CJEU 'consolidates' market access test in the enforcement of Art 34 TFEU (C-639/11 & C-61/12)

In its Judgments of 20 March 2014 in cases C-639/11 Commission v Poland and C-61/12 Commission v Lithuania, the Court of Justice of the European Union (CJEU) has found that both countries infringed their obligations under Art 34 TFEU by making registration in their territory of passenger vehicles having their steering equipment on the right-hand side, whether they are new or previously registered in other Member States, dependent on the repositioning of the steering wheel to the left-hand side. In my view, this case is interesting for at least two reasons.

 

Firstly, the CJEU has 'consolidated' the so-called 'market access test' in the enforcement of Art 34 TFEU by recasting the traditional 'Dassonville' formula and focussing the assessment on hindrances to market access. Indeed, in the 'new' (re)formulation of the test, the CJEU considers that

In view of the Court’s settled case-law, the contested legislation constitutes a measure having equivalent effect to quantitative restrictions on imports within the meaning of Article 34 TFEU, in so far as its effect is to hinder access to the Polish [sic, Lithuanian (oh, the joys of copy and paste!)] market for vehicles with steering equipment on the right, which are lawfully constructed and registered in Member States other than the Republic of Lithuania (see, concerning the origins of that case-law, Case 8/74 Dassonville [1974] ECR 837, paragraph 5; Case 120/78 Rewe Zentral, ‘Cassis de Dijon’ [1979] ECR 649, paragraph 14; and, more recently, Case C‑110/05 Commission v Italy [2009] ECR I‑519, paragraph 58) (C-61/12 at para 57 emphasis added and, equally, C-639/11 at para 52, correction needed in the English version of the C-61/12 Judgment but not in other linguistic versions].

This may be seen as a relatively welcome development, as it continues in the line of clarification already initiated in C-110/05 Commission v Italy (mopeds) and consolidates a more encompassing test that allows for the harmonious assessment of potential restrictions to free movement of goods under a single, unified (and probably more functional) test.

 

Secondly, the case is important in that the CJEU deviates significantly from C-110/95 in applying a much more stringent test of (strict) proportionality to the measures adopted by Poland and Lithuania (basically, requiring a repositioning of the steering wheel prior to registration of the motor vehicles) than it did to the measures adopted by Italy (an outright ban of a specific type of trailers to be towed by motorbikes and other vehicles) on the grounds of road safety [see C-61/12 paras 63-69 and C-639/11 paras 58-65].

 

In my view, the application of such a stringent proportionality test (with which the CJEU seems to revitalise the pro-integrationist agenda in the enforcement of Art 34 TFEU) will create frictions with Member States for two main reasons.

 

Firstly, the 'consolidation' of the new (re)formulation around hindrance of market access indicates an effective substitution of the underlying rationale in internal market rules (art 34 TFEU particularly) from a producers’ freedom (push market) to a consumers’ right (pull market). This will be problematic unless free movement rules further converge with (effective) consumer protection and safety and similar concerns receive a common treatment throughout the EU (ultimately, the goal of the CJEU, particularly when it uses the argument that in 22 of the 28 Member States registration would not have required changing the wheel location).

 

And, secondly, because the new (re)formulation of the case law creates a dangerous test leading to a (very, too broad) Dassonville-like formula limited only by (subjective) proportionality analysis carried out by the CJEU, which can result in an encroachment of domestic regulatory powers if the CJEU adopts a tough stance, as it has done against Poland and Lithuania (and differently from its previous, more timid approach in the case against Italy).

 

In the future, it will be interesting to see if the CJEU does not find itself under the same amount of criticism as when it first adopted the Dassonville fomula and, consequently, whether the next round of evolution of the law on free movement of goods does not initiate a new restriction of the rules under a new version of Cassis de Dijon. All in all, the development of the law in this area of the internal market seems to evolve in cycles.

Keep amassing your brand or it will be eaten up (C-409/12)

In its Judgment of 6 March 2014 in case C-409/12 Backaldrin Österreich The Kornspitz Company (Kornspitz), the Court of Justice of the EU (CJEU) has declared that a trademark is liable to revocation if, as a consequence of acts or inactivity of the proprietor, it has become the common name for the product from the point of view solely of end users of the product. The case interprets Article 12(2)(a) of Directive 2008/95 on the approximation of the laws of the Member States relating to trade marks (Codified version), which indicates that a trade mark is liable to revocation if "in consequence of acts or inactivity of the proprietor, it has become the common name in the trade for a product or service in respect of which it is registered". The contentious part of the provision concerned the interpretation of the term "trade".

 

In the case at hand, the professionals (intermediaries) in the Austrian baking sector are aware that 'Kornspitz' referred to a specific trademark for ‘flour and preparations made from cereals; bakery goods; baking agents, pastry confectionery, also prepared for baking; pre-formed dough … for the manufacture of pastry confectionery’. However, given that the owner of the brand (Backaldrin) produces a baking mix which it supplies primarily to bakers and then allows bakers and foodstuffs distributors to use the term 'kornspitz' in the sale of the bread rolls made with the trade marked mix, it was argued that consumers appreciate no distinctive character in the term 'kornspitz', which has become the standard name for a given mix of flours and seeds. Hence, one of Backaldrin's competitors challenged the 'Kornspitz' trade mark and applied for its revocation.

 

The CJEU accepted the argument and clarified that:

19 […] Article 12(2)(a) of Directive 2008/95 addresses the situation where the trade mark is no longer capable of fulfilling its function as an indication of origin (see, to that effect, Case C‑371/02 Björnekulla Fruktindustrier [2004] ECR I‑5791, paragraph 22).

20 Among the various functions of a trade mark, that function as an indication of origin is an essential one (see, inter alia, Joined Cases C‑236/08 to C‑238/08 Google France and Google [2010] ECR I‑2417, paragraph 77, and Case C‑482/09 Budějovický Budvar [2011] ECR I‑8701, paragraph 71). It serves to identify the goods or services covered by the mark as originating from a particular undertaking, and thus to distinguish those goods or services from those of other undertakings (see, to that effect, Case C‑12/12 Colloseum Holding [2013] ECR, paragraph 26 and the case-law cited). That undertaking is, as the Advocate General stated at point 27 of his Opinion, that under the control of which the goods or services are marketed.
[… 22] […] Article 12(2)(a) of the directive relates to the situation where the trade mark has become the common name and has therefore lost its distinctive character, with the result that it no longer fulfils that function (see, to that effect, Björnekulla Fruktindustrier, paragraph 22). The rights conferred on the proprietor of that mark under Article 5 of Directive 2008/95 may then be revoked (see, to that effect, Case C‑145/05 Levi Strauss [2006] ECR I‑3703, paragraph 33).

23 In the case described by the referring court [...] the end users of the  [...] bread rolls known as ‘KORNSPITZ’, perceive that word sign as the common name for that product and are not, therefore, aware of the fact that some of those bread rolls have been made using a baking mix supplied under the trade mark KORNSPITZ by a particular undertaking.

24 [...] that perception on the part of end users is due, in particular, to the fact that the sellers of the bread rolls made using that mix do not generally inform their customers that the sign ‘KORNSPITZ’ has been registered as a trade mark.

25 [...] the sellers of that finished product do not generally, at the time of sale, offer their customers assistance which includes an indication of the origin of the various goods for sale.

26 Clearly [...] the trade mark KORNSPITZ does not, in the trade in respect of the bread rolls known as ‘KORNSPITZ’, fulfil its essential function as an indication of origin and, consequently, it is liable to revocation in so far as it is registered for that finished product if the loss of its distinctive character in respect of that product is attributable to acts or inactivity of the proprietor of that trade mark (C-409/12 at paras 19-26, emphasis added).

 

The CJEU then goes on to assess whether the loss of distinctive character is attributable to the owner of the brand and finds that an insufficient insistence on the use of the term 'kornspitz' as a trade mark by bakers and foodstuffs distributors would be sufficient to trigger the revocation of the trade mark (paras 31-36). Indeed, the CJEU cleary stressed that

in a case [...] in which the sellers of the product made using the material supplied by the proprietor of the trade mark do not generally inform their customers that the sign used to designate the product in question has been registered as a trade mark and thus contribute to the transformation of that trade mark into the common name, that proprietor’s failure to take any initiative which may encourage those sellers to make more use of that mark may be classified as inactivity within the meaning of Article 12(2)(a) of Directive 2008/95 (C-409/12 at para 34, emphasis added).

Therefore, the standards of 'duty of care' or 'vigilance' applicable to trade mark owners are high and they will always be required to take (appropriate) positive steps to protect the distinctive character of the signs that they use to brand their products [for a law and economics discussion on the requirement of distinctiveness and the ensuing 'trade mark policying' obligations imposed on their owners, see Landes & Posner, 'Trademark Law: An Economic Perspective' (1987) 30 J.L. & Econ. 265, 287-288].

US GAO reports on test commercial items program for #publicprocurement

In a recently published report, the US Government Accountability Office (GAO) assessed the status of a test program for the acquisition of commercial items and services--i.e. are those that generally available in the commercial marketplace in contrast with items developed to meet specific governmental requirements.

 

The report is interesting, and it highlights that US federal agencies are conducting around 2% of their procurement through this program and that, overall, the "test program reduced contracting lead time and administrative burdens and generally did not incur additional risks above those on other federal acquisition efforts for those contracts GAO reviewed." Therefore, there seems to be scope for further use of the commercial items acquisition program.

 

Importantly too, GAO warns that, however, a significant number of these contracts were "awarded noncompetitively [and that, w]hile these awards were justified and approved in accordance with federal regulations when required, GAO and others have found that noncompetitive contracting poses risks of not getting the best value because these awards lack a direct market mechanism to help establish pricing." Consequently, GAO has recommended the interested federal agencies to look in more detail into the use of the program and to take measures to ensure that thorough market research is conducted before a commercial items contract is awarded noncompetitively.

 

In my view, the emphasis that GAO places on the collection and analysis of data in order to determine the benefits and success of the commercial items program offers valuable insights to procurement regulators in other jurisdictions--and, particularly, in the EU, where Member States should start considering procurement reform in view of the imminent publication of the new Directives in the Official Journal.

CJEU clearly indicates total lack of will to effectively become EU's constitutional court (C-206/13)

In its Judgment of 6 March 2014 in case C-206/13 Siragusa, the Court of Justice of the EU has continued developing its case law on the lack of applicability / jurisdiction to interpret the Charter of Fundamental Rights of the EU (CFREU) in purely domestic situations (which it had, amongst other instances, already indicated in Romeo).

In my view, the approach adopted by the CJEU is prone to create potential situations of reverse discrimination and may end up creating multiple (and possibly conflicting) standards of protection of fundamental rights in the EU with significant constitutional implications.

 

In the case at hand, the CJEU was presented with a question on the interpretation of the right to property recognised in article 17 CFREU and, more specifically, on whether it could be constructed as a limit against certain landscape protection rules applicable in Italy. The issue was raised by an Italian court hearing a dispute between an Italian citizen and an Italian public authority. Despite the efforts in trying to connect the situation with the (indirect) application of EU environmental law, the CJEU was not persuaded that there was a sufficient connection and, therefore, rejected to provide a substantive interpretation. The main argument of the CJEU was indeed that

30 [...] there is nothing to suggest that the provisions of Legislative Decree [...] fall within the scope of EU law. Those provisions do not implement rules of EU law [...].

31 It is also important to consider the objective of protecting fundamental rights in EU law, which is to ensure that those rights are not infringed in areas of EU activity, whether through action at EU level or through the implementation of EU law by the Member States.

32 The reason for pursuing that objective is the need to avoid a situation in which the level of protection of fundamental rights varies according to the national law involved in such a way as to undermine the unity, primacy and effectiveness of EU law (see, to that effect, Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125, paragraph 3, and Case C‑399/11 Melloni [2013] ECR, paragraph 60). However, there is nothing in the order for reference to suggest that any such risk is involved in the case before the referring court.

33 It follows from all the foregoing that it has not been established that the Court has jurisdiction to interpret Article 17 of the Charter (see, to that effect, Case C‑245/09 Omalet [2010] ECR I‑13771, paragraph 18; see also the Orders in Case C‑457/09 Chartry [2011] ECR I‑819, paragraphs 25 and 26; Case C‑134/12 Corpul Naţional al Poliţiştilor [2012] ECR, paragraph 15; Case C‑498/12 Pedone [2013] ECR, paragraph 15; and Case C‑371/13 SC Schuster & Co Ecologic [2013] ECR, paragraph 18) (C-206/13 at paras 30-33, emphasis added).

In my view, this line of reasoning (acknowledgedly, rather in line with art 51 CFREU and art 6 TEU) is clearly problematic. To begin with, because it clearly disconnects (implicitly, at least) the protection of the CFREU rights from EU citizenship (art 20 TFEU, coupled with the general prohibition of discrimination on the grounds of nationality in art 18 TFEU). The CJEU has clearly considered it insufficient that EU citizens can be granted different levels of protection of their CFREU rights at domestic level as a result of the application of the domestic laws as sufficient justification for intervention (i.e. to assume jurisdiction and provide legal interpretation). By restricting the goal of a common level of protection of CFREU rights to cases in which 'the unity, primacy and effectiveness of EU law' is affected and excluding its competence, the CJEU seems to forget that the CFREU is in itself EU law and, consequently, that it should be afforded the same treatment as the other Treaty provisions.

 

Secondly, the CJEU is laying down too strong foundations for unresolved problems of reverse discrimination. If the claimant in Siragusa had not been Italian and, consequently, a (very loose) connection to free movement rights could be established, the CJEU may have been willing to assess the intervention by the Italian State on the property of a (moving) EU citizen under a different light (worse still, that challenge could be easier for corporate claimants than for individuals, at least if they do not engage in an economic activity, since 'corporate citizens' could also be potentially protected by freedom of establishment).

 

In such a case, the trigger for the application of the CFREU would be equally unrelated to the content of the rights of the CFREU themselves and, sometimes, the trigger for CJEU intervention may simply result from the fact that the EU citizen affected exercised or not free movement rights--which, in my view, continues to create an unjustifiable discrimination between moving (proper) EU citizens and non-moving (unaware) EU citizens that can only continue to erode the potential development of the EU.

 

 

Finally, this line of reasoning may end up creating a situation where the (constitutional) courts of the Member States may be obliged to enforce at the same time conflicting standards of substantive protection for a given fundamental right, depending on the 'sorce of law' that controls it in a given situation. And that will surely be difficult to understand. How could 'my' right to private property be different under 'my' domestic constitutional law protection or under 'my' CFREU protection, depending on factors unrelated to me, my property, or the rules (primarily) applicable? Surely the compatibility between the CFREU and competing (superior) standards of protection (those derived from the European Convention on Human Rights) have (somehow) been ironed out in art 52(3) CFREU. However, the situation is not the same with (lower-ranking?) domestic standards of protection [art 52(4) CFREU is clearly insufficient for that task] and, in my view, the CJEU approach is not helpful in that regard either.

 

Therefore, the continued rejection of its role as a constitutional court of the EU and the increasing restriction of the scope of application of the CFREU in which the CJEU is engaged are, in my view, undesirable developments in EU law.