Opinion of Advocate General Hogan delivered on 12 November 2020.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2020:924
• Date: 12 November 2020

Provisional text

OPINION OF ADVOCATE GENERAL

HOGAN

delivered on 12 November 2020 (1)

Case C‑400/19

European Commission

v

Hungary

(Failure of a Member State to fulfil obligations – Article 34 TFEU – Common organisation of the markets in agricultural products – Regulation (EU) No 1308/2013 – National law prohibiting unfair trading practices applied against suppliers in respect of agricultural and food products – Sale prices of agricultural and food products – Uniform retail profit margin to be applied to identical products)

I. Introduction

1. By its application, the European Commission requests the Court to declare that, by restricting the fixing of sale prices of agricultural and food products, having particular regard to Paragraph 3(2)(u) of the mezőgazdasági és élelmiszeripari termékek vonatkozásában a beszállítókkal szemben alkalmazott tisztességtelen forgalmazói magatartás tilalmáról szóló, 2009. évi XCV. törvény (Law XCV of 2009 prohibiting unfair trading practices applied against suppliers in respect of agricultural and food products) (2) (‘Law XCV of 2009’), Hungary has failed to fulfil its obligations under Article 34 TFEU and Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007. (3)

2. This application thus raises again the question of the extent to which and under what conditions Member States can utilise the provisions of their national unfair competition or consumer laws to limit pricing mechanisms in order to favour the party or parties which are generally considered to enjoy a less advantageous bargaining position in the food supply chain. These issues were already highlighted in the judgment of 13 November 2019, Lietuvos Respublikos Seimo narių grupė (C‑2/18, EU:C:2019:962) and, for the purposes of this Opinion, it will be necessary to examine the reasoning and conclusions of that decision in some detail.

3. Before doing so, however, it is first necessary to set out the relevant legislative and Treaty texts.

II. Legal framework

A. EU law

4. Article 34 TFEU provides:

‘Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.’

5. Article 83(5) of Regulation No 1308/2013 provides:

‘Member States may only adopt or maintain additional national provisions on products covered by a Union marketing standard if those provisions comply with Union law, in particular the principle of free movement of goods, and subject to Directive 98/34/EC of the European Parliament and of the Council [of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations (OJ 1998 L 204, p. 37)] …’

B. Hungarian law

6. In accordance with its Paragraph 1, Law XCV of 2009 concerns ‘agricultural products and foodstuffs’, which are defined in Paragraph 2(2) of that law, by reference to Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety. (4)

7. Pursuant to its Paragraph 2(1), Law XCV of 2009 relates to (a) undertakings producing, processing or selling without processing agricultural and food products; and (b) undertakings selling those products to final consumers. The latter category includes all retailers, irrespective of their size, and therefore applies to both hypermarkets and small shops selling agricultural and food products.

8. Paragraph 3(2) of Law XCV of 2009 provides:

‘The following shall be deemed to be an unfair commercial practice:

…

(u) any discriminatory fixing, on the basis of the country of origin of the products, of the price at which products identical in composition and organoleptic properties are sold to the final consumer.’

III. Forms of order sought

9. The Commission claims that the Court should:

– Declare that, by restricting the fixing of sale prices of agricultural and food products, having particular regard to Paragraph 3(2)(u) of Law XCV of 2009, Hungary has failed to fulfil its obligations under Article 34 TFEU and Regulation No 1308/2013; and

– Order Hungary to pay the costs.

10. Hungary claims that the Court should:

– Dismiss the Commission’s action as unfounded; and

– Order the Commission to pay the costs.

IV. The action

A. Arguments of the parties

11. By its application, the Commission advances two complaints. It alleges that by restricting the fixing of sale prices of agricultural and food products pursuant to, in particular, Paragraph 3(2)(u) of Law XCV of 2009, Hungary has failed to fulfil its obligations under first, Regulation No 1308/2013 and second, Article 34 TFEU.

12. As regards its action under Regulation No 1308/2013, the Commission claims that in accordance with Paragraph 3(2)(u) of Law XCV of 2009, the retail selling prices of agricultural and food products from a given country must include the same profit margin as that applied to identical products from elsewhere, irrespective of their country of origin. The provision therefore prohibits retailers from selling, for example, imported products at a price plus a 5% profit margin if, at the same time, they offer identical domestic products at a price plus a 10% margin. Paragraph 3(2)(u) of Law XCV of 2009 applies to all agricultural and food products and the concept of ‘identical products’ is defined by reference to the composition and organoleptic properties of the product.

13. According to the Commission, Paragraph 3(2)(u) of Law XCV of 2009, which in practice prohibits retailers from selling imported products at a different profit margin from that applied to domestic products, undermines the implementation of Regulation No 1308/2013 as it is incompatible with a basic principle of that regulation, namely, the free determination of the selling prices of agricultural products on the basis of fair competition. The Commission considers that the profit margin is an integral part of the fixing of the retail price.

14. The Commission refers to the judgments of 4 March 2010, Commission v France (C‑197/08, EU:C:2010:111) and Commission v Ireland (C‑221/08, EU:C:2010:113) which it considers are an example of the importance of protecting the freedom of economic operators in the field of fixing prices. That freedom makes it possible for new imported products to penetrate a given national market by means of attractive retail prices.

15. In respect of its action under Article 34 TFEU, the Commission submits that Paragraph 3(2)(u) of Law XCV of 2009 does not refer to the characteristics of agricultural and food products, but solely to their selling arrangements, and must therefore be regarded as a provision relating to sales arrangements within the meaning of the judgment of 24 November 1993, Keck and Mithouard (C‑267/91 and C‑268/91, EU:C:1993:905). The provision in question fails the second test laid down in that judgment as it grants a de facto advantage to identical national products. Thus, the Commission considers that Paragraph 3(2)(u) of Law XCV of 2009 constitutes a restriction affecting trade between Member States pursuant to Article 34 TFEU, given that it makes it more difficult to market certain goods imported from other Member States as compared with identical national products and thus discourages the retail distribution of such goods. The Commission notes that consumers are naturally more familiar with national products, which have been on the market for longer, and prefer them to newly arrived products. In addition, some consumers feel that they are supporting the national economy by buying local products, and in some Member States there are regular promotional campaigns to this effect, which take advantage of this sentiment. It is precisely for this reason, among many others, that commercial operators may resort to different commercial practices, one of the most appropriate of which is that of lowering the price of certain imported products so that consumers become more familiar with them more quickly.

16. The Commission considers that the interference in the free pricing policy in question is aimed at protecting certain national economic operators rather than defending the interests of consumers as claimed by Hungary. In order to defend the interests of consumers, it would be sufficient to prohibit sales below cost. In the present case, the State intervention goes beyond a ban on sales below cost and does not appear to bring any benefit to the consumer. According to the Commission, Paragraph 3(2)(u) of Law XCV of 2009 constitutes per se an arbitrary discrimination and a practice contrary to Article 34 TFEU such that different statistical data, which might tend to prove that the contested measure is not discriminatory, is irrelevant. The Commission also considers that the term ‘identical products’ gives rise to uncertainty and thus to a breach of Article 34 TFEU. In that regard, the Commission notes that certain retailers could, for example, indicate on the product the breed of cows that produced the UHT milk, as some already do for meat products. Due to the national rules in question, these products may not be sold at a higher price since, according to Hungary, the same profit margin should be applied to all UHT milk with a fat content of, for example, 2.8%. This could negatively influence the consumer and affect the free movement of goods.

17. As regards the possible justifications for the national rules in question, the Commission notes that a measure which constitutes a restriction pursuant to Article 34 TFEU may be justified in accordance with Article 36 TFEU or for overriding reasons in the public interest. However, in accordance with the...