According to Australian Legislation, a wine can be labelled as Tasmania if it is topped up with 15% of wine produced elsewhere in Australia. In order to encourage consumption of 100% Tasmanian wine, a local Tasmanian association is promoting a campaign to label ‘100% Grown, Made and Bottled in Tasmania’.
News of this initiative on the AIDV tom triggered the question as to whether a similar type initiative could be compatible with EU free movement of goods law if the facts were the same but concerned two different Member States (or for comparison purposes, regions within the Internal Market).
The EU Legal Framework
The European rules dealing with indications of origin of a food product (other then the specific rules on geographical indications – not applicable in this case) are set out in Regulation (EU) No 1169/201118 on the provision of food information to consumers and by Regulation (EEC) No 2913/92 establishing the Community Customs Code. 19 With regards to wine labelling and presentation, specific provisions are set down Regulation (EU) No 1308/201320 and Regulation 670/2011.21
The fundamental provisions on the free movement of goods are set out in Articles 34 to 36 TFEU.
Three different scenarios are possible:
The State or a Public Authority adopts measures that induce consumers to buy national products or to avoid buying specific products coming from other Member States;
A private organisation/business operator/association develops norms designed to favour national over EU goods without any involvement of the Public Authority;
The norms developed in scenario 2 are, in some way, endorsed by a Public Authority.
As will be seen in relation to the discussion of the second scenario, the act described in the first scenario is clearly a breach of the EU rules on the free movement of goods. Thus the note will look at the second two scenarios.
What if the norms developed by private organisation/business operator/association Buy- National Campaign are endorsed in some way by the Public Authority?
Articles 34 to 36 TFEU deal with measures taken by the Member States that impede the free movement of goods. It is important to underline that they only apply to acts (or the absence of acts) of Member State rather than those of private parties.
Article 34 TFEU provides that:
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
Article 35 TFEU provides that:
Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States.
Article 36 TFEU provides that:
The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.
On the basis of Article 260(1) TFEU:
[i]f the Court of Justice of the European Union finds that a Member State has failed to fulfil an obligation under the treaties, the State is required to take the necessary measures to comply with the judgement of the Court of Justice.
The addressees of Articles 258 to 260 TFEU, concerning the failure by a Member State to fulfil an obligation deriving from EU law including the provisions on free movement, are logically Member States and not private parties.
As Members States are the addressees of these obligations, the definition of the ‘emanation of States’ becomes relevant.
The meaning of ‘Member States’ has been interpreted broadly. It includes all the public authorities of a country such as central authorities, regional or local authorities, law making authorities, administrative authorities implementing law and courts or judicial authorities interpreting the law. 22 The concept therefore covers measures taken by all bodies established under public law as ‘public bodies’. The mere fact, however, that a body is established under private law does not prevent its acts from being attributable to the state.
Indeed, according to settled case-law:
measures taken by a professional body (bar association!) which has been granted regulatory and disciplinary powers by national legislation in relation to its profession may fall within the scope of Article 34 TFEU.
The activities of bodies established under private law but which are set up by law, mainly financed by the government or a compulsory contribution from undertakings in a certain sector and/or from which members are appointed by the public authorities or supervised by them can be attributed to the state.
By virtue of settled case-law, Article 34 TFEU applies also to measures adopted by the EU institutions. With regard to judicial review the EU legislature must, however, be allowed broad discretion. Consequently, the legality of a measure adopted can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue.
Some examples: Buy Irish Campaign
The Buy Irish case23 concerned the promotion of Irish products in Ireland. As part of the campaign, the Irish government formed and funded a private company (the Irish Goods Council) in order to encourage consumers to buy Irish goods. The government also appointed the members of its management committee.
The Court of Justice held that a Buy-Irish campaign, designed to achieve ‘the substitution of domestic products for imported products’, was liable to affect the volume of trade between Member States. Thus, it was found to be inconsistent with Article 34 TFEU. The Court considered that the Irish Goods Council had significant links to a Member State, and thus came within the notion of State as laid down in Article 260 TFEU.
Apple and Pear development Council
Even non-binding measures adopted by the government of a Member State may influence the conduct of traders and consumers and frustrate the objective of free movement.24
The Apple and Pear case25 concerned a request for a preliminary ruling on the compliance with EU Law of the Apple and Pear Development Council (‘the Development Council’), set up by UK Government in 1947. This Council, whose activities were financed by a charged imposed on growers, had the object of promoting the fruits in question.
The Court held that such a body did not enjoy the same freedom as regards the methods of advertising enjoyed by producers themselves or producers' associations of a voluntary character.26 The Court considered that the Development Council was under a duty not to engage in any advertising intended to discourage the purchase of products of other Member States or to disparage those products in the eyes of consumers. Nor did the Council advise consumers to purchase domestic products solely by reason of their national origin.
Thus the Court found that Article 34 TFEU should not be interpreted to prevent this type of body from promoting the specific qualities of fruit grown in the Member State in question or from organising campaigns to promote the sale of certain varieties mentioning their particular properties, even if those varieties are typical of national production.
The Court held that: ‘the provisions of the Treaty relating to the free movement of goods and to agriculture and the rules on the common organization of the market in fruit and vegetables do not prevent a member state from adopting or maintaining measures establishing a development council, composed of members appointed by the minister responsible’. Thus, it found that it was for the national court, on the basis of those criteria, to decide whether and to what extent, the exercise by the Development Council of the functions entrusted to it, was incompatible with EU Law.
Commission v Germany
A German Law of 1993 set up a fund with the object of promoting the marketing and the development of German agricultural and food products. The Fund's tasks were financed by compulsory contributions paid by undertakings in the German agriculture and food sector.
A limited company (CMA) was responsible for carrying out the Fund’s tasks. Among its tasks the CMA provided the promotion of indications of origin and quality labels.
The Commission is the Guardian of EU law and has the competence to bring Member States up before the Court of Justice for failure to respect the law. This is known as an infringement procedure. Following such a procedure in 1998, the Court, recalling Buy-Irish Case and Apple and Pear Development Council Case, found that such a body could not enjoy the same freedom as that enjoyed by producers themselves or producers' associations of a voluntary character.27 Hence, the Member State concerned ‘is obliged to respect the basic rules of the Treaty on the free movement of goods when it sets up a scheme, open to all undertakings of the sectors concerned, which can have effects on intra-EU trade similar to those arising under the scheme adopted by the public authorities.28
Therefore, the Court held that, by awarding the quality label to finished products of a certain quality made in the state, Germany failed to fulfil its obligations under Article 34 TFEU.
The AGM-COS.MET case29 concerned an official of a Finnish government department who made public statements implying that a particular type of lift vehicle manufactured in Italy, was defective and should not be placed on the market. The issue raised then, was whether a public statement by a civil servant could constitute an obstacle to the free movement of goods.
The Court held that a statement made publicly by a civil servant, even though such statement did not carry any legal force, could constitute an obstacle to the free movement of goods if the addressees of the statement understand it to reflect the official position taken by the State. Therefore, the Member State may be liable in damages to compensate for the loss and damage caused by the statements of the civil servant.
Failure to control farmer protests30
In 1985, several French farmers took action to stop and destroy Spanish strawberries, crossing the border France. Their action created an obstacle to EU trade. The Commission opened an infringement procedure against France under Article 258 TFEU. The Commission alleged that France failed to fulfil its obligation to ensure compliance with EU law. The Court of Justice found31 that Article 34 TFEU requires Member States not merely themselves to abstain from adopting measures or engaging in conduct liable to constitute an obstacle to trade but also, when read with Article 11 of the Treaty, to take all necessary and appropriate measures that that fundamental freedom is respected on their territory.32 Therefore, the Court found that France failed to fulfil its obligations because it abstained from adopting appropriate and adequate measures to tackle the situation.
Traffic Light Labelling
The UK has encouraged use of a system agreed between UK food retailers and manufacturers to indicate the nutritional values of foods according to the traffic light system: red for high, yellow for caution and green for low. This is a nutrition issue which is addressed by Article 35(2) of Regulation (EU) No 1169/2011.33
Some Member States consider this provision to be an indirect discrimination against Mediterranean products 34 and questioned its compliance with free movement rules. As a result the Commission has opened an informal proceeding in order to investigate the compliance of this Recommendation with Article 34 TFEU. This procedure is on-going but will be resolved on consideration of the degree to which the agreement was only made under the threat of legislative action.
In conclusion, although the term ‘Member State’ has been given a broad meaning, it does in general not apply to ‘purely’ private measures, i.e. measures taken by private individuals or companies.
However, a buy-national campaign, supported and funded by the public authority can be considered an infringement of free movement of goods and be inconsistent with Articles 34 to 36 TFEU.
3.1. What if a private organisation/business operator/association develops norms to promote national goods without any involvement of the Public Authority?
General legal framework concerning the labelling of origin of food products
Recital 30 of Regulation (EU) No 1169/2011 provides that:
In some cases, food business operators may want indicate the origin of a food on a voluntary basis to draw consumers’ attention to the qualities of their product, such indications should also comply with harmonised criteria.
One of the consequences of this provision is that, in determining the country of origin of foods, business operator must comply with the general provisions laid down in Regulation (EU) No 1169/2011 and Articles 23 to 26 of Council Regulation (EEC) No 2913/92 (general customs law).35
Article 7(1)(a) of Regulation (EU) No 1169/2011 provides that:
Food information should not be misleading particularly as to the characteristics of the food and, in particular, as to its nature, identity, properties, composition, quantity, durability, country of origin or place of provenance, method of manufacture or production.
Article 23(1) of Regulation (EEC) No 2913/92 provides that:
Goods originating in a country shall be those wholly obtained or produced in that country.
Article 24 of Regulation (EEC) No 2913/92 provides that:
Goods whose production involved more than one country shall be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture.
In conclusion, if a private operator respects the requirements laid down in the food information regulation and the customs regulation it is entitled to indicate the origin of the foods in question without breaching EU Law.
The specific case of wine
Article 1(4) of Regulation (EU) No 1169/2011 provides that:
This Regulation shall apply without prejudice to labelling requirements provided for in specific Union provisions applicable to particular foods.
While a buy-national campaign may happen in Europe for agricultural or food products in general, it is not clear that it would happen in the wine sector. European Law concerning the labelling of the origin of wine is very detailed.
First, the labelling of origin of wine is one of the compulsory particular requested by Article 119(1) of Regulation (EU) No 1308/2013.36 The indication used in order to label the origin of the wine must follow the detailed provisions established by Article 55 of Commission Regulation (EC) No 607/2009.
Second, it can be indicated on the label that a wine has been produced in a particular Member State only if it is entirely produced in that Member State.37
In the case of wine resulting from a blending of wines originating in a number of Member States, it must be stated that the wine is a ‘European Community wine’ or ‘blend of wines from different countries of the European Community’.38
In the case of wine resulting from a blending of wines originating in a number of third countries, it shall be labelling ‘blend of wines from different countries outside the European Community’ or ‘blend from (…)’ citing the names of the third countries in question.39.
Wines produced in a Member State/third country from grapes harvested in another Member State/third country, shall be labelled either with the words ‘European Community wine’ (only if all the products come from the European Union or ‘wine obtained in (…) from grapes harvested in (…)’.40
In addition, the law41 provides that an indication of the bottler or, in the case of sparkling wine aerated sparkling wine quality sparkling wine or quality aromatic sparkling wine, the name of the producer or the vendor shall be compulsory in the wine labelling.
In conclusion, unlikely private parties would promote a buy-national campaign like the one in Tasmania because EU Law is very detailed and already provides for the labelling of wines not totally produced in one particular state.
Examples of Private buy-national campaigns Buy-Irish Campaign
The Guaranteed Irish campaign, condemned as a breach of EU law, still exists but in a modified form. The campaign was separated from the Irish Goods Council and continued without State funding or State direct involvement. The fact that it was launched by the then President of Ireland in 1984 does not amount to continued State involvement, nor would can it be considered enough to attribute the action of the guaranteed Irish campaign to the State (despite the Finnish civil servant case).
Buy- UK-pig Campaign
A TV documentary of 2009, conducted by a Jamie Oliver, a famous British chef, concerned the pork meat business. The documentary attached pork production outside the UK as not being pig- friendly. British Pigs had it better according to Mr Oliver. The programme entitled ‘Jamie saves our bacon’, was broadcasted by public TV, and encouraged consumers to favour British pork over ‘foreign’ pork by examining the labels indicating the country of origin or the place of provenance of the meat.
The main difference between this case and the Buy-Irish campaign is that the only involvement with the public authority was the fact that a public TV broadcast the programme. An action against Mr Oliver and the UK was considered but it was ultimately not initiated.
The campaign ‘Born in Spain, admired in the world’ is about to be launched in Spain. The Ministry of Agriculture, Food and Environment of Spain has endorsed an institutional campaign, promoted by Interbranch Organisations of wines, olive oils, olives and Iberian pork products, to promote Spanish food in international markets with the image of tennis player Rafael Nadal. The initiative aims to encourage the consumption Spanish foods outside Spain and to promote the internationalisation of Spanish companies.
The Spanish Ministry is clearly involved but the campaign is designed to promote Spanish foods and wines outside Spain. Does this make it a barrier to internal EU free movement? Is the fact that the targeting markets are in India, Brazil, Mexico, Russia, Australia but also countries in the EU relevant? The publicity materials will be financed by the State.
The legality of this new campaign has yet to be tested but it should be point out that the free movement rules not only apply to barriers to import but to exports as well.
The fact that the campaign has been advertised intensely in domestic Spanish media means that the campaign is directed not only outside Spain but internally too. It is bound to have an effect on Spanish consumers and promote domestic over imported products. However, Spain has the defence that it is intended for the external market. No challenge has yet been mounted against this campaign.
100% Made in Italy
Article 16(1) and (4) of Italian Law No 166/2009 42 provides that when a product is entirely made in Italy including the design, projection, production and packaging and can be labelled “Made in Italy”.
Producers labelling products, in any language, as ‘100% made in Italy’, ‘100% Italia’, ‘tutto italiano’, or any other label that would induce the consumer to think that the whole production is in Italy, must comply with criteria in Law No 166/2009. Failure to respect the law is sanctioned under Article 517 of Criminal Code (concerning the sale of industrial products bearing mendacious signs) augmented by one third.
Following to this provision, the Institute for the Protection of Italian Manufactures, a private organisation member of the CNEL (National Council for Economy and Labour), has registered a ‘100% made in Italy’ certification trademark. In order to use this sign, Istituto Tutela Produttori Italiani, a private organisation, performs controls in order to certify those operators wishing to use the mark. Therefore, it is a voluntary label designed to guarantee that the products has been entirely produced in Italy.
However Italy does not finance this initiative, nor is it engaged in any advertising intended to discourage the purchase of products from other Member States or to disparage those products in the eyes of consumers, nor advises consumers to purchase domestic products solely by reason of their national origin. The campaign does not seem to be a breach of free movement rules.
Origine France Garantie
On 19 May 2011, a new ‘Origine France Garantie’ label was introduced by the Association ‘Pro France’, a group of businesses and professional organisations, in order to promote products ‘Made in France’. Pro France participates in the awarding of the ‘Origine France Garantie’ label with the Bureau Veritas auditing body.
Even though this initiative is private, the website of the Direction Generale des Enterprises of France Government promotes made-in-France Products. It says that: ‘promouvoir le Made in France vise à améliorer la compétitivité des entreprises française en valorisant les produits fabriqués en France’.
The Pro France Label is also shown on the website.
This campaign may be considered similar to the 100% made in Italy campaign. Following Apples and Pears, the State involvement is limited to the advertising of the label. Besides the voluntary labelling provided by ‘Origin France Garantie’, as 100% made in Italy trademark, does not have the object to hinder the free movement of goods or distort competition.
Can acts of private parties harm the free movement of goods? Is this an issue of free movement of goods or of competition law?
Perhaps the objection of the application of articles
34 to 36 TFEU to private initiatives has really more to do with competition law than with free movement itself or, which is even more likely, such referred collective action might well lead to a concerted practice within the spectrum of competition law. In the Buy-Irish case, the Court approach was based on the assumption that Article 34 TFEU should only impose obligations on private parties if there was a legal relationship between the private parties provided that such measures of the party intended to be bound by Article 34 were not only necessarily legally binding acts, but also taken in pursuance of an economic activity. The Court rejected the contention that only legally binding State measures were caught.
It is established case law that Articles 34 and 35 TFEU only concern public measures and does not address the conduct of undertakings. There are several judgments such as Bayer v. SüllhoÅnfer demonstrating that the free movement provisions and EU law on competition are clearly separated.
Bayer v. SullhoÅnfer43
In a preliminary ruling, the Court was asked whether a no-challenge clause in a patent licensing agreement could be considered inconsistent with Article 34 to 36 and Article 101 TFEU.
The Court held that: ‘It must be borne in mind that Article 34 – 36 of the Treaty form part of the rules intended to ensure the free movement of goods and to eliminate any measures of Member States likely to form, in any way, a barrier to trade. Agreements between undertakings, on the other hand, are governed by the rules on competition in Article 85 et seq .(i.e. 101) of the Treaty, whose aim is to maintain effective competition within the common market’.44
Therefore, the question had to be determined under Article 101 TFEU (prohibiting collusion) in order to verify the compliance of an agreement between undertakings susceptible to restrict or distort competition.
As the Court held in Industrie Diensten Groep BV,45 Articles 34 to 36 TFEU concern only public measures and not the conduct of undertakings. Therefore, ‘it is only the compatibility with those articles of national provisions of the kind at issue in the main proceedings that need be examined’.46
In Dansk Supermarked, 47 Imerco, a group of Danish Hardware Merchants commissioned in the UK a special service on the occasion of Imerco’s fiftieth anniversary. The agreement with Imerco allowed the British manufacturer to sell the pieces by himself, but prevented him to export the pieces to any Scandinavian Country. Dansk Supermarked, the owner of several Supermarket (the appellant), obtained several services marketed in UK and offered them for sale in Denmark at a lower prices that the one sold by Imerco. Imerco obtained by the Maritime and Commercial Court an injunction prohibiting Dansk Supermarked from selling such services, on the basis that the appellant’s actions were in breach of approved commercial usage.
The Court held that:
It is impossible in any circumstances for agreements between individuals to derogate from the mandatory provisions of the Treaty on the free movement of goods. It follows that an agreement involving a prohibition on the importation into a Member State of goods lawfully marketed in another Member State may not be relied upon or taken into consideration in order to classify the marketing of such goods as an improper or unfair commercial practice.
The Court found that:
Articles 34 and 35 TFEU must be interpreted to mean that the Judicial Authorities of a Member State may not prohibit, on the basis of a copyright or of a trade mark, the marketing on the territory of tat state of a product to which one of those rights applies if that product has been lawfully marketed on the territory of another Member State by the proprietor of such rights or with his consent.
Therefore, even in this case, the barrier to trade was implemented by a State measure, through an injunction requested by a private party.
This all serves to lay the ground in order to understand that Articles 34 to 36 TFEU do not tie private parties, nevertheless those provisions do affect their conduct if, for example, the State shelters behind a private body, as can seen in Buy Irish Case. or likewise, in Commission v UK.48
In this other case on origin making, Commission v. UK, the Court dissected the taken measures in order to figure its nature out and to finally declare that by prohibiting the retail sale of certain goods imported from other Member States unless they were marked with or accompanied by an indication of origin, the United Kingdom failed to fulfil its obligation under Article 30 of the former EEC Treaty.
In the same way, where the State can be found to be grandfathering national standards by making compliance with them obligatory in the award of public contracts, there will be a breach of Articles 34-36 TFEU. In Fra.Bo case, concerning whether the activities of a private-law standardisation and certification body must comply with the provisions of primary EU law on free movement of goods, the Court asserts that the fact that: ‘an importer might be dissuaded from introducing or marketing a particular product in a Member State constituted a restriction on the free movement of goods for the importer’.
3.3.1 Does a buy-national campaign affect competition rules?
Acts of private parties are not deemed to infringe free movements of goods in general. A Buy- National Campaign may raise competition issues only in the event that Article 101 or 102 TFEU on competition are concerned.
Article 101(1) TFEU prohibits agreements between undertakings, which may affect trade between Member States and whose object or effect are the prevention, restriction or distortion of competition within the internal market.
Restrictions of competition ‘by object’ are those that by their very nature have the potential to restrict competition. In a case of restriction by object is unnecessary for the purposes of applying Article 101(1) TFEU to demonstrate the effects of the practice on the market.
Only a case-by-case analysis can determine whether a national campaign is inconsistent with competition rules.
However, some general considerations can be made:
Private parties can advertise their products to the point that they do not mislead consumers:49 Recital 3 of Directive (EC) No 114/2006 provides that misleading and unlawful comparative advertising can lead to distortion of competition within the internal market.
Advertising has to be differentiated from boycotting. In the Guidance of the Commission on restrictions of competition ‘by object050 is clarified that: ‘a collective boycott occurs when a group of competitors agree to exclude an actual or potential competitor. This practice generally constitutes a restriction by object’. Therefore, such actions has the merely or mainly object to boycott competitors more than promote own products, as a buy- national campaign. If the object is not to boycott, the effective distortion or restriction of competition within the internal market must be proved.
Specific provisions concerning Agriculture and Competition Law, as set out in Article 42 TFEU,51 do not apply at this stage (unless such practices are performed only by farmers, farmers’ associations or associations of such associations belonging to a single Member States).52 However, even though (theoretically) a private buy– national campaign is susceptible to involve competition rules (and not free movements of goods rules), unlikely a buy-national campaign would constitute an unfair practice that distorts and restricts competition.
4. WTO cases
Shrimp-Turtles Case in WTO dispute settlement53 are relevant for the issue of the present note. In this case, India, Malaysia, Pakistan and Thailand complained that the US banned the importation of certain shrimp and shrimp products in order to protect sea turtles (which were adversely affected by certain fishing practices.
Basically, the US required US shrimp trawlers to use turtle excluder devices in their nets when fishing in areas where there was an important likelihood of encountering previously listed as endangered species of sea turtles. Sea turtles from third countries might be imported in the US only if ‘the harvesting nation was certified to have a regulatory programme and an incidental take-rate comparable to that of the US, or that the particular fishing environment of the harvesting nation did not pose a threat to sea turtles’54. Therefore, such countries had to impose on their fishermen requirements comparable to the ones adopted by the US in order to be entitled to export shrimp products to the US.
The Panel held that GATT Article XX provides that countries have the right to take action to protect the environment. However, the appellants were discriminated against in that they were not provided with assistance and longer transition periods for their fishermen to start using turtle- excluder devices.
In Dolphin-Tuna case, the issue at the stage concerned dolphin protection standards for the domestic American fishing fleet and for countries whose fishing boats catch yellow-fin tuna in that part of the Pacific Ocean. What is interesting, for the issue of the present note, was the dolphin safe labelling: voluntary label based on the US standards.
The Panel concluded that such a environmentally- friendly label did not violate GATT rules because it was designed to prevent deceptive advertising practices on all tuna products, whether imported or domestically produced.