Big European food retailers have expressed their delight at a new ruling by the European Court of Justice that slapped down regulations imposed by the Spanish government to restrict the location and operations of hypermarkets in Catalonia.
The court, whose decisions are legal precedents throughout every country and region in the EU, said Spain had failed to fulfill obligations imposed by the “freedom of establishment” provision of the EU treaties.
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“We think this is important. We’ve had a strong sense in the last couple of years of a kind of creeping protectionism coming through in various parts of Europe,” said Paul Skehan, director of the European Retail Round Table, which represents the 14 largest retailers in Europe – including Tesco, Carrefour and Marks and Spencer.
“What’s lacking has been an absolutely clear-cut legal case like this one which puts down in black and white a pretty good precedent. This is an important decision and we think and hope that we and others can use this,” he told just-food.
Skehan pointed to a wide range of restrictions on larger retailers setting up outlets, such as planning permissions becoming “overly difficult or restrictive”. He also cited panels being set up locally, which, he said, have the right to decide on a new retail operation but are made up of existing competitors “so are hardly likely to vote for them”.
The restrictions were put in place “outwardly to create a broad spectrum of commerce in a particular area”, Skehan explained. “The difficulty we’ve always had with them is that they represent existing competitors.”
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By GlobalDataRuling on just such a system in Catalonia, and noting that only local trade was represented in these committees, the ECJ, Skehan said, ruled that “a body composed in that manner…cannot constitute an appropriate instrument for pursuing objectives relating to town and country planning”. The committees never acknowledged that they were protectionist, Skehan insisted, “but of course they have that effect – they prevent retailers from moving into an area and offering their services”.
Skehan indicated that big retail groups would now focus on developments in a number of Eastern European countries. “In Hungary and the Czech Republic in the last couple of years we’ve seen laws or potential laws come in which could have the effect of curtailing establishment of large retail or, if not that, would curtail how they operate,” he said.
These laws sought to lay down the percentage of own-brand products allowed on a retailer’s shelves or set maximum price differences between own brand and branded products thus constituting a protection for incumbent retailers or incumbent suppliers, he said. One specific case was in Hungary where the government had imposed a “crisis tax” on retailers above a certain level that would hit all the major non-Hungarian retailers.
In general, the larger EU countries do not impose the “creeping protectionism” of this kind even though some, like The Netherlands, do not allow hypermarkets at all. More typical is the UK where the retail sector has long profited from relatively loose regulation and where the Spanish ruling will have little or no effect.
“It wouldn’t surprise me at all if they’ve got a whole bunch of restrictive rules in Spain which are much more draconian than anything we have in the UK,” said Richard Dodd, spokesman for the British Retail Consortium. “Generally speaking, a lot of European countries have a much less open retail regime of all kinds than we do.”
In Brussels, Catherine Bunyan, spokesperson for the European Commission’s internal market division, said in recent years a number of complaints had sparked investigations similar to that leading to the Catalonia case.
However, almost all these probes had now been closed following changes in the law, without the ECJ being involved. In France, for instance, Paris had laid down detailed procedures for applying for permission to open hypermarkets, listing “a large number of criteria which we felt were not sufficiently objective and precise, and certain of the criteria were aimed at economic objectives which were long and costly”, Bunyan said.
Brussels had deemed these to have a discriminatory effect on the free movement of services. “The French government subsequently reformed their law on planning and so the case was closed,” she said.
A similar case against Portugal was closed last year after the planning laws had been eased to remove some of the criteria. There are two cases outstanding in Germany but in each case the provincial government laws are being revised and the Commission is awaiting the result before taking the matter further.
Brussels has only been made aware of infringements when a complaint has been made to it on the grounds that the EU treaty stipulations about freedom of establishment and freedom of services had been infringed. Many cases involving hidden protectionism, as described by Skehan, have therefore not always come to its attention in the past.
The ECJ’s Spanish ruling, and in particular the references to the role and composition of local committees, could, he suggested, promote important changes in planning laws in many EU countries.
