Op-Ed: “COOL obligations assessed by the Court of Justice in Lactalis” by Janja Hojnik
Instant closure of borders between the EU Member States following the COVID-19 outbreak in spring 2020 astonishingly showed how vulnerable free movement of goods – this seemingly enduring oak tree of the EU single market – can still be. Despite considerable normalisation of distribution channels over the summer, national debates on the post COVID-19 economy show that traditional beliefs that trade liberalisation contributes to better economic prosperity and a higher standard of living are under heavy layers of dust. Domestic producers call for governmental support and governments often embrace economic protectionism to this end. It will thus be crucial for the Commission and the Court of Justice to play their single market watchdog role carefully and consistently also in the future – yet, with full awareness of the new perceptions among European consumers of issues, such as food quality and safety, national food self-sufficiency and environmental sustainability of the economy.
The Court of Justice was recently called to rule on some aspects of this complex set of issues in Lactalis (C-485/18), which it did on 1 October 2020. The case before the French Council of State (Conseil d’État) is between dairy group Lactalis and the French Government regarding the 2017 French Decree requiring dairy products sold in France to state their country of origin. At least seven other Member States recently followed the French example by making country-of-origin labelling (COOL) mandatory. Lactalis, supported by numerous industry groups, challenged the legality of mandatory COOL in light of the free movement of goods within the EU and EU secondary legislation harmonising product particulars at the EU level.
Advocate General Hogan rightly observed in his Opinion of 16 July 2020 that ‘the labelling of the country of origin of products has been among the most contentious features of the single market’ (paragraph 3). Although it is true, as AG Hogan noted, that quite often ‘such labelling requirements are simply a disguised method of ensuring that preference is given to national products’ (paragraph 3), it is also clear that most Member States, be it centrally as in this case or through more decentralised agencies and semi-public chambers, make use of such or similar measures that promote product nationality – yet, they rarely end up before the courts and even less often before the Court of Justice. Cases, such as Lactalis, therefore present an important opportunity for the Court to balance objectives of the EU’s agricultural policy with the single market foundations.
In Lactalis, the Court ruled, in essence, that the EU Regulation on the provision of food information to consumers (1169/2011) harmonises the mandatory indication of the country of origin or place of provenance of foods with the exception of certain categories of foods, such as milk as a final product or as an ingredient. However, this does not preclude the Member States from adopting additional requirements in this respect, provided certain conditions – set by Article 39 of the Regulation – are met (see paragraph 24 of the judgment).
The measures must, firstly, be justified on grounds relating to the protection of public health, consumers, the prevention of unfair competition and so on. and secondly, there must be a proven link between certain qualities of the food and their origin or provenance. Where this link is established, as the third (and only ancillary) step, it needs to be verified whether there is evidence that a majority of consumers attach significant value to such information (on this successive assessment of objective (quality link) and subjective condition (consumer value) see paragraphs 35-39 of the judgment). While linking provenance marketing to distinct quality can be traced back at least to the famous Apple and Pear case (222/82), asking the consumers what significance they attach to COOL when observing consistency of national COOL measures with EU law is not so common. As noted by the Court, however, this subjective examination only comes after the objective link between specific qualities and the origin has been established. Finally, the Court held that the concept of ‘qualities’ of foods only refers to the qualities which are linked to the origin or provenance of a given food and may thus not include issues, such as resilience of the food to transport and the risk of deterioration during transit (paragraph 51).
Although it will be for the national court to verify the stated conditions, the judgment comes contrary to the Commission’s position that has approved the disputed French decree under the procedure set forth under the Regulation. The Commission’s approach shows a certain flexibility of the Commission when it comes to COOL of food products, which is consistent with its own endeavours to promote European food products on global markets (see for example this press release, supported by the Parliament) and with its reserved approach towards various national protectionist measures that enhance product nationality and consumer ethnocentrism. In recent years, markets have witnessed numerous cases of consumer ethnocentrism boosting in contravention with EU law. However, the Commission has not brought any action against the violating Member States. Quite to the contrary, the Commission itself is encouraging the shortening of distribution channels and openly showing support for the marketing of local products in the form of financing basic services for the creation of commercial centres, local shops or multi-purpose convenience stores, building of covered and uncovered markets, and so on(Green Paper, paragraph 3.1.2).
The Commission is perhaps rightly cautious in respect of bringing the Member States before the Court of Justice for adopting protectionist measures that are only potentially successful in economic terms. Very often, consumer patriotism ends when our wallets are at stake. National media news on such actions by the Commission against the Member States might, however, have exactly the effect the Commission does not want – that is raising ethnocentric sentiments among the consumers.
Yet, such requirements and campaigns promoting product nationality are currently so widespread that certain limits should be set more clearly. Furthermore, more consistency between the Commission’s agricultural policy of shortening distribution channels and endeavours for a fully functioning internal market would also be needed. While claiming ‘local is fresh and the best’ might be justified in respect of fresh tomatoes and strawberries, local provenance is much less relevant in respect of UHT-milk in tetra pack or in respect of flour. Yet, so-called ‘gastro nationalism’ often encompasses everything that is even remotely related to food, fully overlooking the basic principles of the internal market. The Court’s two-step examination that puts objective criteria first reflects awareness of this fact.
Then again, taking into consideration the recent disturbance of distribution channels under the COVID-19 hurricane, is it still illegitimate for the Member States to strive to achieve self-sufficiency in respect of all the basic food segments or could we perhaps perceive it as a dimension of national security under Article 36 TFEU? As we might recall, the famous Campus Oil case (72/83) in which the Court supported Irish security of oil supplies was evidently influenced by the oil crises that shortly preceded the case.
The Lactalis case shows once again that EU regulations and judgments cannot easily erase ethnocentrism that is deeply rooted in consumers’ perceptions and national economic policies. If EU legal scholars liked it or not, product nationality is becoming one of the crucial marketing, legal and macro-economic policy aspects and consumer ethnocentrism is a highly desired behaviour on the (domestic) market by all the EU Member States and their global trading partners. In this respect, various advertising techniques are used which rely on consumer patriotism, such as buy domestic and buy local campaigns, as well as quality marks and COOL assigned to products of domestic origin to attract the attention of consumers. Such campaigns and quality marks imply that domestic products are generally of better quality than imported ones and should thus be preferred by the consumers, without corresponding tests that would prove this to the consumers. The consumers’ support of domestic products in supermarkets will, in turn, improve their own position as workers, guaranteeing them jobs and prosperity. COOL requirements and other similar measures try to establish two classes of products—domestic and foreign—and are hence openly discriminatory since they indirectly refer to the high (domestic) and low quality (imported) of products. Moreover, the functions of product nationality (or country of origin) and the nationality of individuals are not completely at odds. While the authorities learn about individuals by inspecting their passports, consumers similarly learn about product nationality from product labelling, advertisements, word-of-mouth and based on their own experiences with particular product categories.
As the Court noted in Commission v UK (207/83, paragraph 17) ‘the purpose of indications of origin or origin-marking is to enable consumers to distinguish between domestic and imported products and that this enables them to assert any prejudices which they may have against foreign products’. Consumer rejection of products from a specific country may be the result of some negative historical experiences (such as wars), political relations, and so on, irrespective of the quality judgements attributed to its products. Such rejection may also be the result of general public opinion that domestic/imported products are of superior/inferior quality.
The real task of the Commission should thus be to ascertain why EU consumers link quality to product nationality and to reduce occurrence of such perceptions (provided they are not objectively justified), rather than to restrict EU consumers’ right to be informed about the origin of any product on the EU market. As found by the WTO panel in US COOL measures case (DS384), ‘there can be good reasons – apart from any protectionist motives – why a WTO Member might want information to be provided as to the origin of products, and particularly meat products, at the retail level’ (paragraph 7.649). More recently, New Zealand adopted the so-called Consumers’ Right to Know (Country of Origin of Food) Bill (accessible here). The EU only makes things complicated by selecting when COOL requirements are justified and when not.
To conclude, product labelling is in the complex web of Member States’ efforts to protect and isolate their respective economies and slightly forgotten aim of Jacques Delors and the Court of Justice ‘to unite national markets in a single market having the characteristics of a domestic market’ (207/83, paragraph 17). Thirdly, there are consumers that increasingly dislike being patronised by withdrawing their ‘right to know’ (the origin of every food ingredient they buy and consume). And finally, one cannot disregard the environment. In the context of environmental impact of food, the term ‘food miles’ was developed, referring to the distance food has travelled from the time of its production until it reaches the consumer. Recently intensified concerns about global warming have caused many people to think about where our food comes from – thus counting our ‘food miles’ (or kilometres). The Court in Lactalis refused to accept this food travelling as a factor of product quality and it has done so understandably, considering widespread consequences a contrary ruling would have upon the internal market. Nevertheless, increasing consumer environmental awareness puts hopes into the digitalisation process to enable the consumers easy to use applications to monitor ‘food miles’, but possibly also by other products. A fully integrated internal market that operates as a domestic market will thus continuously be hard to achieve – primarily in the food sector.
Janja Hojnik is EU Law Professor at University of Maribor, Faculty of Law, Slovenia, author of ‘Free movement of goods in a labyrinth: Can “Buy Irish” survive the crises?’, CMLRev (2012) and more recently of ‘Tell me where you come from and I will tell you the price: Ambiguous expansion of prohibited geographical price discrimination in the EU’, CMLRev (2019).