Free Movement of Goods

Quantitative Restrictions

Introduction

Article 34-37 TFEU deals with the quantitative restrictions. Article 34 is the central
provision and states that:

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

Article 35, contains similar provisions relating to exports, while Article 36 provides
an exception for certain cases in which a state is allowed to place restrictions on the
movement of goods.

Directive 70/50 and Dassonville

Article 34 will catch quantitative restrictions and all measures having an equivalent
effect (MEQRs). It can apply to EU measures as well as those adopted by the Member
States.

The notion of a quantitative restriction was defined broadly in the Geddo case, to
mean ‘measures which amount to a total or partial restraint of, according to the
circumstances, imports, exports or goods in transit.’ Quantitative restrictions are
quotas limiting the quantity of the goods coming into a state as well as bans on
imports, which was noted by the Court of Justice in Henn and Darby as being the
most extreme form of prohibition.

It is usually positive actions that infringe Article 34 TFEU, however, a Member State
can infringe Article 34 TFEU by omission i.e. failing to take action when there is a
positive duty of act. In Schmidberger, the Austrian authorities decided to allow a
demonstration by an environmental group to proceed, which had the effect of
blocking a major motorway. The inaction, if not express permission by the Austrian
authorities constituted a restriction on the free movement of goods and was found in
principle to have breached Article 34 TFEU.

MEQRs are more difficult to define. The Commission and the Court have taken a
broad view of such measures.

Guidance on the Commission view can be found in Directive 70/50. This Directive
was only applicable during the Community’s transitional period, but it continues to
furnish some idea of the scope of MEQRs The list of matters which can constitute
MEQRs are specified in Article 2 and include:

 Minimum or maximum prices for imported products;

 Less favourable prices for imported products;
 Lowering the value of the imported product by reducing its intrinsic value or
increasing its costs;
  Payment conditions for imported products which differ from those for
domestic products;
 Conditions in respect of packaging;
 Composition;
 Identification;
 Size;
 Weight etc.

Article 2, therefore, lists a number of ways in which the importing state can
discriminate against goods. The early judicial decision on the interpretation of
MEQRs is Dassonville.

DASSONVILLE

Paragraph 5: ‘All trading rules enacted by the Member States which are capable of
hindering, directly or indirectly, actually or potentially intra-Community trade are to
be considered as measures having an effect equivalent to quantitative restrictions.’

Imp: (Paragraph 5 of Dassonville is now Article 34 TFEU).

Firstly, the ECJ held that the crucial element in proving an MEQR is its effect: a
discriminatory intent is not required. It takes a broad view of measures that hinder the
free flow of goods, and the definition does not even require that the rules actually
discriminate between domestic and imported goods. Dassonville, thus, sowed the
seeds, which bore fruit in Cassis de Dijon, where the ECJ decided that Article 34
could apply to rules which were not discriminatory.

Secondly, ECJ indicated that reasonable restraints may not be caught by Article 34.
This is the origin of what came to be known as ‘the rules of reason’.

Paragraph 6: A Member State may take measures to prevent unfair practices,

subject to the requirements that these measures should be
reasonable and that the means of proof required should not act
as a hindrance to trade between Member States.

Discriminatory Barriers to Trade

In Dassonville, the Court of Justice did not distinguish between national rules which
only apply to imports commonly known as distinctly applicable measures and those
national rules which apply both to imports and exports known as indistinctly
applicable measures.

Distinctly Applicable Measures

Distinctly applicable measures cover both direct discrimination and indirect

discrimination.
Buy Irish Campaign:

The government sponsored campaign which encouraged consumers to buy Irish

products on the basis of their nationality clearly infringed Article 34 TFEU.

Evans Medical and Macfarlane Smith:

A requirement that imports be licensed has also consistently been held to breach
Article 34 TFEU.

International Fruit Co. v Produktschap

Even when then granting of a license is automatic and a mere formality, this again
will be regarded as an MEQR and breach Article 34 TFEU.

Rewe case / Commission v UK (UHT Milk)

Hygiene inspections carried out on imported products may also infringe Article 34
TFEU, because they involve delay and expense.

Indistinctly Applicable Measures

Case law on indistinctly applicable measures can be grouped under four commonly
arising situations.

1) Origin-marking requirements

Origin marking requirements will breach Article 34 TFEU for two reasons:

 they impose an extra burden on importers;

 buyers may consciously or subconsciously select domestically produced
products in preference to imports, primarily on the basis of their nationality.

Commission v UK (Origin marking)

A requirement that all goods designate their origin made it possible for British
consumer to exercise a prejudice against imported goods.

2) Packaging requirements

National laws, which dictate how a product is to be packaged often infringe Article 34
TFEU. Whilst such rules seemingly place all goods traders under the same burden,
the tangible result is that those who wish to import into the Member State will have to
adapt their manufacturing processes.
Walter Rau

The Belgium legislation required margarine to be packed in cubes.

Mars

Prohibition of importing and marketing Mars whose packaged units were increased in
quantity during a publicity campaign with the increase (+10%) indicated on its
packaging.

Estee Lauder Cosmetics v Lancaster

A German consumer protection measure prevented ‘Clinique’ from marketing

products labeled ‘Clinique’ as consumers might be misled into believing that the
products were clinical in nature.

3) Name restrictions

The Member State cannot reserve a generic name for products manufactured out of a
specific raw ingredient or contain only a given proportion of raw ingredients.

Deserbais

The name Edam reserved for cheese with a minimum fat content of 40%, breached
Article 34 TFEU, had the effect of excluding German cheese with a fat content of
34%.

Commission v Italy/ Commission v Spain

The name chocolate cannot be used for products with vegetable fats. They were to be
described as ‘chocolate substitute’.

4) Contents, ingredients and process restrictions

These restrictions are problematic as they are not easily remedied by producers. The
makeup of the good and the techniques of production go beyond marketing and
presentation to strike at the very essence of the product itself.

Cassis di Dijon

German legislation which laid down the minimum alcohol content of 25% for certain
spirits was in breach of Article 34 TFEU.

Gilli and Andres

There was a requirement that all vinegar had to be made from wine.
Bellamy

Belgium legislation dictating that bread could not be sold with a salt content greater
than 2%.

Greenham and Abel

French legislation prohibited the sale of any food and drink containing a particular
chemical substitute.

National Measures versus Private Action

Article 34, only applies to measures taken by the state as opposed to those taken by
private parties: Sapod Audic case

Indistinctly Applicable Rules: Cassis de Dijon

The removal of discriminatory trade barriers is a necessary, but not sufficient,

condition for single market integration. There are many rules that do not discriminate
between goods dependent upon country of origin but which, nevertheless, create
barriers to trade between Member States.

The Commission appreciated this when framing Directive 70/50. Article 3 provided
that the Directive also covered measures, which were equally applicable to domestic
and imported products.

The possibility that Article 34 could be applied to indistinctly applicable rules was
also apparent in Dassonville. The definition of MEQR did not require a measure to be
discriminatory. Then came the landmark case of Cassis de Dijon.

The fundamental assumption was that when goods had been marketed in one Member
State, they should be admitted into another Member State without restriction, unless
the state of import could successfully invoke one of the mandatory requirements. The
Cassis judgment, therefore, encapsulated a principle of mutual recognition. It even
built on ‘the rule of reason’ in Paragraph 8.

Paragraph 8: ‘……the effectiveness of fiscal supervision, the protection of public

health, the fairness of commercial transactions and the defence of the consumer.’

This list is not exhaustive. The mandatory requirements that constitute the rule of
reason are taken into account within the fabric of Article 34, and are separate from
what is now Article 36.

There are a number of cases found in the post-Cassis judgment applying the above
mentioned principles.

 Deserbais;
 Gilli and Andres;
  Rau.

Indistinctly Applicable Rules: Article 35

Article 35 prohibits quantitative restrictions and MEQRs in relation to exports in the

same manner as does Article 34 in relation to imports. The ECJ has held that there is a
difference in the scope of the two provisions. Whereas, Article 34, will apply to
discriminatory provisions and also to indistinctly applicable measures, Article 35 will
apply only if there is discrimination. An exporter, for example, faced with a national
rule on, for example, quality standards of a product to be marketed in that state cannot
use Article 35 to argue that such a rule renders it more difficult for that exporter to
penetrate other markets. The rationale for making Article 34 applicable to measures
which do not discriminate is that they impose a dual burden on the importer, which
will have to satisfy the relevant rules in its own state and also the state of import. This
will not normally be so in relation to Article 35: Groenveld

The Limits of Article 34

Cassis signaled the ECJs willingness to extend Article 34 to catch indistinctly

applicable rules. The difficulty is that all rules that concern trade, directly or
indirectly, could be said to affect the free movement of goods in various ways. Thus,
a distinction has to be drawn between what may be termed as dual-burden rules
(marketing requirements) and equal burden rules (selling arrangements). Cassis is
concerned with the dual burden rules.

The key issue is whether rules of this nature should be held to fall within Article 34,
subject to a possible justification, or whether they should be deemed to be outside
Article 34 altogether.

The ECJ case law provided academics with much material concerning the proper
boundaries of Article 34. Some saw little wrong with ECJ’s approach while others
were less happy with the Court’s approach. In Keck a distinction was made between
product requirements requirements and selling arrangements.

Facts:

Keck and Mithouard (1993), were prosecuted in the French courts for selling goods
at a price which was lower than their actual purchase price contrary to a French law.
The applicants invoked Article 34 TFEU, arguing that the French rule hindered the
free movement of goods. The Court decided to re-examine and clarify its case law on
the matter, something which it does only very very rarely.

It decided to do so in view of the increasing tendency of the traders to challenge any

rules that limits in some way the commercial freedom. Rules that as such have
nothing to do with regulating intra-community trade. What the Court ultimately did in
Keck & Mithouard was to introduce a rigid distinction between on one hand rules
relating to product requirements and on the other hand certain selling arrangements.
The latter is the novel introduction in this particular case.
Product Requirements

The first issue concerns rules dealing with product requirements. What are product
requirements?

In view of the Court, they are rules that lay down requirements to be met by such
goods, such as those relating to designation, form, size, weight, composition,
presentation, labeling and packaging.

All these rules concern MEQRs. In other words these rules fall within the scope of
Article 34 TFEU. This means that in these cases the courts will have to adjudicate on
whether free movement rules are in this particular context infringed or not.

Certain Selling Arrangements

The Court even introduced the concept of certain selling arrangements. Selling
arrangements do not require any change to the product itself but only restrict the way
in which it is marketed. Selling arrangements fall outside the scope of Article 34
TFEU and are legal.

How does one distinguish between a product requirement and a selling arrangement?

 Does the importer have to make any physical alteration to the product by
complying with the rule??? If yes then it is a product requirement. If not then
it is a selling arrangement.

Selling arrangements specifically relate to where, when and how goods are to be sold.
A few examples would include rules relating to advertising of products in pharmacies:
Hunermund; Opening hours: Punto Casa; restrictions on where baby milk powder
could be sold: Commission v Greece.

In order for selling arrangements to fall outside the scope of Article 34 TFEU two
conditions need to be complied with:

 These rules must apply to all relevant traders operating within the national
territory;
 They must also affect in the same manner in law and fact, the marketing of
domestic and foreign products.

If these two conditions are fulfilled then we are indeed confronted with certain selling
arrangements, which are no longer to be considered as MEQRs.

Keck, even at first sight, narrows the scope of Article 34 TFEU. The Courts failure to
list the cases it overruled and the ambiguity of ‘certain selling arrangements’ did not,
however, make for absolute clarity.
Post Keck Case law

It has been through the preliminary reference procedure under Article 267 TFEU, that
the concept of a selling arrangement has been clarified to an appreciable extent.

Restrictions on Advertising

It is clear that national rules imposing partial restrictions on advertising will not be
caught by Article 34 TFEU, since they are selling arrangements. In Hunermund,
decided a month after Keck, the rule related to prohibition on excessive advertising
for non-medical products sold legally in pharmacies. It was held to fall outside the
scope of Article 34 TFEU.

In Leclerc Siplec, the Court of Justice ruled to the same effect as regards a French ban
on advertising certain products on TV. The rationale for this rule was to maintain the
income of newspapers from advertising. It had no link with market access.

In instances, where there are rules that place total restrictions on advertising these will
not be deemed to be selling arrangements. In De Agostini, it was pointed out by the
court that a total ban on advertising would deprive the applicant of its most effective
weapon to penetrate the Swedish market and the court should look at the question of
proportionality.

Sunday Trading Rules and Opening Hours

In Punto casa, an Italian law regulating business opening hours for retail sales
provided for a total closure of the shops on Sundays and public holidays. The
claimants operated shops that frequently opened on Sundays. The court concluded
that such regulations fell within the definition of selling arrangements and that Article
34 TFEU did not apply. The same ruling was held in Tankstation.

In Pelckmans, the Court of Justice refused to revisit the question of compatibility

with Article 34 TFEU of opening hours restrictions reviewed from the perspective of
the Charter of Fundamental Rights, based on principles of equality and non-
discrimination, Article 20 and 21 of the Charter, since they had consistently ruled that
restrictions on retail trading hours did not infringe Article 34 TFEU, and thus they had
no jurisdiction to do so.

Sale of Goods through Designated Methods

The Court in Commission v Greece indicated that a rule requiring a good to be sold
through designated methods was a mere limitation on the means of distribution
without affecting its composition and thus was a ‘selling arrangement’. The
requirement here was that processed milk for infants could only be sold in
pharmacies. Furthermore, the rule applied equally to all products irrespective of origin
and to all traders.

Regulating designated methods of sale was also considered in Ker Optika bt where
the Court noted that limitation on the mailing of the contact lenses to which the
electronic contract pertained deprives traders from other member states of a particular
effective means of selling, therefore significantly impedes market access, and this
does not satisfy the Keck criteria of applying equally in law and fact. In this case the
contact lenses were required by Hungarian law to be sold only in certain specialized
shops or by home delivery for final consumption. Then claimant company operated
online with delivery through mail order. The Court seemed very keen to focus on
expanding the potential for market access through the internet due to the potential
benefits this has for consumers.

Restrictions on certain forms of Sale Promotions

Prior to Keck in Oosthoek and Buet, the Court of Justice held that legislation that
prohibited free gifts being offered as part of a sales promotion would be caught by
Article 34 TFEU. However, applying the Keck test today it is probable that these
cases would now have been deemed to have involved selling arrangements and as
such fallen outside the reach of the Article.

Rules on Use of Products

In Commission v Italy the Court of Justice held that regulations on the use of the
products were within the scope of Article 34 TFEU but could be justified. In this case
the Italian legislation prohibited motorcycles and quadricycles from towing a trailer.
This was a breach of Article 34 TFEU since consumers unable to lawfully use a
motorcycle with a trailer would be unlikely to purchase one, thereby hindering trade
within the internal market. The restriction was however justified on grounds of road
safety. This was confirmed in Mickelsson and Roos.

Market access test as an alternative to Keck

Since Keck received a lot of criticism there were considerable attempts to re-
formulate it and to suggest alternatives. The majority suggested ‘market access test’
to be the panacea.

In Moped Trailers, the Court of Justice re-defined the notion of barriers to trade
underlining the ‘market access test’. It stated:

‘…..any other measure which hinders access of products originating in other Member
States to the market of a Member State is also covered by (measure having equivalent
effect) concept.’

This formula was re-affirmed in Mickelsson & Roos. Some authors guessed that with
this case law the Keck selling arrangements doctrine might have been consigned to
history books, though the Court did not openly over-rule Keck, the market access
formula might suggest, the end of the Keck dichotomy.

Reverse Discrimination or Wholly Internal Situation

Reverse discrimination is a rare situation where a national rule overtly discriminates

against domestic products. Article 34 TFEU, does not apply to the wholly internal
situation. The philosophy behind the permission of reverse discrimination is that it
theoretically encourages national rules to improve quality of domestic products and
make the products more attractive to customers. In Mathot, the Court of Justice said
that a Belgium law requiring butter produced in Belgium to have certain details listed
on its packaging that was not imposed on imported butter did not breach the Article.

As far as Article 35 is concerned the matter was considered in Jersey Produce

Marketing organization, where despite Jersey and United Kingdom being considered
as the same Member State, the ECJ held that the requirement that potato growers
should be registered with a local public organization and the requirement that
marketing organizations could only export potatoes if they concluded a marketing
agreement with a local public organization were contrary to the Article. This was
because they could not rule out the possibility of potatoes being re-exported from UK.
This case increases the parameters of the application Article 35 TFEU, thus internal
rules on exports can fall within its scope.

Defences to Discriminatory Measures: Article 36

If trade rules are found to be discriminatory they can be saved through Article 36
TFEU.

‘The provisions of Article 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, then protection of health and life of humans, animals or
plants, the protection of national treasures possessing artistic, historic 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.’

It will not come as no surprise that the Court has construed Article 36 strictly.
Discriminatory rules will be closely scrutinized to ensure that the defence pleaded is
warranted. They must also pass a test of proportionality: the discriminatory measure
must be the least restrictive possible to attain the end in view. The burden of proof
under Article 36 rests with the Member State.

Case law

Public Morality Henn and Darby

Conegate

Public Policy Centre Leclerc

Public security Campus Oil v Minister for Industry and

Energy
Protection of Health and Life of Humans, Commission v UK
Animals, or Plants Sandoz BV

Defences to Indistinctly Applicable Rules: The Mandatory Requirements

It is necessary to consider separately defences to indistinctly applicable rules,

although it is questionable whether there should be a separate set of defences for
discriminatory and non-discriminatory rules.

The rationale for mandatory requirements is that many rules that regulate trade are
also capable of restricting trade, yet some serve objectively justifiable purposes. The
list of mandatory requirements in Cassis is sometimes referred to as the rule of
reason, drawing upon the earlier hint in Dassonville that, in the absence of EU
measures, reasonable trade rules would be accepted in certain circumstances. In
Oosthoek, the rule of reason was regarded as a general principle of interpretation
designed to mitigate the effects of strict prohibitions laid down in the Treaty
provisions on free movement. The burden of proving justification rests on the state
relying on the mandatory requirement.

The Relationship Between the Mandatory Requirements and Article 36

The traditional view has been that the Cassis mandatory requirements are separate
from the justifications under Article 36. The ECJ held that the Cassis exceptions
could be used only in respect of rules that were not discriminatory. The Cassis list of
mandatory requirements includes matters such as the protection of consumers and the
fairness of commercial transactions, which are not mentioned within Article 36, and
the Cassis list is not exhaustive. The ECJ’s willingness to create a broader category of
justification for indistinctly applicable rules is explicable because discriminatory rules
strike at the very heart of EU, and hence any possible justification should be narrowly
confined.

The Mandatory Requirements

The mandatory requirements are as follows:

Consumer Protection: Commission v Germany

Fairness of Commercial Transactions: Karl Prantl

Public Health: Commission v Germany

Other Mandatory Requirements include:

Protection of the Environment: Commission v Denmark

Pluralism of the Press: Familiapress

Fostering of certain forms of art: Cinetheque

Road Safety: Commission v Italy