The judgment is both a classic one and a bit of surprise. Here's why.
Germany had been successful back in 2000 in its attempt to have annulled Directive 98/43/EC on the advertising and sponsorship of tobacco products. The Court annulled Directive 98/43/EC by its judgment in Case C-376/98 Germany v. Parliament and Council. That was quite a complicated judgment but to simplify it outrageously, the Court had held that Article 95 EC (Article 100a EC as it was numbered at the time) could not be used as a legal basis for the outright ban of certain forms of tobacco advertising.
Then the European Parliament and Council adopted Directive 2003/33/EC to replace Directive 98/43/EC that had been annulled.
So Germany had a go at annulling the new Directive in Case C-380/03. And this time it failed.
In Case C-380/03 Germany sought the annulment of two articles prohibiting:
(i) the advertising of tobacco products in the press and other printed publications, in information society services and in radio broadcasts and
(ii) the sponsorship of radio programmes by tobacco companies. Only publications intended for professionals in the tobacco trade and publications from non-member countries which are not principally intended for the Community market are exempted.
Germany claimed that those prohibitions could not be adopted on the basis of Article 95 EC. That provision allows the EC to adopt measures for the approximation of national provisions which have as their object the establishment and functioning of the internal market. But Germany claimed that neither of the two prohibitions in the new Directive contributes to eliminating obstacles to the free movement of goods or to removing appreciable distortions of competition and consequently the conditions justifying recourse to Article 95 EC were not met.
This time round, the Court of Justice dismissed the action by Germany and held that Directive 2003/33/EC was validly based on Article 95 EC.
The Court found that at the time of the Directive’s adoption, disparities existed between national rules on advertising and sponsorship in respect of tobacco products which justified action by the Community legislature. Those disparities were such as to impede the free movement of goods and the freedom to provide services. They also meant that there was an appreciable risk of distortions of competition(see Joined cases C-154/04 and C-155/04 Alliance for Natural Health and others at paragraph 30). The Court also held that held that, provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the Community legislature cannot be prevented from relying on that legal basis on the ground that public health protection is a decisive factor in the choices to be made (see Joined cases C-154/04 and C-155/04 Alliance for Natural Health and others at paragraph 31).
Interestingly, the Court held that the different national measures prohibiting or restricting the advertising of tobacco products are liable to impede access to the market by products from other Member States more than they impede access by domestic products. It also held that such measures restrict the ability of undertakings established in the member States where they are in force to offer advertising space in their publications to advertisers established in other member States, thereby affecting the cross-border supply of services (see, to this effect, Case C-405/98 Gourmet International Products, paragraphs 38 and 39).
In contrast to its judgment in Case C-376/98, the Court held in this case that because of the disparities in national laws likely to affect trade between member States, the EC could "approximate" national law on the basis of Article 95 EC by definitively prohibiting the marketing of the product in question.
The Court took the precaution of stating:
"Recourse to Article 95 EC as a legal basis does not presuppose the existence of an actual link with free movement between the Member States in every situation covered by the measure founded on that basis. As the Court has previously pointed out, to justify recourse to Article 95 EC as the legal basis what matters is that the measure adopted on that basis must actually be intended to improve the conditions for the establishment and functioning of the internal market (see, to this effect, Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk and Others, paragraphs 41 and 42, and Case C-101/01 Lindqvist, paragraphs 40 and 41).