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EU Court Raises Doubts Over Bustling German Border Drink Sales

The European Union's General Court told the bloc's executive branch to take a closer look at the legality of not charging Scandinavians deposit fees and a related tax on drinks bought at German border stores.

(CN) --- For decades, Danes and Swedes have crossed the border into Germany to buy cheaper beer, spirits and soft drinks, and that's created both a bustling border trade for German stores while also leaving Danish and Swedish vendors on the other side of the border feeling peeved.

On Wednesday, the European Union's General Court told the European Commission, the EU's executive branch, to take a closer look at whether elements of this bustling border business violate EU laws meant to both facilitate open trade but also protect against unfair competition.

Specifically, the General Court examined a complaint brought by the Danish Chamber of Commerce on behalf of Danish businesses that allege Germany is unfairly helping its border stores by letting them not charge Danish and Swedish customers deposit fees for non-reusable bottles and cans sold at the border, thus making the drinks even cheaper and more desirable.

In 2018, the commission determined that Germany wasn't violating the EU's strict rules forbidding so-called state aid, agreeing with German authorities who argued that Scandinavian buyers shouldn't be obliged to pay the refundable deposit fees as long as they declare they will consume the drinks in their home countries. By not paying the fee, Scandinavian buyers also are exempted from being charged a related value-added tax. Germany also exempts its border stores from paying fines for not charging the deposit fees.

German officials argue the cross-border consumers from Denmark and Sweden, two EU member states, shouldn't be forced to pay a fee that is meant to encourage Germans to get a refund for returning used bottles and cans so they can be recycled.

But the Danish Chamber of Commerce objected and brought a legal challenge to the General Court, the EU's second-highest court, in 2019.

In its ruling on Wednesday, the court found the commission had not properly examined EU laws governing state aid and said it needs to do a more comprehensive study to determine if German stores are being given an unfair advantage.

The court faulted the commission for reaching its decision – and finding nothing wrong with the border sales system – by referring to German court rulings that hadn't gone through an entire appellate process.

“It may be concluded that the commission was not in a position to overcome, at that preliminary stage, all the serious difficulties encountered in determining whether the non-charging of the deposit and the non-imposition of a fine constituted state aid,” the ruling said.

The border trade is important for the northern German states of Schleswig-Holstein and Mecklenburg-Vorpommern. There are about 60 stores that specialize in this border trade, providing jobs to about 3,000 people. Typically, Danes and Swedes buy large quantities of beer, mineral water and soft drinks, along with wine, spirits, sweets and tobacco products at land crossings or at German towns with ferry links.

In not paying the deposit fees on drinks, Danes and Swedes need to declare that they are buying the goods for consumption outside Germany. A small bottle of domestic beer costs more than twice as much in Denmark than Germany, $2 compared to 80 cents, according Numbeo, an online database that tracks the cost of living in countries around the world.

The border trade is so robust that the German companies that specialize in the border sales have a trade association that represents them, the Interessengemeinschaft der Grenzhändler, or the Interest Group of Border Traders.

The association says on its website that charging Scandanavian customers the deposit fee would be unfair because they would not be able to get refunded for the bottles and cans they buy.

Wednesday's ruling can be appealed to the EU's highest court, the European Court of Justice.

Courthouse News reporter Cain Burdeau is based in the European Union.

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