Specialising in all-things-barbecue, the ‘Kamin und Grill Shop’ even sells a range of organic spice mixes. However, these have not been subject to a regulated ‘control system’ as required by the EU’s ‘organic produce’ Regulation 834/2007. Kamin und Grill deny infringing the Regulation because their business is done through their website, and the Regulation has an exception for ‘direct sales’. The unsavoury dilemma for the CJEU’s judges is this: if the aims of the Regulation are guaranteeing fair competition, ensuring consumer confidence and protecting consumer interests, then why is it legally right for an internet mail-order company to escape the wrath of the Regulation?
Specialising in all-things-barbecue, the German internet company ‘Kamin und Grill Shop’ sells a range of organic spice mixes. Customers get their spice mixes delivered in the post.
However, these spices have not been subject to a regulated ‘control system’ as required by the EU’s ‘organic produce’ Regulation 834/2007 (OJ  L189/1). Consequently, the local unfair competition authority, which by dint of Article 28 locally polices the Regulation, wrote to Kamin und Grill and served upon them ‘cease and desist’ letters, demands, and a fine.
The company denied being subject to the Regulation. This was because there was an exception to the ‘control system’ obligation in Article 28(2) of the Regulation for ‘direct sales’. The company explained that it was doing just that: its customers were buying their organic spice mixes solely and directly through the company’s website.
Curiously, the authority’s action had the desired effect: the company complied and paid the fine. However, that was not enough for the authority. It sought to recover 220 euro for the costs it had incurred in serving its demand.
The claim pushed the matter to court. At first instance, the judge denied the claim. On appeal, the claim was allowed for various reasons, which included the fact that the documents had been properly worded, formulated and served correctly. More controversially, the reasons also included the appellate court’s belief that the company had sold its spice mix in breach of Article 28(1)(b) of the Regulation which requires an operator to ‘submit his undertaking to the control system referred to in Article 27′. As a result, ‘Kamin und Grill Shop’ were trading unfairly.
That said, the appellate court granted leave to appeal a point of law to the German Supreme Court on the correct interpretation of the ‘direct sale’ exception in Article 28(2) of the Regulation.
At the German Supreme Court
The Supreme Court judges looked at the wording of the Regulation. The exemption contained in Article 28(2) of the Regulation allowed Member States the freedom to exempt people in the market who sell products to consumers in certain conditions.
More precisely, Article 28(2) provides:
Member States may exempt from the application of this Article operators who sell products directly to the final consumer or user provided they do not produce, prepare, store other than in connection with the point of sale or import such products from a third country or have not contracted out such activities to a third party.
However, it was unclear to the Supreme Court judges what this wording meant. Clarity was also not increased by using a systemic interpretation of the EU Regulation which involved reading Article 28(2) together with Recital 32, which provides:
It might in some cases appear disproportionate to apply notification and control requirements to certain types of retail operators, such as those who sell products directly to the final consumer or user. It is therefore appropriate to allow Member States to exempt such operators from these requirements. However, in order to avoid fraud it is necessary to exclude from the exemption those retail operators who produce, prepare or store products other than in connection with the point of sale, or who import organic products or who have contracted out the aforesaid activities to a third party.
From the Recital, it appeared that the legislature intended to allow Member States the power to create exemptions to the obligations in the Regulation, a power that reflected the notion of proportionality.
However, how did that square with the obligation in Article 2(b) of the Regulation which suggested that it applied to the entire process, ranging from the production and preparation of organic produce to their distribution? Further doubts as to the ‘direct sale’ exception concerned whether it was really possible for a consumer of organic produce to be protected any better if the sale took place where the goods were stored rather than via a sale involving a mail-order.
Consequently, Judge Koch and four other judges of the German Supreme Court decided to make a preliminary reference to the CJEU.
My unofficial translation of the German Supreme Court’s question reads:
Is there a ‘direct’ sale to the final consumer within the meaning of Article 28(2) of Regulation 834/2007 when the retail operator or his sales personnel sells the products to the final consumer without the intervention of a third party, or does a ‘direct’ sale further presume that the sale occurs in the place where the products are stored, and sold in the presence of not only the retail operator or his sales personnel but also the final consumer?
Readers of EU Law Radar interested in food law are alerted to another preliminary reference from the German Supreme Court; see further, Case C-393/16, Comité Interprofessionnel du Vin de Champagne – against German Champagne Sorbet not from the French Champagne.
Update – 26 September 2016
There is another website-sales food-labelling case from Germany; see further, Case C-422/16, TofuTown.com – selling ‘tofubutter’ and ‘veggiecheese’ without butter or cheese.