CJEC, January 10, 1985, No 229-83

THE COURT,

1. By a judgment of 28 September 1983, which was received at the court on 10 October 1983, the Cour d'appel (court of appeal), Poitiers, referred a question to the court under article 177 of the EEC treaty for a preliminary ruling on the interpretation of various rules of community law, in particular the provisions relating to free competition in the Common Market and articles 3 (f) and 5 of the EEC treaty, so as to enable it to assess the compatibility with community law of national legislation requiring all retailers to abide by the selling prices for books fixed by the publisher or importer.

2. The question was raised in proceedings between association des centres Distributeurs Edouard Leclerc (hereinafter referred to as 'Leclerc') and Thouars Distribution, part of the Leclerc Group, on the one hand, and various booksellers in Thouars and Union syndicale des libraires de France (French booksellers'association), on the other. The dispute concerns the need to comply with the retail prices for books fixed under law no 81-766 of 10 August 1981 on book prices (Journal officiel de la République francaise of 11 August 1981).

3. Leclerc has retail outlets throughout France which initially sold groceries but have extended their business to cover other products including books. The outlets have the reputation of charging low prices. It appears that Thouars Distribution, like other distributors in the Leclerc Group, has sold books at prices undercutting the prices fixed under the aforementioned legislation.

4. Under the law of 10 August 1981 all publishers or importers of books are required to fix retail prices for the books which they publish or import. Retailers must charge an effective price for sales to the public of between 95 % and 100 % of that price. The law exempts certain private and public entities, such as libraries and educational establishments, from having to pay that price and it authorizes clearance sales, subject to certain conditions. If the provisions of the law are contravened competitors and various types of association may seek an injunction or claim damages ; criminal proceedings may also be brought.

5. As far as imported books are concerned, the last paragraph of article 1 of the law provides that 'where imported books were published in France the retail price fixed by the importer shall be no less than that fixed by the publisher '. Decree no 81-1068 of 3 December 1981 (Journal officiel de la République francaise of 4 December 1981), issued pursuant to the law of 10 August 1981, further provides that the principal distributor of imported books who must comply with the requirement laid down in article 8 of the law of 21 June 1943 - namely the requirement that a complete copy must be deposited with the ministry of the interior - is deemed to be the importer.

6. In proceedings commenced by several booksellers, the president of the Tribunal de grande instance (regional court), Bressuire, ordered Thouars Distribution to make its retail prices for books comply with the law of 10 August 1981 or incur penalty payments and declared this order also to apply to Leclerc, against which a third-party notice had been issued.

7. On appeal, the Cour d'appel, Poitiers, took the view that in order to resolve the dispute it was necessary to ascertain whether the law of 10 August 1981 was such as to infringe the community rules on free competition in the Common Market since it considerably restricted competition as regards both books published in France and imported books, and since booksellers in other member states were not subject to such restrictions. Accordingly, the cour d'appel referred the following question to the court of justice for a preliminary ruling :

' Must articles 3 (f) and 5 of the EEC treaty be interpreted as prohibiting the setting-up in a member state, by law or by regulation, in respect of books published in that member state and books imported into that state, in particular from other member states, of a system which compels retailers to sell the books at the price fixed by the publisher or the importer without being able to reduce that price by more than 5 %?

'

8. Article 3 (f) of the EEC treaty sets out one of the general principles of the Common Market, which are applied in conjunction with the relevant chapters of the treaty devoted to their implementation. It envisages 'the institution of a system ensuring that competition in the Common Market is not distorted ', a general objective which is enlarged on by, inter alia, the rules on competition set forth in chapter 1 of title i of part three of the treaty. The second paragraph of article 5 of the treaty requires member states to 'abstain from any measure which could jeopardize the attainment of the objectives' of the treaty. Thus the question referred by the national court, concerning the compatibility of legislation of the type described above with articles 3 (f) and 5, seeks to establish whether that legislation accords with the principles and objectives of the treaty and with those provisions of the treaty concerned with their detailed implementation.

9. Articles 2 and 3 of the treaty set out to establish a market characterized by the free movement of goods where the terms of competition are not distorted. That objective is secured inter alia by article 30 et seq. Prohibiting restrictions on intra-community trade, to which reference was made during the proceedings before the court, and by article 85 et seq. On the rules on competition, which it is appropriate to consider first.

The application of articles 3 (f), 5 and 85 of the EEC treaty

10. Leclerc maintains that the French law on book prices does not introduce state price controls but rules restricting price competition, since the prices are freely fixed by publishers and importers. Hence the law should be considered first from the point of view of the rules on competition laid down in the treaty. In that regard, Leclerc submits that the law establishes a collective system of price maintenance which undertakings are precluded from establishing by article 85 (1) of the treaty and which is contrary to the system of undistorted competition in the Common Market which article 3 (f) designates as one of the aims of the community. The second paragraph of article 5 of the treaty therefore imposes on member states an obligation to refrain from adopting such measures, since they are likely to render article 85 ineffective by enabling private undertakings to circumvent the constraints embodied therein and are thus likely to jeopardize the attainment of one of the aims of the treaty.

11. The French government considers that articles 3 (f) and 5 of the treaty merely lay down general principles and do not in themselves give rise to obligations. Article 85, on the other hand, applies, in its view, only to certain practices on the part of undertakings and cannot be construed, even in conjunction with articles 3 (f) and 5, as prohibiting member states from adopting measures which might have an effect on free competition. The limitation of price competition at retailer level - price competition at publisher level being moreover free - should be examined in the light of article 30 et seq., the only potentially relevant treaty provisions in this case.

12. The Commission considers that articles 3 (f) and 5 cannot be interpreted in such a manner as to deprive member states of all power in the economic sphere by prohibiting them from interfering with free competition. Since article 85 concerns only practices on the part of undertakings and not state measures, it would only be the exceptional case - where a member state required or facilitated the conclusion of prohibited agreements, heightened their impact by extending them to third parties or pursued the specific aim of enabling undertakings to circumvent the community competition rules - that the adoption of such state measures could constitute a failure to fulfil the obligations arising under the second paragraph of article 5 of the treaty. The Commission therefore considers that the compatibility with the treaty of legislation of the type in question is to be considered solely in the light of article 30 et seq.

13. In accordance with the aim laid down in article 3 (f) of the treaty, the following are incompatible with the Common Market and prohibited by virtue of article 85 (1) of the treaty : all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the Common Market, and in particular those which directly or indirectly fix purchase or selling prices or any other trading conditions. Thus, article 85 (1) covers agreements, decisions and concerted practices in restraint of competition between undertakings, subject to exemptions granted by the Commission under article 85 (3) of the treaty.

14. Whilst it is true that the rules on competition are concerned with the conduct of undertakings and not with national legislation, member states are none the less obliged under the second paragraph of article 5 of the treaty not to detract, by means of national legislation, from the full and uniform application of community law or from the effectiveness of its implementing measures ; nor may they introduce or maintain in force measures, even of a legislative nature, which may render ineffective the competition rules applicable to undertakings (cf. Judgment of 13 February 1969 in case 14-68, Wilhelm v Bundeskartellamt, (1969) ECR 1, and judgment of 16 November 1977 in case 13-77, Inno v Atab, (1977) ECR 2115).

15. However, legislation of the type at issue does not require agreements to be concluded between publishers and retailers or other behaviour of the sort contemplated by article 85 (1) of the treaty; it imposes on publishers and importers a statutory obligation to fix retail prices unilaterally. Accordingly, the question arises as to whether national legislation which renders corporate behaviour of the type prohibited by article 85 (1) superfluous, by making the book publisher or importer responsible for freely fixing binding retail prices, detracts from the effectiveness of article 85 and is therefore contrary to the second paragraph of article 5 of the treaty.

16. The French government, while maintaining that article 85 of the treaty is not applicable to legislative measures, seeks to justify the legislation at issue on the ground that its aim is to protect books as cultural media from the adverse impact that untrammelled competition in retail prices would have on the diversity and cultural level of publishing. The French government further maintains that such legislation is necessary both in order to conserve specialist booksellers in the face of competition from other distribution channels which rely on a policy of reduced margins and a limited range of titles and in order to prevent a small number of large distributors from being able to impose their will on publishers to the detriment of poetic, scientific and creative works. It is therefore indispensable in order to preserve books as an instrument of culture and has counterparts in most of the member states.

17. The Commission, which also considers that article 85, even in conjunction with article 5, does not apply to a case such as this, does not share the French government's assessment of the state of competition in the book trade. It contests the utility and desirability of special national rules for the book trade. Nevertheless, it recognizes that publishers and booksellers have retail price maintenance agreements or practices in most member states, even though the various national systems exhibit considerable differences, from one member state to another, as regards their application and detailed rules.

18. It may be observed that the Commission, which has publicly stated its intention to investigate all those systems and practices, has not yet succeeded in bringing that investigation to a conclusion or in determining what approach to adopt with regard to the exercise in this sphere of the powers conferred on it by the treaty and by regulation no 17 of 30 October 1962. Moreover, it has so far failed to submit any proposal for action to the council. Nor has it initiated any proceedings under article 85 of the treaty with a view to prohibiting national systems and practices for fixing book prices.

19. The only Commission decision relating to the fixing of book prices concerned a transnational agreement between trade associations in two member states which the court held to be incompatible with article 85 (1) of the treaty in its judgment of 17 January 1984 in joined cases 43 and 63-82 (VBVB and VBBB v Commission, (1984) ECR 19). In that judgment the court observed that national legislative or judicial practices, even on the supposition that they are common to all the member states, cannot prevail in the application of the competition rules set out in the treaty. However, neither the Commission's decision nor the court's judgment took a stand on the compatibility with article 85 of the treaty of purely national price-fixing agreements.

20. It is thus apparent that the purely national systems and practices in the book trade have not yet been made subject to a community competition policy with which the member states would be required to comply by virtue of their duty to abstain from any measure which might jeopardize the attainment of the objectives of the treaty. It follows that, as community law stands, member states 'obligations under article 5 of the EEC treaty, in conjunction with articles 3 (f) and 85, are not specific enough to preclude them from enacting legislation of the type at issue on competition in the retail prices of books, provided that such legislation is consonant with the other specific treaty provisions, in particular those concerning the free movement of goods. It is therefore necessary to consider those provisions.

The application of articles 30 and 36 of the EEC treaty

21. The Commission considers that the legislation in question constitutes a measure equivalent in effect to a quantitative restriction on imports, contrary to article 30 of the treaty. It observes that two provisions of the law of 10 August 1981 are peculiar to imported books, namely: first, the price of imported books is to be fixed by the importer, the principal distributor being deemed for this purpose to be the importer; and, secondly, where books published in France are imported, the retail price is to be no lower than that fixed by the publisher. In the Commission's view, those two provisions impede imports by making it impossible for importers to charge lower prices and preventing them from penetrating the French market by means of price competition. Leclerc expresses substantially the same view.

22. The French government argues that legislation of the type at issue is not contrary to article 30. In its contention, each member state remains free to regulate its domestic trade. The restriction on retail price competition does not in any way restrict imports. Imported and domestic books are treated identically in that respect. The principal distributor is responsible for fixing the price of foreign books because he performs an equivalent commercial role in the domestic market to that performed by the publisher in distributing French books. The French government contends that the provision relating to books published in France and re-imported is vital in order to make the legislation as a whole coherent and to prevent the re-importation of books from being used as a device for circumventing the law.

23. Article 30 of the EEC treaty prohibits quantitative restrictions on imports and all measures having equivalent effect in trade between member states. The court has consistently held that under that article any national measure which is capable of hindering intra-community trade, directly or indirectly, actually or potentially, is to be considered a measure having an effect equivalent to a quantitative restriction. That would be the case, for instance, where national legislation treated domestic products differently from imported products or disadvantaged, in any manner whatsoever, the marketing of imported products vis-à-vis domestic products.

24. In that regard two different situations to which the national legislation in question applies must be considered: first, that of books published in another member state and imported into the member state concerned, and, secondly, that of books published in the member state concerned and re-imported, following exportation to another member state.

25. As regards books published in another member state and imported into the member state concerned, a provision whereby the retail price is to be fixed by the importer responsible for complying with the statutory requirement to deposit one copy of each imported book with the authorities, that is to say the principal distributor, transfers the responsibility for fixing the retail price to a trader at a different stage in the commercial process than the publisher and makes it impossible for any other importer of the same book to charge the retail price in the importing state that he considers adequate in the light of the cost price in the state in which it was published. Contrary to the French government's contention, such a provision does not merely assimilate the rules applying to imported books to those applying to domestic books but creates separate rules for imported books which are liable to impede trade between member states. Such a provision must therefore be viewed as a measure equivalent in effect to a quantitative restriction on imports, contrary to article 30 of the EEC treaty.

26. On the other hand, in so far as the legislation applies to books published in the member state concerned and re-imported following exportation to another member state, a provision requiring such books to be sold at the retail price fixed by the publisher does not make a distinction between domestic and imported books. Nevertheless, such a provision discourages the marketing of re-imported books by preventing the importer from passing on in the retail price an advantage resulting from a lower price obtained in the exporting member state. Accordingly, it constitutes a measure equivalent in effect to a quantitative restriction on imports, contrary to article 30.

27. However, the above finding is not applicable where it is established that the books in question were exported for the sole purpose of re-importation in order to circumvent legislation of the type at issue.

28. The French government again invokes, as justification for the two provisions at issue, the imperative requirements of consumer protection, referring to its view, which is mentioned above, that books as cultural media need to be protected.

29. As far as that point is concerned, it must be noted that national legislation which requires traders to abide by specific retail prices and discourages the marketing of imported products can be justified solely on the grounds set out in article 36 of the treaty.

30. Since it derogates from a fundamental rule of the treaty, article 36 must be interpreted strictly and cannot be extended to cover objectives not expressly enumerated therein. Neither the safeguarding of consumers 'interests nor the protection of creativity and cultural diversity in the realm of publishing is mentioned in article 36. It follows that the justification put forward by the French government cannot be accepted.

31. The question referred by the Cour d'appel, Poitiers, must therefore be answered as follows :

1. As community law stands, the second paragraph of article 5 of the EEC treaty, in conjunction with articles 3 (f) and 85, does not prohibit member states from enacting legislation whereby the retail price of books must be fixed by the publisher or by the importer and is binding on all retailers, provided that such legislation is consonant with the other specific provisions of the treaty, in particular those relating to the free movement of goods.

2. In the context of such national legislation, the following constitute measures equivalent in effect to quantitative restrictions on imports, contrary to article 30 of the EEC treaty:

(a) provisions whereby the importer responsible for complying with the statutory requirement to deposit one copy of each imported book with the authorities, that is to say the principal distributor, is responsible for fixing the retail price ;

(b) provisions requiring the retail price fixed by the publisher to be applied to books published in the member state concerned and re-imported following exportation to another member state, unless it is established that those books were exported for the sole purpose of re-importation in order to circumvent the legislation in question.

Costs

32. The costs incurred by the French government and the Commission of the European communities, which have submitted observations to the court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

The court

In answer to the question referred to it by the Cour d'appel, Poitiers, by judgment of 28 September 1983, hereby rules :

1. As community law stands, the second paragraph of article 5 of the EEC treaty, in conjunction with articles 3 (f) and 85, does not prohibit member states from enacting legislation whereby the retail price of books must be fixed by the publisher or by the importer and is binding on all retailers, provided that such legislation is consonant with the other specific provisions of the treaty, in particular those relating to the free movement of goods ;

2. In the context of such national legislation, the following constitute measures equivalent in effect to quantitative restrictions on imports, contrary to article 30 of the EEC treaty :

(a) provisions whereby the importer responsible for complying with the statutory requirement to deposit one copy of each imported book with the authorities, that is to say the principal distributor, is responsible for fixing the retail price ;

(b) provisions requiring the retail price fixed by the publisher to be applied to books published in the member state concerned and re-imported following exportation to another member state, unless it is established that those books were exported for the sole purpose of re-importation in order to circumvent the legislation in question.