Case C‑16/23

FA.RO. di YK & C. Sas

v

Agenzia delle Dogane e dei Monopoli

(Request for a preliminary ruling from the Tribunale Amministrativo
Regionale della Liguria)

Judgment of the Court (First Chamber) of 17 October 2024

(Reference for a preliminary ruling – Services in the internal market – Directive 2006/123/EC – Authorisation scheme – Article 10 – Conditions for granting authorisation – Sale of tobacco products – National legislation making the grant of authorisation to establish a point of sale for tobacco products subject to compliance with conditions – Conditions relating to distance and population – Protection of public health against smoking)

1. Freedom of establishment – Freedom to provide services – Services in the internal market – Directive 2006/123 – Scope – National legislation reserving the retail sale of manufactured tobacco products to authorised distributors – Included

   (European Parliament and Council Directive 2006/123, recitals 2, 5 and 8 and Art. 1(1) and (3), Art. 2(1) and (2) and Art. 4(1))

   (see paragraphs 55, 56, 58-62)

2. Freedom of establishment – Services in the internal market – Directive 2006/123 – Authorisation scheme – Concept – National legislation making the retail sale of manufactured tobacco products subject to an award procedure for points of sale – Included – Verification by the referring court

   (European Parliament and Council Directive 2006/123, Art. 4(6))

   (see paragraphs 67, 70, 71)

3. Freedom of establishment – Services in the internal market – Directive 2006/123 – Authorisation scheme – National legislation making the grant of authorisation for points of sale of tobacco products subject to conditions relating to distance and population size, without the possibility of taking into account periodic increases in the number of consumers – Whether permissible – Conditions – Compliance with the conditions referred to in Article 10(2)

   (European Parliament and Council Directive 2006/123, Recitals 7 and 66 and Art. 4(8), Art. 9(1), Art. 10(1) and (2), Art. 14(5))

   (see paragraphs 77-79, 81-86, 89-92, 94-98, 100, 101, 103-106, 108, 112, 113, operative part)

Résumé

In the present reference for a preliminary ruling concerning the establishment of a point of sale for manufactured tobacco products, the Court of Justice rules on the compatibility with Directive 2006/123 ( 1 ) of the Italian legislation applicable to the retail sale of those products, inasmuch as that legislation uses restrictive criteria based on geographical distance and population density to authorise that establishment.

Further to the revocation of its licence for the retail sale of tobacco products, the company FA.RO. made a request to the Agenzia delle Dogane e dei Monopoli (Customs and Monopolies Authority, Italy; ‘the ADM’) to set up a new ordinary point of sale for manufactured tobacco products in its commercial restaurant and bar business.

The ADM refused that request on the ground that the conditions relating to the minimum geographical distance between suppliers and population size laid down by the national legislation were not satisfied.

FA.RO. then brought an action before the Tribunale amministrativo regionale per la Liguria (Regional Administrative Court, Liguria, Italy), the referring court. That company claimed, inter alia, that a new point of sale in its establishment would not result in the harmful effect of an inflated supply as compared to demand because of the high level of tourism during certain periods.

The referring court therefore asked the Court of Justice whether, in essence, Article 15 of Directive 2006/123 precludes national legislation which makes the grant of authorisation for points of sale for tobacco products subject to compliance with conditions relating to the minimum geographical distance between suppliers and to population size, without the possibility of the competent public authority taking into account, in place of those conditions, periodic increases in the number of consumers.

Findings of the Court

In the first place, the Court states that legislation which reserves the retail sale of manufactured tobacco products to distributors authorised by the public authorities falls within the scope of Directive 2006/123. Such legislation does not fall within the concept of a monopoly, which is outside the scope of that directive, ( 2 ) since the State does not carry out that retail trade activity, which remains subject to competition and is not conferred on a single operator and the authorities cannot, moreover, interfere in the commercial decisions of the operators of points of sale and licenced operators.

In the second place, the Court notes that the organisation of the retail sale of manufactured tobacco products is covered by the concept of ‘authorisation scheme’ within the meaning of Article 4(6) of Directive 2006/123, since, in the context of the scheme set up by the national legislation at issue, a service provider is obliged to take steps before a competent authority in order to obtain a formal decision enabling the service provider to gain access to that activity.

Accordingly, the restrictive conditions relating to distance and to population size provided for by that authorisation scheme must respect the provisions of Article 10(2)(a) to (g) of Directive 2006/123.

Thus, first, those conditions must be non-discriminatory, which appears to the case here.

Second, they must be justified by an overriding reason relating to the public interest. This may consist in the protection of human health against the risks generated by manufactured tobacco products. By contrast, considerations of a purely economic nature cannot constitute an overriding reason relating to the public interest. An authorisation scheme cannot include prohibited requirements, with Article 14(5) of Directive 2006/123 prohibiting making the granting of authorisation subject to proof of the existence of an economic need or market demand. However, in the present case, the criteria established by the national legislation relating to distance and the resident population might – subject to verification by the referring court – be classified as an economic test if their objective was to ensure a sufficient income for sellers of manufactured tobacco products or to maximise the collection of tax levies on consumers of those products, since those criteria are intended, inter alia, to avoid, on the one hand, the proliferation of points of sales in places where demand is already satisfied by existing points of sale and, on the other hand, an insufficient number of points of sale, which could leave part of the demand unsatisfied. By contrast, where those criteria did not pursue an objective of an economic nature and were objectively justified by an overriding reason relating to the public interest, such as the protection of public health, by avoiding increased supply encouraging consumption and by having a dissuasive effect on demand, they would not be covered by that prohibition.

Third, the conditions relating to distance and population size must be suitable for securing, in a consistent and systematic manner, the attainment of the objective pursued and must not go beyond what is necessary to attain it.

In that regard, it appears, first of all, that those conditions have the effect of creating a control on the supply of tobacco, making it possible to avoid encouraging its consumption, thus contributing to the objective of protecting public health. In addition, the controlled supply of legally manufactured tobacco products helps reduce the use of contraband products which are likely to act as an incentive to consumption, due to the lower prices, or to pose additional risks to the health of consumers.

However, in order to achieve, in a consistent and systematic manner, the public health protection objective, that control mechanism for the supply of tobacco, which makes it possible to guarantee the accessibility and availability of manufactured tobacco products, should also have a dissuasive effect on the demand for those products. Furthermore, in order to maintain the effectiveness of the objective of protecting public health, it is necessary to verify that the application of the conditions relating to distance and population size is sufficient to discourage the consumption of manufactured tobacco products, without leading to an increase in the unlawful supply of those products. For those reasons, it is for the referring court to ascertain whether, as regulated by the national legislation, the installation of vending machines constitutes a means of selling manufactured tobacco products as an alternative to sale by means of ordinary or special points of sale or by licence, which must comply with the same conditions relating to distance and population size, and does not lead to an increase in the supply of those products.

Next, the Court points out that the Member States have a measure of discretion to determine the degree of protection which they wish to afford to public health and the way in which that degree of protection is to be achieved. It is thus not indispensable for the restrictive measure issued by the authorities of a Member State to correspond to a conception shared by all Member States. Consequently, the fact that the FCTC ( 3 ) does not envisage conditions relating to distance and population size as a measure intended to reduce tobacco consumption has no bearing on the assessment of the necessity of the scheme at issue in the main proceedings to achieve the objective of the protection of public health.

In the light of that discretion, where a Member State considers it useful to introduce measures to control the supply of manufactured tobacco products, that State may legitimately take the view that a periodic increase in the number of consumers is not a factor that should be taken into account. Indeed, to take such a periodic increase into account would run counter to the intended objective of limiting supply in order to dissuade consumption.

Fourth, it appears that the conditions relating to distance and population size are based on objective data, are known in advance and are not, in principle, likely to give rise to difficulties of interpretation or application. That said, according to the national legislation, even if the conditions relating to distance and population size are satisfied, ordinary points of sale are to be established, in particular, when the authorities consider it useful and appropriate in the interest of the service. Since that latter concept is defined in general terms, it is likely to call into question the clear, unambiguous, objective and transparent nature of the criteria governing the exercise of the authorities’ discretion, which it is for the referring court to verify.

( 1 ) Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36).

( 2 ) Article 1(3) of that directive.

( 3 ) World Health Organisation Framework Convention on Tobacco Control, signed in Geneva on 21 May 2003.