Report for the Hearing delivered in Case 216/84

I — Facts

Article 1 of the Law of 29 June 1934 on the protection of milk products Joumal officiel de la République française of 1 July 1934) provides as follows:

Under Article 2 of that law infringements of that prohibition carry criminal sanctions.

The products in question are used as coffee whiteners in automatic coffee dispensers, which are employed principally in mass catering, by airlines and in the manufacture of some foodstuffs, for instance, biscuits. The substitutes' composition differs from that of milk in so far as they are made from sugar (lactose) and vegetable fats with the addition of other substances (notably colouring matters) and contain a higher percentage of fats than milk. The substitutes are produced industrially and are generally marketed at a lower price than milk.

By letter of 4 February 1980 the Commission informed the French Government that it had received a complaint based on the refusal to permit the marketing in French territory of substitutes for milk powder intended for automatic coffee dispensers and sold under the name Milk-O-Mat of creamer, pursuant to the aforementioned article of the Law of 29 June 1934. The Commission stated that that article was incompatible with Articles 30 to 36 of the EEC Treaty and gave the French Government two months in which to submit its observations. In its reply dated 22 April 1980 the French Permanent Representation argued, in particular, that the rules in question were designed to obviate any possible confusion between milk products and imitation products. Labelling indicating the real composition of the imitation product would be ineffective, notably where the product was marketed at stages preceding retail sale and mixed directly with coffee in dispensing machines or at outlets where refreshments were sold.

On 24 December 1981 the Commission delivered a reasoned opinion to the French Republic under the first paragraph of Article 169 of the EEC Treaty, stating that by prohibiting the importation and sale of substitutes for milk powder and concentrated milk, under any name whatsoever, the French Republic failed to fulfil its obligations under the EEC Treaty. In its reply dated 14 May 1982 the French Government argued in the first place that milk production in the Community was already in surplus and the abolition of the provisions in question would only aggravage that tendency. As a result, such a step would be directly opposed to the objectives which the Community had set itself and to the Commission's policy in the milk products sector, one of whose aims was to reduce structural surpluses. Were the Commission's action to be successful it would seriously harm milk producers.

In conclusion, the French Government stated that it was prepared to consider any other solution likely to meet the requirements of the free movement of goods while safeguarding the legitimate interests of milk producers and providing genuine protection for the consumer, and suggested that discussions should be initiated to that end.

Following that suggestion, meetings took place between representatives of the French authorities and the Commission's departments. Since this exercise did not result in the French authorities' amending the legislation at issue, the Commission brought this action by application of 17 August 1984.

II — Written procedure and conclusions of the parties

The Commission's application was received at the Court Registry on 21 August 1984. The written procedure followed its normal course. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. The Commission was asked to answer two questions in writing. That request was complied with within the prescribed period (see Section IV below).

The applicant claims that the Court should:

The Government of the French Republic claims that the Court should:

III — Submissions and arguments of the parties

The parties' submissions are based on three aspects, namely consumer protection, protection of human health and the impact on the milk surpluses and the Community budget.

1. Consumer protection

The Commission points out that the provision in question places an absolute prohibition on the manufacture, the marketing and the importation into France of any product intended to replace milk powder and concentrated milk but composed of different products, whatever name it is marketed under, and that that prohibition applies to domestically made and imported products alike. In the Commission's view that absolute prohibition is not justified by the aim of consumer protection invoked by the French Government, on the ground that that objective could also be attained by less severe means, that is to say, by a clear description and appropriate labelling on the product packaging or on the machine dispensing the product. The provision is therefore excessive and hence prohibited under Article 30 et seq. of the EEC Treaty.

The Commission points out that according to previous decisions of the Court, in particular the judgment of 20 February 1979 in Case 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649, and Commission Directive 70/50 of 22 December 1969 (Official Journal, English Special Edition 1970 (I), p. 17), the prohibition contained in Article 30 of the EEC Treaty also covers measures applicable to domestic and imported products alike where they create obstacles to intra-Community trade and are not justified by mandatory requirements, which are specified by the Court and include, in particular, the defence of the consumer. It follows from the judgment in the Rewe-Zentral case that national provisions preventing imports of a product legally manufactured and marketed in another Member State are caught by the prohibition laid down in Article 30 when consumer information can be secured by means of appropriate labelling indicating the product's characteristics.

In that connection the Commission refers to Council Directive 79/112/EEC of 18 December 1978 (Official Journal 1979, L 33, p. 1), which provides that Member States must ensure, first, that foodstuffs labelling includes all necessary information about the characteristics of the foodstuffs and, secondly that the names under which products are sold are such that purchasers are aware of the real nature of the products. It points out that under Article 2 (1) (a) (i) of the directive the labelling and methods used must not be such as could mislead the purchaser ..., particularly ... as to the characteristics of the foodstuff and, in particular, as to its nature, identity, ... composition, ... method of manufacture or production ... .

The Commission acknowledges that foodstuffs labelling could be subject to difficulties as regards its implementation and a limitation of consumers' choice is not ruled out. However, that problem is not peculiar to milk products but concerns all foodstuffs. The real aim of the provision in question is to abolish a form of competition for concentrated milk and milk powder and hence it tends to prevent the consumer from exercising his freedom of choice in the light of such considerations as the cost of the product and his health.

In contrast, the French Government claims that labelling has no value as consumer protection in this instance. It considers that labelling would be ineffectual where the substitutes are distributed by retail sale and by dispensing machines and impossible in mass catering.

In the case of retail sale, consumer information through labelling can only protect the consumer where the retailer's margin is such that he has an interest in continuing to offer milk products for sale to his customers even though substitutes are cheaper. That is not invariably the case in countries where substitutes are freely sold now, for example in the Netherlands, according to surveys conducted in The Hague. In that event, labelling could not protect consumers since they would no longer have a choice.

Where marketing takes place by machine the decisive criterion as far as traders are concerned is definitely the cost of the products distributed. Were this mode of sale of substitutes to be authorized in France all drink dispensers (coffee machines in particular) would soon use whiteners and cease to use milk. Since very often the machines are situtated on premises where beverages are not dispensed by other means or at other places the consumer — even if he were informed — would no longer be able to obtain milk.

The situation would be even worse in the mass catering sector, which includes, in particular, canteens and airlines, since there substitutes, being cheaper, would probably take the lead. There it would be practically impossible to ensure that the consumer is informed. Milk substitutes could be used in many ready-cooked dishes or special preparations (sauces, creams, pizza cheeses, biscuits and so on). Whereas it would be possible to envisage the substitutes' being labelled when delivered packaged to the immediate consumer, that is to say the caterer or canteen manager, it would be very difficult to make sure that the ultimate consumer, the customer of the restaurant or canteen, is informed. The immediate consumer would make his choice on cost grounds and impose that choice on the ultimate consumer without his being aware of it.

Turning to Directive 79/112, the French Government maintains that the Commission made no reference thereto either when the French Government was formally invited to submit its observations or at the stage of the reasoned opinion. It can therefore no longer be invoked by the Commission at the litigation stage. In any event, it follows from Article 15 of that directive that Member States may forbid trade in foodstuffs complying with the directive on grounds of public health. The French Government argues in the alternative, in case that objection is not accepted, that the provisions of the directive are insufficient to protect the consumer against milk substitutes. Whereas Article 2 of the directive provides that foodstuffs labelling must not mislead the purchaser, the potential purchaser is already misled about the properties of substitutes and in particular about the properties of the vegetable fats they contain, which are considered to be less harmful than the fats contained in milk. However, that belief is wrong. Moreover, a large proportion of purchasers mistakenly consider milk substitutes to be a dietetic product. Finally, for the reasons already given, in the context of mass catering the directive cannot protect the consumer.

2. Protection of human health

The Commission also considers that the prohibition of the marketing of milk substitutes is unjustified on grounds of the protection of human health. It admits that the nutritional value of products of vegetable origin is lower than that of milk. Nevertheless, it stresses that the nutritional qualities of milk products are not at issue in the present proceedings. It maintains that the question at issue is the different one of whether the inferior nutritional value of milk substitutes warrants an absolute ban on their being marketed, even though they are not a danger to health. If that argument were to be allowed to prevail it would result in Member States' prohibiting a great many foodstuffs and beverages. The Commission further observes that, in view of their utilization, the products in question account for only a minuscule proportion of the foodstuffs consumed each day.

As regards vegetable proteins being inferior in biological value to animal proteins, the Commission maintains that the generally accepted view in scientific circles is that a balanced diet should include both types of protein. It also argues that vegetable fats contain more unsaturated fats, which are considered in medical circles to be less harmful than the saturated fats present in milk. Whilst milk undeniably contains large quantities of certain minerals and vitamins, that is less true of skimmed milk but that has not led to a ban on the marketing of that form of milk.

In contrast, the French Government considers that milk substitutes have undeniable harmful effects owing to their lower nutritional value. In its contention, the substitutes' fat content is much higher than that of milk, their protein content is much lower, even nonexistent, and their calcium content is negligible. It cites in support of this view an American scientific study which concludes that imitation milk cannot be considered a replacement for milk for any age group with regard to any nutritional criteria. Consequently, were it not for the contested provision, restaurant or canteen customers who are on a diet or pregnant or breastfeeding and are recommended to drink milk could never be guaranteed that it is actually milk that they are consuming.

The French Government contests that one of the characteristics of substitute milk is that it contains more unsaturated fats. On the contrary, according to comparative research carried out in the United States, milk substitutes contain more saturated fatty acids than milk and hence have adverse effects on health. Such effects, which are recognized in the United States by federal agencies and professional bodies, are particularly detrimental to the French, whose diet is already too rich in fats. It is therefore essential that the consumer should be able to choose between such products and milk in the light, in particular, of his state of health.

Lastly, the French Government observes in this connection that according to Article 15 of Directive 79/112 Member States may forbid trade in foodstuffs complying with that directive on grounds of public health.

3. Impact on milk surpluses and the Community budget

As regards the effects of the contested French legislation on the disposal of dairy surpluses and the impact which its abolition would have on the Community budget, the Commission argues that given that products subject to a common organization of the market are concerned it is for the Community and not a Member State to take measures to resolve the problem of the surpluses in question. In any event, the problem of the existence of such surpluses cannot be resolved by permitting a national provision incompatible with the principle of the free movement of goods to remain in being. It contends that the real aim of the national provision is to eliminate a form of competition for milk powder and concentrated milk.

The Commission further points out that in 1981 the annual consumption of substitutes for milk powder in the Community as a whole came to about 15000 tonnes, whereas at present stocks of skimmed-milk powder alone amount to 632000 tonnes. Consequently to preserve a ban on the marketing of milk substitutes in one Member State would make no meaningful contribution towards resolving the problem of the milk surpluses.

For its part, the French Government argues that the infringement procedure initiated by the Commission is at odds with the aims pursued by the common agricultural policy in the milk sector. Indeed, in January 1974 and July 1975 the Commission submitted to the Council two proposals for regulations intended, respectively, to safeguard the natural composition of milk products in consumers' interests and to encourage the utilization of milk products in the Community. Those proposals had the aim of restricting the manufacture and marketing, and even of prohibiting the use of milk products part of whose natural constituents had been replaced by non-milk constituents. Even though nothing came of those proposals the Commission thereby acknowledged that such products were a threat to the use of milk products in the Community and hence affectd the Community's policy for the milk sector.

The French Government further argues that such substitutes contain a preponderance of cheap vegetable fats which are produced outside the Community and are not subject to import levies. It stresses that the Community aid systems for animal fats on the one hand and vegetable fats on the other do not function in the same way. The system of guaranteed prices applied to milk products is such that the cost of the social policy conducted by the Community for the benefit of producers is passed on to the consumer. In contrast, it is the Community, by a system of direct aid, which underpins the incomes of producers of the oil seed used in the manufacture of milk substitutes.

The French Government also observes that in those Member States where substitutes have come onto the market they clearly undercut the price of milk. On top of the difference in the selling price, retailers' margins on substitutes are higher. It is because of those price differences that substitutes have won for themselves an enviable market share at the expense of milk products, which in some cases have totally disappeared from food shops. It is therefore to be feared that the appearance of substitutes on the market will cause milk to be pushed out of shops with the result that consumers will be deprived of choice.

By taking the place of milk, substitutes are likely to cause an increase in the quantities of milk powder put into intervention and, as a result, to weigh heavily on the Community budget. The system of milk quotas is not calculated to alleviate that risk in view of the foreseeable rise in sales of substitutes in the event that they come on to the market.

Lastly, the French Government points out that at its meeting held on 13 to 16 May 1985 the Council asked the Commission to examine the problem raised by the free development of certain milk substitutes in view of the milk production quotas, and to submit to it, if appropriate, suitable supplementary proposals so as to enable it to take a decision before 1 April 1986.

IV — Replies to the questions put by the Court

By letter dated 31 October 1985 the Court asked the Commission to answer the following questions by 15 January 1986:

The Commission answered those question by letter dated 19 December 1985, which was received at the Court Registry on 20 December 1985.

In answer to the first question, the Commission stated that according to the information available to it provisions comparable to those of the French legislation in question existed in the Grand Duchy of Luxembourg and in the Federal Republic of Germany. Infringement procedures had already been started in respect of them. Whilst proceedings against Luxembourg were already pending before the Court, the proceedings against Germany were still at the stage of the reasoned opinion. The latter document had been sent to the German authorities on 14 August 1985.

In reply to the second question the Commission stated that it had not submitted proposals to the Council in addition to its proposal for a regulation of 3 April 1984 on the designations used in the marketing of milk and milk products (Official Journal, C 111 of 26 April 1984, p. 7), which was based in particular on Article 43 of the EEC Treaty and was still before the Council.

V — Oral procedure

The oral procedure took its normal course. It closed on 17 April 1986 with the delivery of the Advocate General's Opinion. However, at the end of May 1986 the President of the Court granted a request for the suspension of the proceedings which was made by the Commission and supported by the French Republic, on the ground that the Commission hoped that the outcome of the Council's discussions on a new proposal for a regulation designed to bring about more precise designations for milk products would lead the French Republic to put an end to the infringement with which this case is concerned. The suspension, originally granted until 14 July 1986, was extended until 15 July 1987. By letter of 23 October 1987 the Commission informed the Court that the French Republic had not terminated the infringements cited in the application.

On 1 July 1987 Council Regulation No 1898/87 of 2 July 1987 on the protection of designations used in marketing of milk and milk products (Official Journal 1987, L 182, p. 36) came into force. Article 5 of that regulation provides as follows:

It was the proposal for this regulation that the Commission had in mind when it first asked for the proceedings to be suspended.

According to a letter from it of 14 September 1987, the French Republic interprets the provision quoted above as meaning that the French legislation on the protection of milk products which is challenged in these proceedings may continue to be applied in any event.

Accordingly, the Court ordered the oral procedure to be reopened pursuant to Article 61 of the Rules of Procedure. It asked the parties to restrict their pleadings at the hearing to answering the following questions :

At the reopened hearing, the French Republic stated that it considered that Article 5 was retroactive. In particular, it enabled the French legislation to be maintained. In any event, there would be no reason for the provision if it did not secure the continued existence of national legislation on milk substitutes.

For its part, the Commission stated that it took the view that Article 5 was not retroactive and had no implications with regard to these proceedings. It reflected an initial step towards the Community institutions' concern with the question of milk substitutes.

1 Language of the Case: French.

2 That is to say, until 31 March 1989 (see Regulation No 856/84, Official Journal 1984, L 90, p. 10).