## Facts

- Italy imposed and maintained a consumption tax on bananas under Italian Law No. 986 of October 9, 1964.
- The tax applied to bananas marketed in Italy, including fresh bananas and, under the same scheme, dried bananas and banana meal.
- The Commission of the European Communities brought an infringement action against the Italian Republic under then-Article 169 EEC, seeking a declaration that the banana tax breached Article 95 EEC (internal taxation).
- The Commission alleged the tax discriminated against bananas imported from other Member States (including bananas from the French overseas departments) in favor of “table fruit” typically produced in Italy (such as apples, pears, peaches, and similar fruit), which was not subject to the same tax burden.
- The Commission accepted that bananas and Italian table fruit differed in sensory properties and water content.
- The Commission also did not dispute Italy’s submission that, on the Italian market, bananas were regarded as particularly nutritious, high in energy, and suitable for infants.

## Issues

1. Are bananas and domestically produced Italian table fruit “similar products” within the meaning of the first paragraph of Article 95 EEC?
2. If not, are fresh bananas nevertheless in (even partial, indirect, or potential) competition with Italian table fruit such that taxing bananas affords indirect protection to domestic production contrary to the second paragraph of Article 95 EEC?
3. Did the Commission establish that dried bananas and banana meal were in competition with Italian table fruit so as to show an infringement for those products?

## Decision

- The Court held that bananas and the table fruit typically produced in Italy were not “similar products” for purposes of Article 95(1).
- The Court held that Article 95(2) can apply where products are not similar but are nevertheless competing products, including where competition is partial, indirect, or potential.
- The Court declared that, by imposing and maintaining a tax on fresh bananas applicable to bananas originating in other Member States (in particular from the French overseas departments), Italy failed to fulfill its obligations under the second paragraph of Article 95 EEC.
- The Court dismissed the application insofar as it concerned dried bananas and banana meal because the Commission did not show those products were in competition with the table fruit typically produced in Italy.
- Italy, being essentially unsuccessful, was ordered to pay the costs.

## Legal Principles

- Article 95 EEC as a whole seeks free movement of goods under normal conditions of competition by eliminating protection resulting from discriminatory internal taxation, and by securing neutrality of internal taxation as between domestic and imported goods.
- For Article 95(1), similarity depends on whether the products have similar characteristics and meet the same consumer needs.
- Article 95(2) addresses indirect tax protection where products are not similar under Article 95(1) but are nevertheless in competition, including partial, indirect, or potential competition.
- A selective internal tax on an imported product may breach Article 95(2) if it places a heavier burden on that product and thereby protects competing domestic products.
- In an infringement action, the Commission must show the competitive relationship for each taxed product category; failure to do so defeats the claim for that category.

## Conclusion

Italy’s banana consumption tax breached Article 95(2) EEC as applied to fresh bananas because it imposed a fiscal burden on an imported product that competed with untaxed domestic table fruit, thereby giving domestic production indirect protection; the Commission’s case was rejected as to dried bananas and banana meal for lack of proof that those products competed with Italian table fruit.


Commission v. Italy, Case C-184/85, 1987 E.C.R. 2013 (1987)