14 November, 2016

Deutsche Parkinson Vereinigung (C-148/15) - an important judicial piece in the free movement puzzle

The Court of Justice of the EU (CJEU) has recently decided that German legislation on fixed prices for prescription pharmaceuticals is contrary to the free movement of goods, pursuant to Article 34 TFEU*, and that the legislation is not justifiable pursuant to Article 36 TFEU. On the face of it, the judgement is not particularly surprising. However, when one looks closer, the case is an important judicial piece in the free movement puzzle. We shall soon take a closer look at the judgement, but first the facts of the case.

*Treaty on the Functioning of the European Union

What the DPV case was about

The case concerned Deutsche Parkinson Vereinung eV (DPV) an organisation helping patients suffering from Parkinson's disease. DPV had entered into an agreement with the Dutch mail-order pharmacy DocMorris (a pharmacy chain already famous in EU law circles). By virtue of this agreement, the members of DPV could order prescription-only medicinal products for Parkinson' disease from DocMorris and recieve various bonuses. This was not appreciated by the German Association for Protection Against Unfair Competition (Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, ZBUW) which filed an injunction to prohibit DPV from promoting its' bonus system.

The matter eventually landed before the Regional Court in Düsseldorf. The regional court did not consider that the practice of DPV infringed the German price-fixing legislation as such. However, the regional court took the view that the German price fixing regime prohibited a system where, in parallel to the purchase of a medicinal product at the fixed price, a customer is afforded a benefit which makes the purchase appear more economically advantageous to him or her. As the regional court also had doubts as to the compatibility of the national price fixing regime as such with Article 34 and 36 TFEU, the regional court made reference for a preliminary ruling to the CJEU.

The judgement

The CJEU found that the price-fixing regime constituted a measure having an equivalent effect of a quantitative restriction, contrary to Article 34 TFEU. The Court's rationale was that since mail-order pharmacies were not able to compete effectively with service, in the same way as brick-and-mortar pharmacies, a restriction on the possibility to compete with price made it harder to access the German market for foreign mail-order pharmacies (paras. 24-27). In the light of the Court's tremendously low threshold for finding measures contrary to Article 34 TFEU, the judgement in this part is not surprising at all.

The Court then makes an assessment of whether the German price fixing regime could be justified for the protection of public health - more specifically to ensure safe and high-quality supply of pharmaceuticals - pursuant to Article 36 TFEU. The CJEU starts off by affirming, as the Court has done many times before, that protection of public health is the most important ground for restricting one of the fundamental freedoms in the Treaties (para. 30). The Court goes on discuss the arguments raised by the applicant and several interveners of the case, who argued that price fixing of pharmaceuticals was necessary to guarantee safe and high-quality supply of pharmaceuticals, in particular in rural areas (paras. 32-33). Whilst the Court acknowledges that this may be the case, it also adds that measures restricting a fundamental freedom must be accompanied by necessary evidence that shows the appropriateness and proportionality of the restrictive measure (paras. 34-35). The national court then has to render judgement on the basis of such evidence (para. 36).

In my opinion, the judgement could have stopped here and the CJEU could have - as it usually does - handed the matter to be decided back to the national court. But lo and behold the CJEU does not in this case. Instead, the Court goes on to rule on the evidence in the case file and reaches the conclusion that there was not sufficient evidence that showed that price fixing was an appropriate measure to ensure safe and high quality supply of pharmaceuticals. In that regard, the Court underlined that it is not sufficient, when justifying a restriction of a fundamental freedom, to rely on general contentions (para. 37). The Court rounds up the case by dismissing further arguments put forward as to the negative effects of price competition for prescription pharmaceuticals (paras. 39-44) (e.g. that price competition on prescription pharmaceuticals would affect pharmacies in rural areas negatively (paras. 40 and 43)).

My thoughts on the judgement

I find this judgement very interesting for four reasons:
Firstly it is quite odd that the Court actually rules on the facts of the case and finds that the price fixing regime is not justified pursuant to Article 36 TFEU, based on the evidence in the case file. Given that the case is referred to the CJEU by a national court pursuant to Article 267 TFEU, the CJEU should, in my opinion, have left it to the national Court to rule on the appropriateness and proportionality of the price fixing regime.

Secondly, I do agree with the law. If there is not sufficient evidence to ascertain a measure restricting  a fundamental freedom, a national court should should not accept the measure. This follows in line with the recent Scotch Whisky Judgement (C-333/14, to which the CJEU also refers to in the judgement) and confirms that the Court has taken a more strict view on the appropriateness criterion and the necessity of producing sufficient evidence when restricting fundamental freedoms.

Thirdly, what will the consequences of this judgement be? Will price fixing regimes in other MS come under challenge? Will the judgement necessitate new secondary legislation expressly allowing national price regulation of pharmaceuticals (the European Commission's proposal on new transparency rules for price regulation of pharmaceuticals was recently withdrawn)? Will other markets, for example books where there is price fixing in Germany and Austria, come under similar judicial scrutiny?

Fourthly and finally, could the applicants and interveners really produce no hard evidence what so ever to support their claim!?! This is perhaps the most surprising part to me but it also shows how important it is that the CJEU is now evidently taking a much stricter view on the appropriateness criterion and the need to produce sufficient evidence.

In conclusion, the DPV judgement will, alongside last year's Scotch Whisky Judgement, be one of the most important rulings on the free movement of goods in recent years. I really hope that the case will spark some debate as the judgement, in its simplicity, is controversial for several reasons. Personally, I look forward to the opinion of the Swedish Dental and Pharmaceutical Benefits Agency (Tand- och läkemedelsförmånsverket, TLV) on the judgement.

07 November, 2016

10 EU-related terms you should know

Understanding the EU is not easy. There are too many councils, courts and other difficult things to keep track of. Below is a cheat-sheet of the most important terms you should know. To make things easier for our Swedish readers, the Swedish terms are included in brackets.

Inspiration cred goes to Professor Mårten Schultz, who recently made a list of mistakes commonly made when discussing and reporting on legal matters, and Annika Ström Melin's article about lacking EU knowledge, which itself was wrongly edited

I. Institutions

1. European council (Europeiska rådet)
The European council consists of the heads of state of the EU's Member States. The European Council does not have any formal legislative power! Instead, the European council sets out the broader political direction of the EU. Sometimes, one can get the impression that the European Council enters into international agreements, such as the recent deal with Turkey regarding asylum seekers. However, such agreements, if made by the European Council alone, are not necessarily legally binding. For more detail on this issue, read here.

2. Council of ministers (Ministerrådet) (also called the Council of the European Union)
This is the Council that is meant when just referring to "the Council". The council is made up of the ministers of the different Member State governments. The council has a number of different constellations, depending on the question discussed. For example, when discussing the regulation of foodstuffs (say bananas), the ministers responsible for that issue will meet. The Council, together with the European Parliament, has the formal legislative power in the EU. 

3. European Parliament (Europaparlamentet)
The European Parliament is directly elected by the citizens of the EU and is not organized by nationality of its members, but by groups of political parties. Together with the Council, the Parliament has the legislative power in most, but not all, legislative issues decided by the EU.

4. Commission (Kommissionen)
The Commission consists of one Commissioner from each Member State. The Commissioners usually have a background as politicians and are (similar to ministers) tasked with different policy areas. One of the most important tasks of the Commission is to propose and draft new legislation. Thus, when you read in the paper that "the EU wants (insert controversial issue)", usually what has happened is that the Commission has proposed new legislation. This, however, does not necessarily mean that such legislation will also be passed, since the Commission does not have legislative power to adopt its proposals. This power rests with the Council of ministers (indirectly elected by the people) and the Parliament (directly elected by the people).

5. European Court of Justice / Court of Justice of the European Union (EU-domstolen)
The Court has its seat in Luxembourg and actually consists of three separate Courts: The Court of Justice, the General Court and the Civil Service Tribunal. Most prominently, the Court of Justice answers questions regarding the interpretation of EU law by national courts of the Member States (so called preliminary rulings). Note that preliminary rulings are just that - preliminary. Final judgment is always rendered by the national court asking the question. 

II. Institutions NOT part of the EU

6. Council of Europe (Europarådet)
The Council of Europe, which has 47 European states as its' members, is an international organization tasked with promoting human rights, democracy and the rule of law in Europe. The monumental achievement of the Council of Europe is the adoption of the European Convention on Human Rights (ECHR) in 1950, Europe's human rights bill. The Council of Europe is also, contrary to the popular belief that the EU is the originator, the creator of the gold-starred European flag and the European anthem.

7. European Court of Human Rights (Europadomstolen)
This Court has its seat in Strasbourg and is tasked with judging in cases where one of the states signatory of the European Convention of Human Rights (ECHR) has allegedly infringed human rights.

III. EU Legislation and decision-making

8. Regulations (Förordningar)
Regulations are one of the legislative instruments that can be adopted by the EU (usually the Council and the Parliament together). Regulations are directly applicable in the Member States. One example it Regulation 1/2003 which, amongst other things, allows the Commission to investigate and fine companies that have been involved in a cartel. 

9. Directives (Direktiv)
Directives are the other important legislative instrument that can be adopted by the EU. Directives need to be implemented into national law by the Member States. This means that a national law can be based on a directive, but this is not necessarily visible from the individual clauses in the law itself.

10. International free trade agreements (Internationella frihandelsavtal)
If the Member States want to enter into a free trade agreement with a state outside of the EU, they first need to give the Commission a mandate to negotiate such an agreement. During negotiations, the Commission must inform and consult with the Council and the European Parliament. Once negotiations are concluded, the Council and the European Parliament must formally agree to the deal negotiated by the Commission. Recent examples are the free trade agreements with Canada (CETA) and with the USA (TTIP), whereas the latter is still being negotiated.