CJEC, November 29, 1983, No 181-82

The court

1 By judgment of 14 july 1982, which was received at the court on 20 july 1982, the president of the arrondissementsrechtbank (district court), the hague, referred to the court for a preliminary ruling under article 177 of the eec treaty several questions concerning the interpretation of articles 3 (f), 5, 7, 30, 85 and 86 of the eec treaty and of certain principles of community law in order to enable him to determine the compatibility with community law of national legislation on prices for imported medicines.

2 Those questions were raised in interlocutory proceedings instituted against the netherlands by 10 pharmaceutical undertakings and by the nederlandse associatie van de farmaceutische industrie (' ' nefarma ' ') (netherlands pharmaceutical industry association) for an order rendering inoperative the prijzenbeschikking registergeneesmiddelen 1982 (prices of registered medicines decree 1982, hereinafter referred to as ' ' the prices of registered medicines decree ' ') of 8 june 1982 (staatscourant no 107 of 9 june 1982, p. 7) adopted on the basis of the prijzenwet (prices law) which authorizes the competent ministers to fix maximum prices if they consider that the public interest, both social and economic, so requires.

3 Before june 1982, the prices of medicines, whether produced in the netherlands or imported, were regulated without distinction by the prijzenbeschikking goederen en diensten 1982 (prices of goods and services decree 1982) (staatscourant no 250 of 29 december 1981, p. 6) which continues to apply to domestically-produced medicines. That decree prohibits producers from selling any goods on the domestic market at a price exceeding 100.9% of the reference price charged before 28 november 1981, plus or minus an amount corresponding to the fluctuations in the purchase price of the raw materials and subsidiary materials and in transport costs as well as in excise duties and turnover tax. Traders are required not to exceed the purchase price of the goods, increased by 105% of their profit margin before the reference date of 28 november 1981 and by turnover tax.

4 The prices of registered medicine decree introduced specific rules for imported medicines. It is clear from the explanatory memorandum to that decree, which is set out in the judgment making the reference, that the competent ministers took the view that the legislation formerly applicable provided only limited possibilities of controlling prices of imported medicines since the import prices of those products were often higher than the prices charged in certain countries of origin in which the level of medicine prices was lower and those high import prices might be passed on under the prijzenbeschikking goederen en diensten. The prices of registered medicines decree therefore prohibited the sale of an imported medicine at a price higher than the manufacturer ' s basic price last applicable in the country of origin before 15 may 1982 in a similar case for an identical medicine in the same package size, plus or minus the amount by which the manufacturer ' s basic price has risen or fallen since that date, further increased by the direct costs and by the profit margin applied before the reference date of 15 may 1982 or by the maximum profit margin allowed under the prijzenbeschikking goederen en diensten, and including turnover tax.

5 In the main proceedings, the plaintiffs claimed, in particular, that the legislation in question is contrary to articles 30, 7, 3 (f), 85 and 86 of the eec treaty and to the general principles of community law in regard to equality, proportionality, legal certainty and proper and exact preparation of legislation. In its defence of the contested prices of registered medicines decree, the netherlands contended, in particular, that intra-community trade was not affected where the national authorities adopted measures against an artificial division of the common market by a dual pricing system, as operated by certain pharmaceutical undertakings.

6 Taking the view that the decision in the case depended on the interpretation of various rules of community law, the president of the arrondissementsrechtbank referred to the court the following questions for a preliminary ruling:

' ' 1. In the light of the argument put forward by the netherlands, a member state of the community, is the prices of registered medicines decree 1982 to be regarded as:

A measure having an effect equivalent to a quantitative restriction on imports, prohibited by article 30 of the eec treaty?

A form of discrimination prohibited by article 7 of the eec treaty?

2. Do articles 3 (f) and 5, in conjunction with articles 85 and 86 of the eec treaty, have direct effect?

3. If question 2 is answered in the affirmative, has the netherlands by adopting the prices of registered medicines decree 1982 infringed those articles?

4. Do the principles of equality, proportionality, legal certainty and proper and exact preparation have direct effect in a case such as this?

5. If question 4 is answered in the affirmative, has the netherlands by adopting the prices of registered medicines decree 1982 contravened one or more of those principles?

' '

The netherlands market in medicines

7 Before those questions are answered, it is appropriate to consider, in connection with the main proceedings, certain characteristics of the netherlands market in medicines to which the national legislation at issue refers.

8 It is common ground that the prices of medicines differ appreciably between one member state and another. Whilst in certain member states, including belgium, france and italy, the level of prices is low, the netherlands is one of those member states in which the level of prices of both domestic and imported medicines is high. Those differences in prices are attributable, in particular, to legislation which allows certain member states to intervene, either directly or by the adoption of measures in the field of social security, in the formation of prices.

9 The market in medicines is characterized by the presence of very large undertakings which operate in several states, or even on a world scale, and which are able to adjust their pricing policy to the conditions prevailing on a given national market. The ultimate consumer of a medicine generally exerts only a very limited influence on the choice of a medicine, which he most frequently uses after it has been prescribed by a doctor, and he normally has only a limited financial interest in using inexpensive medicines since his costs are covered by social security. In those circumstances, competition between pharmaceutical undertakings is scarcely concerned with the prices of medicines, and the differences in the prises charged by producers according to the country of destination of the medicines can, in principle, easily be passed on to the consumer.

10 On the netherlands market, approximately 80% of the medicines used are imported from other member states. On the other hand, approximately 80% of the medicines produced in the netherlands are intended for export.

11 The contested provisions of the prices of registered medicines decree seek to reduce the high prices charged on the netherlands market for imported medicines by depriving producers in member states in which prices of medicines are low of the possibility of varying their prices from one member state to another according to the destination of the medicines, in this case the netherlands market. Foreign producers are placed in a situation in which they are compelled either to accept a reduction in their prices corresponding to the level prevailing in the country of origin or to forego the opportunity of selling their products on the netherlands market.

Application of article 30

12 The first part of the first question submitted by the president of the arrondissementsrechtbank seeks in substance to ascertain whether article 30 of the eec treaty must be interpreted as precluding the adoption of national legislation on the price of imported goods of the kind described above.

13 According to the plaintiffs in the main proceedings, article 30 must be interpreted as meaning that legislation such as that contested in the present case constitutes a measure having an effect equivalent to a quantitative restriction because it restricts trade by preventing a supplier of medicines from selling his products at profitable prices, since the artificial intervention of certain member states aimed at restricting the price of medicines makes it impossible in those member states to charge prices which cover the real costs.

14 The netherlands government observes that in the absence of community legislation in this area, the member states may adopt rules regulating the prices of goods. The contested prices of registered medicines decree forms part of a general system concerning the prices of medicines. It does not treat imported medicines less favourably since importers can pass on the manufacturer ' s basic prices charged in respect of products intended for consumption within the territory of the member state of manufacture and they can obtain the same trading margins. A member state is entitled to combat differences in prices from one member state to another resulting from the defective functioning of the common market and from the operation by certain manufacturers of a dual pricing system.

15 The commission considers that national measures regulating the prices of imported products on the basis of the manufacturer ' s basic prices charged in respect of products intended for consumption within the territory of the member state of manufacture do not constitute in themselves measures having an effect equivalent to quantitative restrictions. However, it would be otherwise if the sale of imported products were rendered impossible or appreciably more difficult than that of domestic products as a result of the price fixed in the member state of manufacture being too low to cover the actual cost price. According to the commission, it is for the national court to consider whether that is so in the present case, regard being had to the characteristics of the community market in pharmaceutical products.

16 Article 30 of the eec treaty prohibits, in trade between member states, all measures having an effect equivalent to a quantitative restriction. According to the well-established case-law of the court, any measures which are capable of hindering, directly or indirectly, actually or potentially, trade between member states are to be regarded as measures having such effect.

17 The court has frequently had occasion to apply those principles to price control systems applicable to domestic products and imported products alike (see judgments of 26 february 1976 in case 62-75 tasca (1976) ecr 291 and in joined cases 88 to 90-75 sadam (1976) ecr 323; judgment of 24 january 1978 in case 82-77 van tiggele (1978) ecr 25; judgment of 6 november 1979 in joined cases 16-20-79 danis (1979) ecr 3277). The court has held that although such systems do not in themselves constitute measures having an effect equivalent to a quantitative restriction, they may have such an effect when the prices are fixed at a level such that the sale of imported products becomes either impossible or more difficult than that of domestic products.

18 In circumstances such as those referred to in the question raised in the present case, the legislation in question does not apply to domestic products and imported products alike but consists of different sets of rules for the two groups of products, laid down by different decrees and different also as regards their substantive content. Whilst the legislation concerning domestic products freezes prices at a certain date, subject to increases which are permitted on certain conditions, the legislation concerning imported products fixes prices at the level of the selling prices charged by producers in the country of manufacture.

19 Legislation of that kind, which differentiates between the two groups of products, must be regarded as a measure having an effect equivalent to a quantitative restriction where it is capable of making more difficult, in any manner whatever, the sale of imported products.

20 It is in the light of the conditions prevailing on the market of the member state of importation that it is necessary to assess the compatibility with the rules set out above of legislation such as that at issue in the present case.

21 It is true that legislation freezing prices at a certain date takes account, in substance, as regards domestic products, of the manufacturer ' s basic price for those products charged at that date to purchasers in the country of manufacture and that that price, in this case, is also the criterion for fixing the price of the imported products. However, the significance of the manufac turer ' s basic price as a criterion varies from one member state of manufacture to another as a result of the legal provisions and economic conditions which govern the formation of that price in those countries. Thus, legislation such as that at issue in this case has different effects, first of all for the producers of a member state which freezes prices at a level previously fixed by the producers themselves and, secondly, for the producers of a member state which itself unilaterally lays down imposed prices.

22 Whilst producers of domestic products and imported products were able, until the entry into force of such differentiating legislation, to profit from the benefits available under the conditions prevailing on the import market, only producers of domestic products may continue to do so after the entry into force of that legislation. However, producers of imported products are bound by the prices fixed in the member state in which the goods are produced.

23 A situation of that kind can have the effect of placing the sale of imported products at a disadvantage by rendering such sale more difficult, impossible or, in any event, less profitable than the sale of domestic products whenever the level of prices to which, as regards products from other member states, the legislation of the member state of importation refers, is lower than that applicable to products from that state. In those circumstances, therefore, it is capable of hindering trade between member states.

24 That finding leaves intact the possibility which the member states have of combating inflation and adopting measures intended to control increases in the price of medicines, whatever their origin, on condition that they do so by means of measures which do not place imported medicines at a disadvantage.

25 Accordingly, the answer to the first part of the first question should be that article 30 of the eec treaty precludes a member state from introducing specific legislation in respect of imported pharmaceutical products which refers to the manufacturer ' s basic prices usually charged for products intended for consumption within the territory of the member state in which they are produced, where the legislation applicable to domestic production is based solely on a freeze of the level of prices at a given reference date.

26 In view of the answer given to the first part of the first question, it is no longer necessary to answer the other questions submitted by the president of the arrondissementsrechtbank.

Costs

27 The costs incurred by the netherlands government and by 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 action 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 submitted to it by the president of the arrondissementsrechtbank, the hague, by judgment of 14 july 1982, hereby rules:

Article 30 of the eec treaty precludes a member state from introducing specific legislation in respect of imported pharmaceutical products which refers to the manufacturer ' s basic prices usually charged for products intended for consumption within the territory of the member state in which they are produced, where the legislation applicable to domestic production is based solely on a freeze of the level of prices at a given reference date.