCH A NATURE AS ADVERSELY TO AFFECT THE MARKETING OF IMPORTED TOBACCO UNDER NORMAL CONDITIONS OF COMPETITION .
28 IT THUS APPEARS THAT , ALTHOUGH IT REMAINS LAWFUL FOR THE FRENCH REPUBLIC TO LIMIT THE EFFECT OF THE PRINCIPLE OF THE FREE DETERMINATION OF SELLING PRICES BY THE MANUFACTURER OR IMPORTER , BY THE APPLICATION OF ANY MEASURES OF A GENERAL NATURE INTENDED TO ENSURE CONTROL OF THE INCREASE OF PRICES , IT IS CONTRARY BOTH TO DIRECTIVE NO 72/464 AND TO ARTICLES 30 AND 37 OF THE TREATY TO EXTEND TO IMPORTED MANUFACTURED TOBACCO THE APPLICATION OF PROVISIONS RELATING TO THE FIXING BY COMPULSORY POWERS OF THE PRICE OF MANUFACTURED TOBACCO WHICH THE FRENCH STATE HAS RESERVED TO ITSELF WITHIN THE SCOPE OF THE PROVISIONS ORGANIZING THE PUBLIC TOBACCO MONOPOLY .
29 THE ARGUMENTS PUT FORWARD BY THE FRENCH GOVERNMENT RELATING TO THE DEFENCE OF ITS FISCAL INTERESTS AND TO THE NEED FOR MEASURES AGAINST TOBACCO ABUSE CANNOT PREVAIL AGAINST THAT CONCLUSION . THE MEMBER STATES RETAIN THE FREEDOM TO DETERMINE , IN CONFORMITY WITH THE PROVISIONS OF THE DIRECTIVE , THE LEVEL OF TAXATION AFFECTING ALL TOBACCO . THE INTEGRITY OF THE FISCAL RECEIPTS RESULTING THEREFROM IS GUARANTEED UNDER THE SCHEME OF THE DIRECTIVE BY THE MECHANISM OF THE ' ' IMPOSED PRICE ' ' UNDERSTOOD AS A MAXIMUM PRICE , WHOSE FUNCTION CONSISTS PRECISELY OF AVOIDING AN UNDERESTIMATE OF THE SELLING PRICE AT THE TIME OF THE PAYMENT OF THE DUTY . AS TO OBTAINING THE BEST RETURN FOR THE REVENUE , THE LEVEL OF THE LATTER IS IN ESSENCE A FUNCTION OF THE RATE OF THE TAX ; THAT OBJECTIVE CANNOT BE PURSUED BY MEANS OF AN INCREASE IN PRICE IMPOSED ON IMPORTED TOBACCO . THE SAME OBSERVATION APPLIES TO THE ADOPTION OF MEASURES AGAINST TOBACCO ABUSE ; IN SO FAR AS THE INCREASE OF TOBACCO PRICES MAY BE A MEANS SUITABLE FOR THAT PURPOSE , THAT CAMPAIGN MAY NOT , IN ANY EVENT , BE PURSUED BY MEANS OF AN INCREASE IN PRICE BORNE SOLELY BY IMPORTED TOBACCO .
30 IT MUST THEREFORE BE CONCLUDED THAT THE FRENCH REPUBLIC , BY FIXING THE RETAIL SELLING PRICES OF MANUFACTURED TOBACCO AT A DIFFERENT LEVEL FROM THAT DETERMINED BY THE MANUFACTURERS OR IMPORTERS , HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE EEC TREATY .
COSTS
31 UNDER ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE , THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS . AS THE DEFENDANT HAS FAILED IN ITS SUBMISSIONS , IT MUST BE ORDERED TO PAY THE COSTS .
ON THOSE GROUNDS ,
THE COURT
HEREBY :
1 . DECLARES THAT THE FRENCH REPUBLIC , BY FIXING THE RETAIL SELLING PRICES OF MANUFACTURED TOBACCO AT A DIFFERENT LEVEL FROM THAT DETERMINED BY THE MANUFACTURERS OR IMPORTERS HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE EEC TREATY ;
2 . ORDERS THE FRENCH REPUBLIC TO PAY THE COSTS .
