A ROYAL NORWEGIAN MINISTRY OF HEALTH AND CARE SERVICES

EFTA Surveillance Authority Rue Belliard 35 B-1040 Brussel

Your ref Our ref Date 71877/687532 09/5380- 18.09.2014

Response from the Norwegian to the EFTA Surveillance Authority’s letter of formal notice - legislation on private import of alcohol

1. INTRODUCTION Reference is made to the EFTA Surveillance Authority’s (“the Authority”) letter of formal notice to for maintaining in force certain legislation on private import of alcohol, dated 18 June 2014. The letter was forwarded from the Norwegian Ministry of Finance to the Norwegian Ministry of Health and Care Services, which is responsible for the Norwegian legislation on alcohol. By the Authority’s e-mail of 3 July 2014, an extension of the deadline for Norway’s response was granted until 18 September 2014. On behalf of the Norwegian Government (“the Government”), the Ministry of Health and Care Services hereby gives its response to the letter of formal notice. The Government respectfully submits that the Norwegian requirement on functional and structural separation between the undertaking selling the alcoholic beverages and the undertaking delivering the beverages does not violate Article 11 and/or 36 EEA. The Government refers in this regard to its letters of 21 August 2012, 20 December 2012 and 24 January 2014, as well as to its letter of 21 December 2009'. In addition, the Government would like to make the following remarks.

1 Complaint concerning the import an distribution of alcohol in Norway, case 67389/539008. See the remarks on question 4 and 5.______Postal address Visiting address Telephone* Departement of Public Our officer POBox 8011 Dep Teatergt, 9 +47 22 24 90 90 Health Hege Christina 0030 Vat no. Bredesen [email protected] www.h0d.dq3.no 983 887406 +47 22 24 86 15 At the outset, the Government would like to note that it shares the Authority’s opinion that falls outside the scope of art. 11 EEA and 36 EEA, and that the following assessment is relevant for products covered by the EEA Agreement only.

2. RELEVANT NORWEGIAN LEGISLATION Under the Norwegian Alcohol ActA section 3-1 paragraph 1, the sale of alcoholic beverages containing more than 4.7 per cent alcohol by volume up to 60 per cent alcohol by volume may only be carried out by AS , a wholly State-owned company. For alcoholic beverages containing less than 4.7 per cent alcohol by volume, a separate retail sale licence may be granted according to section 3-lparagraph 2. The right to import alcoholic beverages is regulated in the Alcohol Act section 2-1, which sets out: “Alcoholic beverages may only be importedfrom abroad by parties who are authorised to engage in wholesale, hold a production licence, a retail sales licence extended to cover imports under section 3-1 third paragraph or a serving licence extended to cover imports under section 4-2 third paragraph. Under regulations issued by the Ministry, alcoholic beverages may however be imported by AS Vinmonopolet without a licence as mentioned in the first paragraph. Without such a licence, alcoholic beverages may also be imported by foreign powers ’ representations in Norway for official use, when they are imported duty free or pursuant to regulations issued by the Ministry. Alcoholic beverages may be imported from abroad bv private persons for personal use (private import) without a licence as mentioned in the first paragraph. The Ministry may issue further requirements which must be met in order for the importation to be regarded as private import, [emphasis added]. In the preparatory works to section 2-1 paragraph 3, it is clarified that in order for the activity to be considered private import, the private person must be in charge of the import. Further, the importing private person must not resell or use the imported alcoholic beverages in business activities.3 The Norwegian Alcohol Regulation4 section 15-5 sets out further requirements that must be met in order for the importation to be considered private import:

2 Lov 2. juni 1989 nr. 27 om omsetning av alkoholholdig drück m.v. (alkoholloven) 3 Otprp. nr. 53 (2008-2009) Om lov om endringer i lov 2. juni 1989 nr. 27 om omsetning av alkoholholdig drikk m.v. (opphevelse av forbudet mot privat innførsel av alkoholholdig drikk) page 36. 4 Forskrift 8. juni 2005 nr. 538 om omsetning av alkoholholdig drikk mv.

Page 2 “Undertakings that deliver alcoholic beverages to private persons that import alcoholic beverages for personal use shall: 1) have an internal control system in place that secures that the requirements relating to delivery of alcohol are observed, cf chapter 8, 2) be independent from the vendor of the alcoholic beverages that is being delivered and shall not receive any director indirect advantage from the sale besides normal remuneration from the service and 3) shall not have permanent places of delivery of alcoholic beverages besides what is part of their normal system for distribution of all lands of consignments. ”5 The requirement in no. 2 (“the separation requirement”) entails that the vender himself is not permitted to transport the beverages into Norway in the context of private import; the seller must deliver the beverages to the buyer or a transporter outside Norwegian territory.6 The requirement intends to safeguard the Norwegian system of retail sales of alcohol in Norway through the monopoly or through undertakings which have been granted a licence for retail sale of alcoholic beverages. The alcohol regulation section 15-3 reads: “AS Vinmonopolet may import alcoholic beverages fórjale to someone who has ordered a product for personal consumption if that product is not available in Vinmonopolet’s product range. “ [emphasis added]. This provision was introduced before it was opened up for the consumer's own private imports after the Rosengren case. 7 AS private parsons were not allowed to import the products themselves, the purpose of the provision was to establish a system that would give private persons the possibility to buy products Vinmonopolet could not provide from a wholesaler. This was done by giving Vinmonopolet the right to import these products for sale to the private person as an exemption from the main rule that Vinmonopolet as a retailer could not be an importer. As the provision reads, this is a sale from Vinmonopolet to a private person and not private import (which requires that the private persons themselves buys the alcoholic beverages directly from the seller outside Norway). The private buyer have to place the order at Vinmonopolet. In the consultation document dated 5 December 2008s on amending the legislation related to private import of alcoholic beverages section 4.9, the Ministry concluded that import of

5 Unofficial translation. 6 For further information on the separation requirement, see the letters of 21 August 2012 and 25 January 2014 from the Norwegian Ministry of Health and Care Services to the Authority. 7 Case C-170/04 Rosengren and others, 8 Høringsnotat - Forslag til endringer i alkoholloven og alkoholforskriften. Utredning av opphevelse av forbudet mot privat innførsel av alkoholholdig drikk. Available at http://www.reg3eringen.n0/upload/HOD/Dokumenter%20FHA/SAN/Hoeringsnotat.pdf#search-privati mport®j_oss=l

Page 3 alcoholic beverages for sale to private persons for personal use through Vinmonopolet should remain a possibility even after the ban on private import was lifted, as an added service from Vinmonopolet to the customers. On this basis, no changes in the alcohol regulation section 15-3 were proposed. According to Vinmonopolet, the possibility of acquiring alcoholic beverages on the basis of section 15-3 has not been used since 2009. When it comes to the delivery arrangement connected to section 15-3 sales, Vinmonopolet informs that they have never performed the delivery themselves and that they do not foresee to do so in the future either. Vinmonopolet previously had a delivery agreement with Marine Express when selling alcoholic beverages based on section 15-3, but as the system has not been used for many years, this agreement has not been renewed.

3. PRELIMINARY REMARKS ON THE SEPARATION REQUIREMENT The Authority has in its assessment considered the separation requirement to constitute a restriction on free movement of services and goods. The Government is however of the view that the separation requirement is merely a distinguishing feature between two types of arrangements, subject to different regulations. The distinguishing feature should thus not in itself be regarded as a restriction on trade and in itself subject to demands of justification. The concept of private import in the Norwegian alcohol legislation presupposes a transaction between a person in Norway and a retailer outside Norway, where the point of sale of the commodity is also outside Norwegian territory. The separation requirement stresses the distinction between this arrangement and retail sale in the Norway. An arrangement where both the contract of sale of beverages and the delivery to the private consumer in Norway are carried out by the same undertaking, must in fact be considered retail sale in Norway. The separation requirement merely seeks to clarify the distinction between the two types of arrangements, a distinction that would follow from an interpretation of the arrangements as such, whether this was directly regulated in the regulation or not. The Government is thus of the view that the separation requirement serves as a legal clarification and is not a restriction in itself. The separation requirement as a distinguishing feature finds its support in instruments of EU law. Reference is made to Directive 2008/118/EC9 Article 36, where distance selling is defined as goods “which are purchased by a person, other than an authorized warehouse keeper or a registered consignee, established in another Member State who does not carry out an independent economic activity, and which are dispatched or transported to another Member State directly or indirectly by the vendor or on his behalf’. In such a case, the goods are subject to excise duty “in the Member State of destination”. The underlying premise

9 Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for exdse duty and repealing Directive 92/12/EEC.

Page 4 seems to be that point of sale in such a case is in the Member State of destination. This is further supported by Article 32, which on the other hand sets out that if a private individual purchases goods for his own use, and the goods are “transported from one Member State to another by him”, the goods are subject to excise duty in the Member State in which the excise goods are acquired. To conclude these preliminary remarks, the Government reiterates that the separation requirement as such should not be subject to an individual assessment under EEA law. Nevertheless, and in case the Authority disagrees, the Government will in the following provide some comments on the assessment under the EEA Agreement.

4. RELEVANT EEA LAW The Government agrees with the Authority that there are no specific directives or regulations on transportation that are applicable to the case at hand, and that the general rules of the EEA Agreement are applicable in this area. However, the Authority primarily assesses the separation requirement in light of the EEA Agreement's provisions on free movement of services. The Government however is of the view that the correct starting point for the assessment should be the EEA Agreement’s provisions on free movement of goods, and not services. The Court of Justice of the European Union (“the Court”) has held that: it is settled case-law that, where a national measure relates to both the free movement ofgoods and freedom to provide services, the Court will in principle examine it in relation to one only of those two fundamental freedoms if it appears that one of them is entirely secondary in relation to the other and may be considered together with if’.10 Further, and as expressed by the Commission11 : “.. when a national measure may affect more than one fundamental freedom, the Court usually examines that measure in the light of one fundamental freedom only. For this purpose, it decides which of the fundamental freedoms prevails, cf. Case C- 20/03 Burmanjer. In most cases, therefore, it is essential to identify the main focal point of the national measure: if it is goods-related, then Article 28 EC [Article 34 Treaty of the Functioning of the European Union (“TFEU”)] applies; if it is services- related then Article 49 EC [Article 56 TFEU] Applies. ”

10 Case C-20/03 Burmanjer para. 35, Case C-275/92 Schindler, para 22, Case C-390/99 Canal Satélite Digital, para. 31, Case C-71/02Kamer, para 46, and Case C-239/90Boscher, paras. 8-10. 11 Commission, Free Movement of Goods: Guide to the application of Treaty provisions governing free movement of goods (Articles 28 - 30 EC) [Articles 34-6 TFEU], SEC (2009) 673 final p. 47.

Page 5 The Government holds that the main focal point of the Norwegian separation requirement is goods-related. The main objective of this requirement is, as noted above, to safeguard the Norwegian system of retail sales of alcohol by distinguishing between private import of alcohol and retail sale of such beverages. In the opinion of the Government, the fact that the sale of alcoholic beverages from abroad to Norwegian customers necessarily entails transport of such beverages into Norway, does not alter the fact that the requirement is above all goods- related. In the view of the Government, this finds it support in case-law from the Court of Justice of the European Union (“the Court”). In Burmanjer, which concerned national rules on itinerant sales, the Court held in para. 34: “It cannot however be excluded that the sale of a product may be accompanied by an activity with ‘services ’ aspects. None the less, that fact cannot be sufficient, by itself, to classify an economic operation such as the itinerant sales at issue in the main proceedings as a ‘provision of services ’ within the meaning of Article 49. It must be established, in each case, whether that service is or is not wholly secondary in relation to the elements concerning the free movement of goods. In the circumstances of the main proceedings, it appears that the latter aspect prevails over that of the freedom to provide services ”. Further, in Kamer 77 , the Court held that the dissemination of advertising “is not an end in itself. It is a secondary element in relation to the sale of the goods in question”. For this reason the Court considered the rules on free movement of goods to prevail, and that it was not necessary to consider the provisions on free movement of services. In Ker-Optika3, which concerned the internet sales of contact lenses, the Court held, with references to its case in Deutscher Apothekerverband14, which concerned internet sales of medicinal products: “44. Further, it follows from Case C-322/01 Deutscher Apothekerverband [..] that a national measure concerning an arrangement characterized by the sale of goods via the Internet and the delivery of those goods to the customer 's home is to be examined only with regard to the rules relating to the free movement of goods and, consequently, with regard to Articles 34 TFEU and 36 TFEU. 45. In the present case, the national legislation prohibiting the selling of contact lenses via the Internet concerns a selling arrangement characterized by the delivery of such lenses to the customer ’s home. Consequently, that legislation must be examined with regard to Articles 34 and 36 TFEU. ”

12 Case C-71/02 Kamer para. 47. 13 Case C-108/09 Ker-Optika. 14 Case C-322/01 Deutscher Apothekerverband.

Page 6 The Government thus holds, as supported by the case-law referred to above, that the primary activity that the separation requirement seeks to regulate is goods-related. Therefore, the assessment of the separation requirement, if it falls to be assessed separately, is correctly to be performed under the EEA Agreement’s provisions on free movement of goods. In the following, the Government will firstly address the provision on state monopolies in Article 16 EEA (section 5). In the alternative, the Government will submit its comments on Article 11 and 13 EEA (section 6). Lastly, and in the alternative, the Government will comment upon the EEA Agreement’s provisions on free movement of services (section 7).

5. ARTICLE 16 EEA 5.1 The existence and operation of the monopoly In case the separation requirement is to be assessed separately under the EEA Agreement, the Government is of the view that the requirement correctly should be evaluated under Article 16 EEA on state monopolies in so far as the beverages at issue fall within the monopoly’s exclusive right. It is established case-law that the existence and operation of state monopolies for the retail sale of alcoholic beverages should be assessed under Article 16 EEA, while provisions which, although they have a bearing upon the monopoly, are separable from its operations, are to be assessed under Article 11 EEA.15 The question of whether Article 16 EEA or 11 EEA is applicable, is further elaborated in case law. With regards to the corresponding provisions in the Treaty of the Functioning of the European Union, the Court held in Rosengren that: “Firstly, it should be recalled that the specific function assigned to the monopoly by the alkohollagen consists of the exclusive rieht of retail sale in of alcoholic beverages to consumers... It is common ground that that exclusive right does not extend to the importation of those beverages. ” 16 (emphasis added) The Court further held that the rules at issue did not govern the monopoly’s exclusive right of retail sale in Sweden, and did therefore not concern the monopoly’s exercise of its specific function and consequently could not be considered relating to the very existence of the monopoly.17 A contrario, regulations regulating retail sale taking place on Swedish territory, or in our case Norwegian territory, should be considered to be related to the existence and operation of the monopoly.18 Reference is also made to the decision by the EFTA Court in Tore Wilhelmsen AS v. Oslo commune, in which the EFTA Court held:

15 E.g. Franzén, para 35; Rosengren, paras. 17-18, with further references to case law. 16 Rosengren para. 20. Emphasis added. 17 Rosengren paras. 21-22 and para. 24. 18 Rosengren para. 24

Page 7 "Provisions granting an exclusive right for retail sale of beer containing more than 4.75 % alcohol by volume to Vinmonopolet form an inherent part of the regulations designing the system. These provisions must, therefore, be examined in light of Article 16EEA. ” 19 In the Government’s view, provisions concerning the exclusive right of retail sales of alcohol that fall within the ambit of the monopoly thus falls to be assessed under Article 16 EEA. In this regard, the Government reiterates that the relevant starting point when the vendor transports the goods to the consumer in Norway, is that the point of sale is considered to be within Norway. Reference is made to section 3 above. Since the point of sale is considered to be in Norway, such sale would contradict the retail sales monopoly. The separation requirement contributes to define the scope of the monopoly’s exclusive right to consumer supply within Norway, as well as it ensures that arrangements that would undermine the function of the monopoly are not established. By example, problems with regards to establishment of delivery arrangements within the territory undermining the function of the alcohol retail monopoly were noted in Finland prior to the introduction of the separation requirement. As noted in the preparatory works for the Norwegian legislation concerning private import about the experience from Finland: 90 "At the end of the 1990 's, several companies that took orders on alcoholic beverages from consumers, as well as carried out the delivery of the ordered goods, were established in Finland. There were also established permanent order and delivery premises within Finlandfor the company. ” [unofficial translation] Experience from Sweden further illustrates that without such a separation criteria it may in practice be very difficult to hinder the establishment of delivery arrangements which would undermine the function of retail monopoly. Reference is given to the Swedish Government Official Report21 concerning private import on alcohol, where it is noted: “Since then [legalizing of private import] actors have appeared in the Swedish market who, for commercial purposes, convey the sale of alcoholic beverages from abroad or otherwise contribute to such sales. Several Swedish companies in various industries have also launched various types of cooperation with such mediators or brokers of alcoholic beverages. ”

19 Case E-6/96 Tore Wilhelmsen AS v. Oslo kommune para.101. 20 See Ot.prp. nr. 53 (2008-2009) om lov om endringer i lov 2. juni 1989 nr. 27 om omsetning av alkoholholdig drikk m.v. (opphevelse av forbudet mot privat innførsel av alkoholholdig drikk) p. 11, available athttø:/Ayww.regieringen.no/en/deD/hod/documents/regtmbi/otprp/2008-2009/otPrp-nr-53- 2008-2009-.html?id=553862. 21 See the Swedish Government Official Report in SOU 2014:58 Privat innforsel av alkoholdrycker (2014 p. 14). Available at htto://www.regeringen. se/sb/d/18046/a/243666.

Page 8 In the report it was thus concluded that a separation requirement between the seller and transporter should be introduced in Swedish legislation.22 In the view of the Government, this supports the contention that the separation requirement contributes to define the scope of the monopoly’s exclusive right to consumer supply within Norway, as well as it ensures that arrangements which would undermine the function of the monopoly are not established, and that it as such concerns the existence and operation of the state monopoly. The Government would also like to note that the separation requirement is distinguishable from the rules at issue in i.e. Rosengren, since the Norwegian rules do not prohibit private import, but merely seek to ensure that such import is conducted in a way that does not undermine the . In order to safeguard the monopoly's exclusive right to retail sale of alcohol in Norway, it is the Government’s view that it would also be necessary to establish rules that seek to hinder the establishment of competing arrangements that would undermine the monopoly. Norway thus submits that the separation requirement is indivisible to the alcohol monopoly, and must be considered as concerning the existence and operation of a state monopoly.

5.2 The test of discrimination If the separation requirement falls to be assessed separately, it should as a starting point be noted that Member States have a broad discretion in formulating and implementing their alcohol policies, as the health and life of humans rank foremost among the interests that the states legitimately can protect.23 The Government is of the opinion that the separation requirement is compatible with the conditions laid down for state monopolies of a commercial character in Article 16 EEA. Article 16 EEA provides that: “Member States shall adjust any State monopolies of a commercial character so as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States. ” According to the wording, and as confirmed by consistent case law, the decisive test is that of discrimination. Consequently, the operation of a monopoly is consistent with Article 16 EEA

22 SOU 2014:58 p. 14. 23 In relation to Article 36 TFEU, see Case C-320/93 Lucien Ortscheit GmbH para. 16, Rosengren para. 39, Case C-108/09Ker-0ptika para. 58 and Case C-421/09 Human plasma GmbH para. 32. See also the EFTA Court’s case E-l/97 Gundersen para. 20 with regards to Article 16 EEA.

Page 9 in so far as trade in goods from other Member States are not put at a disadvantage, in law or in fact, compared with trade in domestic goods.24 The discrimination test under Article 16 EEA must also be interpreted in line with the general discrimination test under EU/EEA law, according to which comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified.25 These two elements of the test are to a certain degree overlapping. The Government submits that nothing indicates that the Norwegian regulation does in law or in fact discriminate between products or undertakings. It applies equally to all, whether nationals or from another EEA state, and on equal terms. Neither a Norwegian nor a foreign seller, who does not hold a monopoly on retail sales of alcoholic beverages, may sell/deliver alcoholic beverages falling within the range of the monopoly’s exclusive rights to sell and deliver directly to a consumer in Norway. In fact, the point can be made that the foreign seller actually has an advantage compared to Norwegian vendors since they may, from their point of sale in their country, sell their alcoholic beverages directly to the private person in Norway, and do not have to sell their goods through the monopoly. In this regard, the Government notes that the Authority in relation to Articles 36 and 11 EEA is of the opinion that the Alcohol Act section 2-1 paragraph 3 and the Alcohol Regulation section 15-5 paragraph 2 apply in a discriminatory manner, because there is no separation requirement when private import is carried out by the Vinmonopolet. The Government respectfully disagrees with this conclusion. Since the Authority’s argument concerns the question of discrimination, the Government finds it suitable to give some comments in relation to the question of discrimination under Article 16 EEA. Firstly, the Government refere to the description of the Alcohol Regulation section 15-3 in section 2 above. The provision regulates sales from Vinmonopolet in Norway (exclusive retail rights) and do not regulate private import. This is in fact two different situations and cannot be compared. In any case, if Vinmonopolet should assist in private import, it would in such cases not act as a seller of the alcoholic goods, and is thus not in a comparable situation as with vendors abroad. Secondly, as regards to the internet sales or section 15-3 sales from Vinmonopolet, it must be recalled that the Vinmonopolet is granted a monopoly on the retail sales of alcohol in Norway. Vinmonopolet’s exclusive retail rights according to the Alcohol Act section 3-1 is also considered to include the delivery of the purchased beverages to the customer, when the

24 See Franzén para 40. 25 E.g. Case 106/83 Sermide, para. 28, Case C-127/07 Sodété Arcelor Atlantique et Lorraine and Others, para.23 and Franzén, para. 65.

Page 10 goods for instance are bought at Vinmonopolet’s Internet shop and not in one of their physical outlets. Vinmonopolet’s home delivery of alcoholic beverages is considered to be a part of Vinmonopolet’s sales arrangement and thus inherent in the monopoly’s exclusive right to retail alcoholic beverages in Norway. The Vinmonopolet is thus not in any case in a comparable situation with vendors outside of Norway that do not have a monopoly on retail sales of alcohol in Norway. The Government would in this regard reiterate that the monopoly is an important measure in the Norwegian alcohol policy with the aim to curb the use of alcohol and subsequently reduce damages thereof. Through Vinmonopolet, the private profit motive from sales of wine, spirits and strong beer is removed. Because of the company’s non profit motive and focus on key social objectives, Vinmonopolet has exclusive retail rights and cannot be assessed on the same terms as other retailers. Further, the Government would in this regard recall that that the lawfulness of the existence of the Norwegian monopoly on retail trade in alcohol does not seem to be called into question. Reference is also made to the fact that the Court has held that the retail sales monopoly of alcohol is compatible with EU (EEA) law.26 The Government thus submits that the separation requirement is compatible with Article 16 EEA. In any event, the Government holds that any potential different treatment is objectively justified. The alcohol monopoly is undisputedly based on public health considerations.27 With regard to the public health grounds which constitute the rationale for the Norwegian system, reference is made to section 6.2 below.

6. FREE MOVEMENT OF GOODS 6.1 Article 11 EEA The Authority finds that the separation requirement constitutes a quantitative restriction on imports or a measure having equivalent effect contrary to Article 11 EEA, and that it is applied in a discriminatory nature. In case the separation requirement falls to be assessed under Article 11, the Government is of the view that a separation requirement for sales of alcoholic beverages represent a certain type of selling arrangement that, based on settled case law, does not constitute an import restriction under Article 11 EEA, if they apply to all relevant traders operating within the national

26 Cf. inter alia Franzén. 27 See Franzén para. 41: “In the present case, it is not contested that, in aiming to protect public health against the harm caused by alcohol, a domestic monopoly on the retail of alcoholic beverages, such as that conferred on , pursues a public interest aim”.

Page 11 territory and affect the marketing of domestic products and of those from other Member States in the same manner, both in law and in fact.28 It should be noted that the Court has applied the selling arrangement-doctrine specifically to rules obliging retailers to be licensed29 and on national restrictions on sales outlets30 as well as provisions prohibiting certain types of sale31. This also follows directly from the wording in Keck, cited ever since, referring to “national provisions restricting or prohibiting certain selling arrangements ”,32 Further, it should be noted that the scheme in the case at hand does not imply any requirement to be met by the products themselves, such as requirements as to designation, form, size, weight, composition, presentation, labelling and packaging. Regarding the test of discrimination under Article 11 EEA the Government submits that the way the test should be set out, and the application of this test, should not differ from the Article 16-test analysed in section 5.2 above. The Government will especially draw attention to the fact that Vinmonopolet is not involved in private import arrangements, and in practice they are not importing for sale to private persons pursuant to the provision in the Alcohol Act section 15-3 either. The Government hence submits that there is no indication of discrimination in the Norwegian regulations, neither in law nor in fact.

6.2 Article 13 EEA 6.2.1 General remarks The Government is of the opinion that the separation requirement in any case is a suitable and necessary public health measure. The Court has acknowledged that legislation that purports to control alcohol consumption in order to prevent harmful effects caused to human health by alcoholic substances, reflects health concerns as recognized by Article 13 EEA.33 It is not contested that the monopoly and the retail sale license scheme, are based on such public health concerns. We would like to underline that the separation requirement accordingly is merely based on a public health objective.

28 E.g. Joined cases C-34/95, C-35/95 and C-36/95 De Agostini and TV-shofi para.40, Case C-110/05 Commission of the European Communities v Italian Republic, para 36 and Case C 108/09 Ker-Optika bt para 51. 29 E.g. Case C-20/03 Burmanjer, Van der Linden, De Jong and C-387/93 Banchero. 30 E.g. Case C-391/92 Commission v. Greece. 31 Case C-322/01 Deutscher Apothekverband. 32 Joined Cases C-267/91 and C-268/91 Keck and Mithouard, para 16. 33 See Rosengren para. 40 and Ahonen and Leppik para 28.

Page 12 The Court has also consistently held that the health and life of humans rank foremost among legitimate objectives, and that this influences the proportionality test.34 Further, it is for each state not only to determine the level of protection opted for, but also the way in which this level is to be achieved, irrespective of different choices by other Member States, see inter alia the Court’s decision in Ker-OptikaiS: “[...] in that regard, if that measure is within the field ofpublic health, account must be taken of the fact that the health and life of humans rank foremost among the assets and interests protected by the Treaty and that it is for the Member States to determine the level of protection which they wish to afford to public health and the way in which that level is to be achieved. Since the level may vary from one Member State to another, Member States should be allowed a measure of discretion [...] ” The principle of proportionality consists of essentially two tests: A test of suitability and a test of necessity, which will be further addressed in the following.

6.2,2 Suitability Firstly, the suitability test entails that the means employed must be suitable to attain the ends. In this regard, it should be recalled that in cases where the states enjoy a wide margin of discretion, such as in tiie present case, this also entails “a margin of discretion in determining ... the measures which are likely to achieve concrete results”.36 This seems to imply that the state has a margin of discretion also in determining whether a measure will be suitable. At least, it must be sufficient that the existing documentation indicates that there is a reasonable connection between the measure and the protection of human health.37 The Norwegian system for retail sales of alcoholic beverages is undoubtedly based on public health considerations. TR The basic premise is that by limiting retail sales of alcoholic beverages in Norway to the alcohol monopoly, this will in turn limit the general consumption of alcohol and harm caused by alcohol and thus contribute to the protection of human health. Recent studies strongly indicate that restrictions on availability, such as monopoly and licensing systems, are associated with reduction in both alcohol use and alcohol-related

34 See the Court’s case law as referred to in footnote 20. 35 See Ker-Optika para. 58. 36 Case C-694/97 Heinonen, para. 43 and the Opinion by AG Sagiio, para. 32; and Case C464/04 Ahokainen, para. 32. 37 See Case 132/80 United Foods para. 28. See also by comparison the EFTA Court’s case E-16/10 Phillip Morris para. 84. 38 In Franzén, the Court acknowledged that a domestic monopoly on the retail of alcoholic beverages pursues a public interest aim in aiming to protect public health against the harm caused by alcohol, see para. 41.

Page 13 problems.39 In the Babor report it was inter alia held that “/gjovernment monopolies on alcohol production and sales provide an effective way to control availability if public health considerations rather than revenue maximization are the primary rationale for the system”40 It was underlined that there is strong evidence to support that off-premises monopoly systems limit alcohol consumption and alcohol-related problems.41 Further, in the Global Alcohol Strategy, adopted by the World Health Assembly in May 2010, governmental alcohol monopolies and licensing systems on retail sales are mentioned as policy options to reduce the harmful use of alcohol.42 Reference can also be made to the EFTA Court’s case in Alcopops, where the EFTA Court held that: “Excessive alcohol consumption causes health problems, as well as considerable social problems, and there is a link between availability and the harmful effects caused by the consumption of alcohol. ”43 The Government submits that this supports the contention that it is reasonable to assume that the Norwegian regulations on monopoly and retail licenses will contribute to the protection of public health.

The Government reiterates that the separation requirement serves as a factor that distinguishes private import from retail sale and that it in itself should not be regarded as a restriction subject to justification. However, the Government recalls from section 5.1 above that without a distinct functional and structural separation between the seller of the alcoholic beverage and the undertaking charged with the task of delivering the alcoholic beverage, it may in practice be very difficult to hinder the establishment of delivery arrangements which undermine the monopoly on alcohol and rules on retail sale license. The separation requirement thus hinders new sales arrangements in Norway which would potentially lead to increased sales and subsequently increased use and damages to public health caused by alcohol use. The experience from Sweden, as referred to in section 5.1 above, illustrates that a new business involving the establishment or participation in sales arrangement involving alcoholic beverages came about after private import of alcoholic beverages was legalised. Also, the Swedish experience suggests that availability to alcoholic beverages has increased.

39 Babor et al. (2010), “Alcohol: No Ordinary Commodity. Research and Public Policy”, Second Edition, Oxford University Press, p. 145. 40 Ibid. p. 249. 41 Ibid. p. 136. 42 Global Alcohol Strategy, adopted by World Health Assembly in May 2010 (Res WHA 63.13) page 14, available at: http://www.who.int/substance_abuse/activities/gsrhua/en/ 43 Case E-9/00 Alcopops para. 56.

Page 14 The Government thus finds it reasonable to assume that the separation requirement, in safeguarding the Norwegian system of monopoly on alcohol and rules on retail sale license, will contribute to the protection of public health. 6.2.3 Necessity The second part of the proportionality principle, the necessity test, requires an assessment of whether the same level of protection can be achieved equally effectively with less restrictive means. The Government fails to see such alternative measures, and thus submits that the Norwegian regulations are necessary. The Government would firstly like to stress that it could be very difficult to assess the degree to which a concrete national regulation produces the desired result, in particular because many public health instruments work in parallel. It is even more difficult to assess and compare the effects of the chosen measure with other measures, perhaps even measures never implemented. The states should therefore be allowed a certain margin of discretion also under the necessity test.44 The Government submits that a reasonable balance was described in the EFTA Court’s ruling in the Pedicel45 case, which also concerned a measure to reduce alcohol consumption and the risks thereof. The EFTA Court stated that it must be “apparent” that less restrictive means exist. The Court held46: “[..Ja against the advertising of alcoholic beverages such as the one at issue may be justified on grounds of the protection ofpublic health, unless it is apparent that, in the circumstances of law and of fact which characterise the situation in the EEA Contracting Party concerned, the protection ofpublic health against the harmful effects of alcohol can be secured by measures having less effect on intra-EEA trade. ” The same should apply in the present case.

There is no indication that informing the sellers about the existing legal framework and monitoring their compliance would be a measure with equivalent effect to the present system. A key element in Norwegian alcohol policy is to remove the private profit motive from sales of wine, spirits and strong beer. As a result, Vinmonopolet is wholly owned by the state. Eliminating the profit motive gives Vinmonopolet room to manoeuvre in meeting key social objectives, such as securing responsible social control of sales. The company operates with the emphasis on responsibility in contrary to other sellers which will have a private profit motive as basis for their business activities. By only allowing independent undertakings with no interest in the alcohol sale to deliver alcoholic beverages, it is more likely that social responsibility will be respected than if the sellers themselves delivers it.

44 See, to this effect, e.g. Joined Cases C-l/90 and C-176/90 Aragonesa de Publicidad, paras. 16 and 17; and Case C-429/02 Bacardi France SAS, paras. 33 and 39 45 Case E-4/04 Pedicel. 46 Pedicel para 61.

Page 15 Further, and as noted above, the Swedish report recommends that a separation requirement, similar to the separation requirement in the Norwegian legislation, should be introduced in the Swedish Law on Alcohol. Additional to the points referred to in section 5.1, the need for a separation requirement is in the report also explained by the fact that new entrants to the retail market for alcohol causes significant pressure to reduce restrictions on alcohol sales, and further that private profit in retail means that the functioning of the monopoly will be less effective as an alcohol policy measure.47 This substantiates in our view the necessity of clarifying the legislation with a separation requirement. We would also call your attention to the fact that the Swedish report indirectly, by proposing to introduce the same kind of separation requirement as is in force in Norway, concludes that the Norwegian separation requirement is in compliance with the provisions on free movement.48 The Authority considers that experience from Sweden shows, with reference to the proportion of private import in Sweden, that the consequences of private import into Sweden of alcoholic beverages on the public health in general must be considered very limited. Accordingly, the Authority believes that the activity of vendors delivering alcoholic beverages in Norway will be a minor activity only, and will not have any significant impact on the existing Norwegian retail system. In this regard, the Government would firstly underline that Norway has chosen a high level of protection which means only Vinmonopolet should retail stronger alcoholic beverages in Norway. Even a minor activity as the Authority is expecting, would reduce the level of protection Norway is aiming for. The Government would also add that it does not share the Authority’s assessment of the Swedish experiences and the expected consequences in Norway. Even if the volume of private imported alcoholic beverages in Sweden is still relatively small compared to Systembolaget’s sales, the Swedish Government expects an increase in private import trough internet sales. In the press conference in July 2014 where the report on the private import of alcoholic beverages (SOU 2014:58)49 was presented, the Swedish Minister Maria Larsson informed that private imported alcoholic beverages had increased from 0,5% in 2012 to 1,7% in 2013, which is a drastic increase and gives a prediction of the development in the coming years. Finally, in the view of the Government, the separation requirement does not constitute either a means of arbitrary discrimination or a disguised restriction on trade between Member States.50 The requirement is only based on public health grounds and not used to discriminate against goods originating in other EEA States or indirectly to protect certain national products.

47 SOU 2014:58 p. 117. « SOU 2014:58 p. 70-72 and p. 75-77. 49 Can be seen at http://www.regeringen.Se/sb/d/3209/a/243667 50 See Rosengren para. 41.

Page 16 7. FREE MOVEMENT OF SERVICES As held above, the Government is of the view that the measure shall not be evaluated under the provisions on free movement of services. In any event, the Government holds that the separation requirement is in line with the EEA Agreement’s provisions on free movement of services. Reference is made to section 6 above. The Government submits that the separation requirement in any case is justified as a suitable and necessary public health measure according to Article 33 EEA, cf. Article 39 EEA. As described in more detail in section 6, the health and life of humans rank foremost among legitimate objectives, and this influences the proportionality test. Further, the state does not only determine the level of protection opted for, but also the way in which this level is to be achieved. The Government recalls that it is reasonable to assume that the Norwegian regulations on monopoly and retail licenses will contribute to the protection of public health. The separation requirement hinders new sales arrangements in Norway which would potentially lead to increased sales and subsequently increased use and harms to public health caused by alcohol use. The Government refers to the more detailed assessment of the suitability of the separation requirement in section 6.2.2 above. As concerns the necessity test, the Government recalls that the states have a certain margin of discretion also under the necessity test. The Government finds that the separation requirement is a necessary measure to achieve the desired level of protection. The reasoning behind this assessment is described in more detail in section 6.2.3 above. Finally the Government notes that the requirement is only based on essential public health grounds and that it has not been diverted from its proper purpose.

8. CONCLUSION In light of the above, the Government is of the view that the requirement on functional and structural separation between the undertaking selling the alcoholic beverages and the undertaking delivering the beverages does not violate the EEA Agreement. The summary of the Government’s conclusions thus is: 1. The separation requirement is merely a distinguishing feature between private import and sales in Norway and is not a restriction in itself. Thus, it should not be subject to an individual assessment under EEA-law.

Page 17 2. In alternative, the separation requirement falls to be assessed under the EEA Agreement’s provisions on free movement of goods and not the provisions on free movement of services. 3. If the separation requirement is to be assessed separately, it must be considered as concerning the existence and operation of the monopoly and should be evaluated under Article 16 EEA. The separation requirement is compatible with Article 16. 4. If the separation requirement in the alternative falls to be assessed under Article 11, the Government is of the view that this is a certain type of selling arrangement that does not constitute an import restriction under Article 11 EEA. In any case there is no indication of discrimination. 5. The separation requirement is in any case a suitable and necessary measure according to Article 13 EEA. 6. If the separation requirement should be assessed under the provisions on free movement of services, the requirement is in any case in compliance with Article 33 EEA, cf. Article 39 EEA.

Geir Stene-Larsen Director General

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