Mobile Phones; Roaming Charges, Price Caps and Harmonization: Case C-58/08

The Court of Justice has handed down an important judgment in Case C-58/08 Vodafone and Others v. Secretary of State for Business, Enterprise and Regulatory Reform upholding the legality of Regulation 717/2007 - the Roaming Regulation.

Anyone who has used a mobile phone in Europe over the past few years knows that calling or receiving calls in a different country from that in which the subscription or plan was taken out knows that it is an extremely costly business. Prohibitively expensive, in fact. The EU institutions acted by adopting the Roaming Regulation fixing maximum charges that mobile phone operators may charge. The regulation was adopted on the basis of Article 95 EC (now, Article 114 TFEU).

Not surprisingly, the leading mobile operators hated the regulation and the very idea that they could no longer rip-off the consumer simply because he or she was making or taking calls in a foreign country. Consequently, they challenged the measures taken by the British authorities to implement the Roaming Regulation before the English High Court. The English court then referred two questions on the validity of the Roaming Regulation itself to the Court of Justice.

The first question referred asked whether Article 95 EC was the proper legal basis for the regulation.

The Court of Justice answered that it was.

The Court considered first the general legal parameters surrounding the use of Article 95 EC as a legal base. It recalled that the object of measures adopted on the basis of Article 95(1) EC must genuinely be to improve the conditions for the establishment and functioning of the internal market (Case C‑491/01 British American Tobacco (Investments) and Imperial Tobacco [2002] ECR I-11453, paragraph 60, and Case C-217/04 United Kingdom v Parliament and Council [2006] ECR I‑3771, paragraph 42) 5for our previous post on that case, look here). The existence of disparities between national rules and the abstract risk of infringements of fundamental freedoms or distortion of competition is not sufficient to justify the choice of Article 95 EC as a legal basis, the EU legislature may have recourse to it in particular where there are differences between national rules which are such as to obstruct the fundamental freedoms and thus have a direct effect on the functioning of the internal market (Case C‑380/03 Germany v Parliament and Council [2006] ECR I‑11573, paragraph 37) or to cause significant distortions of competition (Case C‑376/98 Germany v Parliament and Council [2000] ECR I‑8419, paragraphs 84 and 106).

Article 95 EC can also be used, the Court stated, if the aim of the measure is to prevent the emergence of such obstacles to trade resulting from the divergent development of national laws. However, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (Germany v Parliament and Council, paragraph 38, and Case C‑301/06 Ireland v Parliament and Council [2009] ECR I-593, paragraph 64; United Kingdom v Parliament and Council, paragraphs 60 to 64).

Also, where an act based on Article 95 EC has already removed any obstacle to trade in the area that it harmonizes, the EU legislature can adapt that act to any change in circumstances or development of knowledge having regard to its task of safeguarding the general interests recognized by the Treaty (British American Tobacco (Investments) and Imperial Tobacco, paragraphs 77 and 78).

The Court held, in paragraph 43 of United Kingdom v Parliament and Council, that by using the expression ‘measures for the approximation’ in Article 95 EC the authors of the Treaty intended to confer on the EU legislature a discretion as regards the method of approximation most appropriate for achieving the desired result, in particular in fields with complex technical features. Provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the EU legislature cannot be prevented from relying on that legal basis on the ground that consumer protection is a decisive factor in the choices to be made (see, regarding public health protection, Germany v Parliament and Council, paragraph 88; British American Tobacco (Investments) and Imperial Tobacco, paragraph 62; and Joined Cases C‑154/04 and C-155/04 Alliance for Natural Health and Others [2005] ECR I-6451, paragraph 30).

The Court examined the content of Regulation 717/2007 in the light of those parameters.

It found that the object of Regulation 717/2007 is to improve the conditions for the functioning of the internal market and that it could be adopted on the basis of Article 95 EC.

The Court states that the level of retail charges for international roaming services, when the regulation was adopted, was high and the relationship between costs and charges was not such as would prevail in fully competitive markets. That high level of retail charges had been regarded as a persistent problem by public authorities and consumer protection associations throughout the EU and attempts to solve the problem using the existing legal framework had not had the effect of lowering charges. In those circumstances, the EU legislature was actually confronted with a situation in which it appeared likely that divergent national measures would be adopted with the aim of lowering retail charges, but without affecting wholesale charges. Such a development could however have caused significant distortions of competition and disrupted the orderly functioning of the EU-wide roaming market, which justified the adoption of a regulation on the basis of Article 95 EC in order to protect the proper functioning of the internal market.

The second question referred to the Court of Justice concerned the proportionality of the measure.

The Court held that the Roaming Regulation was proportionate.

It first recalled that the principle of proportionality is one of the general principles of EU law and requires that measures implemented through EU law provisions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and must not go beyond what is necessary to achieve them (Joined Cases C‑453/03, C‑11/04, C‑12/04 and C‑194/04 ABNA and Others [2005] ECR I‑10423, paragraph 68).

With regard to judicial review of compliance with those conditions the Court has accepted that in the exercise of the powers conferred on it the EU legislature must be allowed a broad discretion in areas in which its action involves political, economic and social choices and in which it is called upon to undertake complex assessments and evaluations. Thus the criterion to be applied is not whether a measure adopted in such an area was the only or the best possible measure, since its legality can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue (Case C‑189/01 Jippes and Others [2001] ECR I‑5689, paragraphs 82 and 83; British American Tobacco (Investments) and Imperial Tobacco, paragraph 123; Alliance for Natural Health and Others, paragraph 52; and Case C‑558/07 S.P.C.M. and Others [2009] ECR I-0000, paragraph 42).

Even though it has a broad discretion, the EU legislature must base its choice on objective criteria. Furthermore, in assessing the burdens associated with various possible measures, it must examine whether objectives pursued by the measure chosen are such as to justify even substantial negative economic consequences for certain operators (Joined Cases C‑96/03 and C‑97/03 Tempelman and van Schaijk [2005] ECR I‑1895, paragraph 48; Case C‑86/03 Greece v Commission [2005] ECR I‑10979, paragraph 96; and Case C‑504/04 Agrarproduktion Staebelow [2006] ECR I‑679, paragraph 37).

The Court found that before the Commission proposed the regulation, it carried out an exhaustive study of alternatives and evaluated the economic impact of various types of regulation. The average retail charge for a roaming call in the EU at the time the regulation was adopted was high (EUR 1.15 per minute, which was more than five times higher than the actual cost of providing the wholesale service) and the relationship between costs and prices was not such as should have prevailed in fully competitive markets. The tariff provided for in the regulation is significantly below that average charge and is set in relation to the ceilings for the corresponding wholesale charges, so that the retail charges reflect more accurately the costs incurred by providers. In those circumstances, an intervention limited in time in a market that is subject to competition, which makes it possible, in the immediate future, to protect consumers against excessive prices, such as that at issue, is proportionate to the aim pursued, even if it might have negative economic consequences for certain operators.

Finally, the Court examined whether Regulation 717/2007 complied with the principle of subsidiarity. It held that it did.

It recalled that, as regards Article 95 EC, it held had that the principle of subsidiarity applies where the EU legislature uses it as a legal basis, inasmuch as that provision does not give it exclusive competence to regulate economic activity on the internal market (British American Tobacco (Investments) and Imperial Tobacco, paragraph 179).

In this particular case, given the interdependence of retail and wholesale charges, the EU legislature could legitimately take the view that a common approach at EU level was necessary to ensure the smooth functioning of the internal market, thus allowing operators to act within a single coherent regulatory framework.

Comments

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or

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