C-31/74

1. In sectors covered by a common combat a rise in prices, is for those organization of the market, and States to take, at the Community especially when this organization is level, the necessary action for the based on a common price system, purpose of tempting the competent Member States can no longer take Community authority to institute or action, through national provisions authorize measures which are taken unilaterally, affecting the consistent with the single market. machinery of price formation as established under the common 2. The price system established by organization. Regulations Nos 120/67 and 136/66 is applicable solely at the production Article 103, which refers to Member and wholesale stage, with the result States' conjunctural policies, does not that these provisions leave Member relate to those areas already subject States free — without prejudice to to common rules such as the other provisions of the Treaty — to organization of agricultural markets. take the appropriate measures The only way compatible with relating to price formation at the Community law of enabling Member retail and consumption stages, on States to attain, in a sector covered by condition that they do not jeopardize a common organization of the the aims or functioning of the market, the objectives sought by common organization of the market national legislation and intended to in question.

In Case 31/74

Reference to the Court under Article 177 of the EEC Treaty by the Pretura

1 — Language of the Case: Italian.

JUDGMENT OF 23. 1. 1975 — CASE 31/74

Unificata of Rome, VIIIth Criminal Chamber, for a preliminary ruling in the criminal proceedings pending before that court against

JUDGMENT

Facts

The judgment making the reference and undertakings producing or distributing the written observations submitted under goods to submit price returns and any Article 20 of the Protocol on the Statute changes in those prices and Decree Law of the Court of Justice of the European No 427 of the same date (GU No 189 of Economic Community may be summa­ 24.7.1973, p. 5235) fixing maximum rized as follows: prices for important consumer goods. Mr Galli who, among other things, deals in cereals and flour derived from oil seeds is charged with having contravened I — Facts and procedure the first of those Decrees as regards the two aforementioned products. In July 1973 the Italian Government adopted a certain number of provisions He pleads in his defence that the Italian regulating domestic prices including, in regulation of prices is, as regards the, particular, Decree Law No 425 of 24 products in question, inapplicable not July 1973 (Gazzetta Ufficiale No 189 of only because those products are subject 24. 7. 1973, p. 5234) ordering large-scale to price rules laid down by the

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least as regards products subject to such may replace, derogate from or an organization. abrogate existing legislative meas The two products here in question are ures of the EEC with regard to the subject respectively to Regulation No system and regulation of prices 120/67 of the Council on the common relating to such products? organization of the market in cereals and (e) Are the principle of the free to Regulation No 136/66 of the Council on the establishment of a common movement of goods within the Common Market and the conse organization of the market in oils and quent ban on the isolation of

Tariff (Article 2 of Regulation No States? 136/66), with however in certain cases the possibility of compensatory levies. (f) Under the second subparagraph of Article 40 (3) of the Treaty of Rome, Considering that the interpretation of a taken together with Article 5 and the number of provisions of Community law legal provisions of Regulation No is necessary, the Pretore of Rome has put 120/67 concerning cereals and of the following questions to the Court: Regulation No 136/66 concerning (a) Was the legislative power to regulate fats and oils, can a Member State be agricultural prices as it affects authorized: cereals and flour derived from oil (1) to compel solely the dealers seeds conferred on the European within its jurisdiction to sell Economic Community on an their products at a controlled

JUDGMENT OF 23. 1. 1975 — CASE 31/74

(3) to impose, in respect of the of a number of these questions to the abovementioned agricultural decision to be given by the national products, the obligation to court is open to doubt. In respect of comply with controlled prices, a cereals, there is no need to examine the ban on sales at prices not Community rules applicable in this field, expressly authorized, and a duty since their object has never been to to submit and comply with a publish prices nor to ensure price return for sales during correspondence between the prices periods of time laid down in declared and those actually in force. advance solely and exclusively As regards derived flours, it is easy to affecting dealers whose turnover reply that Regulation No 136/66 on the in the first six months of 1973 establishment of a common organization was in excess of 5 thousand of the market in oils and fats does not million lire? establish a system of Community prices (4) Does not imposition of the and that its interpretation is therefore aforesaid obligations relating to unnecessary.

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although they are, without doubt, among those fundamental to the Community As to (c) legal order, are not, in themselves, As regards the common organizations of directly applicable in the sense that they markets, the Commission recalls that create individual rights which the national courts must protect. there exists for cereals an organization which offers producers a maximum price In reply to this question the Commission guarantee, which is based on a number submits that the principle of free of basic prices, namely a target price, a movement of goods within the Common threshold price and intervention prices, Market does not create in itself, in other and which is coupled with a system of words, apart from any link with the levies on imports and refunds on special provisions intended for its exports. implementation, individual rights which For oils and fats, the common the national courts must protect. organization prescribed by Regulation No 136/66/EEC distinguishes between: (2) As to the problem of national — oils and fats in general for which powers with regard to the regulation there exists no price regulation and of prices (questions (a), (b), (c) and to which the Common Customs (d)) Tariff is simply applied; In the Commission's opinion the — olive oil, for which producers are problem only arises in relation to the given a price guarantee; prices of agricultural products subject to — oil seeds and oleaginous fruit, for an organization of the market which which a target price and a basic prescribes the fixing of prices.

regards the whole area of application of proposes to examine, first, question (e), relating to the direct effect of the the Community legal order, of the power to enact provisions which either principle of the free movement of goods, so as to be able to deal next with the reproduce Community provisions or derogate from them. question whether the regulation of prices of agricultural products comes within On the other hand, the aim of a market the exclusive jurisdiction of the organization providing for a system of Community and, if the answer to this prices is actually to bring about a market question is in the negative, what are the price which is neither lower nor higher limits, if any, on the jurisdiction of than the target price. Member States (questions (a), (b), (c) Taking into account these observations, and (d)). Question (f) will be examined it must be stated that, on the one hand, thereafter. the maximum Italian prices represent

something very different from the the reply is negative; since maximum Community prices and that, on the other prices constitute a charge imposed hand, the Community system does not indiscriminately on national products expressly prohibit Member States from and on imported products they are introducing maximum prices. This being comparable to many national rules the case, it must be concluded, in the affecting trade which are compatible Commission's opinion, that action on with the free movement of goods even the part of Member States is contrary to though they may create difficulties in the Treaty if it jeopardizes, impedes or respect of trading.

Account must — relate to any one of the marketing also be taken of the fact that a national stages. However, it is possible that a regulation of prices which does not have maximum price imposed at a more this restrictive effect on trade at any advanced state of marketing may prevent given time, may have such effect the attainment of the Community price following a change in market conditions. level at an earlier stage. Therefore, in reply, the Court can go no further than The Commission proposes to reply to to affirm the general criterion proposed questions (a), (b), (c) and (d) in the by the Commission, a criterion which following manner: only the national court can apply to the 'The target price, the intervention price actual case. and the threshold price have been fixed, as regards cereals, by Regulation No

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products'. Mr Galli states, first, that the point of view he is expounding is only of a subsidiary nature since it is his opinion (4) As to the methods of national price that the dispute before the national court regulation (question (f)) must be resolved on the basis only of If Member States are considered to be national law constituted in this case by able still to regulate the prices of the last paragraph of Article 1 of Decree agricultural products, then the questions Law No 425 of 24 July 1973, which set out under (f) are devoid of any states that 'the above obligation (relating

In

several measures which were adopted by objectives defined in Article 39, the the Commission for the purpose of regulation of prices, a measure which dealing with cases of market disturbance exists moreover in several sectors, there and which had, in compliance with is no provision in Community rules on Article 39 of the Treaty, to reconcile agriculture, and in particular in those different interests among which figures relating to the market in cereals, which the need to ensure reasonable prices for authorizes Member States to legislate on consumers, the measure chosen is prices. Hence the national regulation of presented in the recitals of these acts as prices cannot cover the sector of the 'only one accepted and authorized', agricultural products without conflicting thereby excluding in all cases recourse to with Community law.

Likewise, (Grosoli). there can be no question, in the single agricultural market, of applying Articles Case 18/72 (Judgment of 30 November 108 and 109 providing for alternative 1972, Granaria v Produktschap voor intervention measures, without the prior Veevoeder, Rec. 1972, p. 1163) is even express authorization of the institutions. more significant since in that case the Court held that Member States are not It does not necessarily follow from the entitled 'unless otherwise provided by above that in the agricultural sector Community law, to have recourse to alone can general measures be taken, the national measures which may adversely application of which extends to all the affect the application of this law'.

institutions. Member States can lawfully appreciable rise in prices resulting from exercise only the powers conferred on this situation. them by the Community institutions. The absence of legislative power on the Although Article 40 (3) includes among part of Member States in the agricultural the measures necessary to attain the sectors has been expressly recognized by

the Commission in Decision No put to the Court relating to the 74/287/EEC (OJ L 152 of 8. 6. 1974) discriminatory nature of the Italian price which, while authorizing the Italian legislation, a discrimination arising from Republic to impose certain monetary the fact that the obligation to submit a restrictions on imports, emphasizes that price return and to control prices only the search for common solutions 'cannot applies to undertakings having a be allowed to prejudice the Commis turnover every six months in excess of sion's right to take the decisions which five thousand million lire. are its responsibility at the appropriate In this connexion, the question first of

It follows from this excluded. Furthermore, these rules have, statement that prohibition of discrimi at all levels, created a 'Community spirit' nation is a rule which is directly in which it is accepted that action taken applicable and that, a fortiori, this is the for the provision of rules in agricultural case where, as in the cereals sector, the sectors must be a matter solely for the market organization is particularly well Comunity institutions. This is the advanced. approach generally adopted by the Italian courts, including that adopted in Mr Galli refers to the opinion of Mr Advocate-General Trabucchi in Case the interpretation of Decree Law No 425. 2/73 (Geddo, [1973] ECR 865) which

Community law can principle of free movement of without doubt distinguish between goods and of non-discrimination 'undertakings', by reason of certain of its (question (f), 1, 2, 3 and 4) particular purposes (Article 86), but Member States cannot be considered to Mr Galli examines secondly the question possess the power to define particular

characteristics of certain undertakings in relating to cereals and to oil seeds such a way as to be able to exempt them (Article 18 of Regulation No from the general treatment prescribed by 120/67/EEC of the Council, OJ No 117 Community law. This is precisely what of 19. 6. 1967, p. 2269, and Article 3 of the Italian Republic has done by Regulation No 136/66, OJ No 172 of 30. referring to 'certain undertakings', 10. 1966, p. 3025) prohibit, in relation mainly undertakings which are (a) to transactions with third countries Italian and (b) have a half-yearly (besides those with countries of the turnover in excess of 5 thousand million EEC), not only charges having an effect lire. equivalent to customs duties, but also In this connexion, Mr Galli asserts that quantitative restrictions and measures the need to establish complete equality having equivalent effect and this between Community dealers entails an prohibition is of immediate application. absolute prohibition of discrimination The measures provided for by Decree based on territoriality, even if the Law No 425 constitute measures having discrimination is solely to the detriment an effect equivalent to quantitative of the citizens of the State practising it. restrictions. Since the price control In addition, a distinction based on the precluded the making of any profit, the size of an undertaking is not to be found actual effect of those measures was to in Community law. cause the 'large' Italian undertakings to The different treatment accorded to stop their activities and in particular undertakings coming under the their imports, even though it is in fact on provisions of the Decree Law is reflected the large-scale undertakings that the in the disadvantage caused to commerce importation of cereals into Italy

gradual process. were able to sell at the price freely determined on the market. This was the The system of referring to the prices case for small Italian undertakings and ruling in Italy on 28 June 1973, without for Community or 'foreign' undertak taking into account the effect of world ings. prices on the prices of imported products In Mr Galli's opinion, there is no point constitutes an infringement of Article 2 in fixing agricultural levies and common (3) (e) of Commission Directive No refunds for all the countries of the 70/50 OJ L 13 of 19 January 1970) European Community with a view to according to which measures having an placing all Community dealers on the effect equivalent to quantitative restrictions must be taken to those same competitive level, if a Member State is allowed to require certain measures which 'fix the prices of undertakings to incur considerable losses products solely on the basis of the cost for the benefit of other dealers in the price or the quality of domestic products

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Member States and Community interpretations. In Mr Galli's opinion, institutions and which create rights the Community rule therefore has a wide and obligations only in respect of scope extending beyond its application them; by the national court. To take account — those which create in respect of of this, the Court must specify the individuals rights and obligations 'secondary effects' of Community law in which the national court must the national proceedings so that the protect; criminal court has no doubt as to the need to take it into consideration. — those which are of a general nature (because they are not solely addressed to Community institutions C — Observations of the Italian

Hence, national criminal law punishes in national rules relating to the contravention of such a rule. But, administrative control of prices have whatever the circumstances, it is not always been considered permissible only just but also extremely appropriate because they are concerned with that the court should take account of the cooperation and seek to attain the rules in the third category so that, by objectives of the common agricultural reason of the gradual and ever greater policy laid down in Article 39 of the realization of the principles expressed in Treaty of Rome. these rules, it is recognized, that, before On the other hand, the common market even the stage of direct applicability is organizations established seek to realize reached, the rules must be 'taken into a common agricultural policy within the

meaning of Article 39 of the Treaty and rules in dispute appear not to conflict result in the fixing of target prices and with the Community provisions recalled not prices which are binding. The fixing in the order for reference but in fact are of different categories of prices provided autonomous, being directed towards the for in the regulations establishing the same objectives as the common agricultural organizations (intervention agricultural policy, namely to stabilize price, guaranteed minimum price, markets, assure the availability of threshold price . . .) is intended to supplies and to ensure that supplies prevent prices in the Community from reach consumers at reasonable prices. falling lower than the intervention price.

The stabilization of the prices mentioned organization has been established, it is in the returns of the most important for the Community institutions to fix the producer and distributor undertakings has met this need, given the considerable price rules envisaged in the regulations influence which those undertakings have establishing the common organization, that does not prevent a system of on the market, their capacity to orient it and their power to absorb short-term national rules on consumer prices from fixing maximum sale prices. pressures and tensions.

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terms, to the aims of the said measure powers of the Community, but it is even which coincide with those of embodied in a form of cooperation and Community policy. collaboration with the Community in Furthermore, the measure does not which the Member States must partake contain, even indirectly, any quantitative by virtue of the express provisions of the restriction on imports, especially if Treaty. account is taken of the fact that the market prices charged in Italy for the III — Oral Procedure products in question at the time when this measure was adopted were higher than those fixed by the Community. 1. At the oral proceedings on 10 and 22 October 1974 Mr Galli, represented As a measure of restraint and by Professor M. S. Giannini, F. Capelli coordination, intended to ensure a and Professor G. M. Ubertazzi, the balanced national economy and having Italian Government, represented by the effect of ensuring that the level of G. Zagari and the Commission, prices in Italy does not differ represented by C. Maestripieri, appreciably from the target price fixed submitted their oral observations. by the Community institutions, not only is the action undertaken by the Italian 2. The Advocate-General delivered his authorities not in contradiction with the opinion on 19 November 1974.

Law

1 By order of 26 April 1974 lodged at the Court Registry on 13 May, the Pretura of Rome raised, under Article 177 of the EEC Treaty, a number of questions on the interpretation of Articles 2 and 3, the second paragraph of Article 5, and Articles 30, 39 (1) and 40 (3) of the EEC Treaty and the provisions of Regulation No 120/67/EEC of the Council of 13 June 1967 (OJ p. 2269) on the common organization of the market in cereals and Regulation No 136/66/EEC of the Council of 22 September 1966 (OJ p. 3025) on the establishment of a common organization of the market in oils and fats.

5 The first four questions ((a), (b), (c) and (d)) relating to the price system applicable in the areas covered by Regulations Nos 120/67 and 136/66 seek, essentially, to ascertain whether, and to what extent, a Community price system established within the context of a common organization of the market may exclude a national price control system.

6 The Court is also asked, with the same purpose in view, and with reference to Articles 2, 3 and 5 of the Treaty, whether the principle of free movement of goods within the Common Market and the consequent ban on the isolation of national markets in such a way as to impede the realization of a single market are basic principles of the Community legal order giving rise to individual rights which national courts must protect if they are infringed by Member States (Question (e)).

7 A similar question is put to the Court in respect of Article 30 of the Treaty which prohibits quantitative restrictions on imports and all measures having equivalent effect (Question (f) (4)).

8 Regulation No 120/67 on cereals, adopted within the framework of the common agricultural policy, is intended to establish a common organization of the market within the meaning of Article 40 of the EEC Treaty.

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This common organization of the market is intended, as is emphasized repeatedly in the preamble to Regulation No 120/67, to create for the Community a 'single market' in cereals subject to common administration.

The purpose of the above articles is to apply to the sector of the market at issue the provisions of Articles 2, 3 (in particular subparagraphs (a), (d) and (f)), 9 and 30 of the Treaty which seek to create a single market through the removal of all obstacles to the free movement of goods.

JUDGMENT OF 23. 1. 1975 — CASE 31/74

15 Such a system excludes any national system of regulation impeding directly or indirectly, actually or potentially, trade within the Community.

Consequently, as concerns more particularly the price system, any national provisions, the effect of which is to distort the formation of prices as brought about within the framework of the Community provisions applicable, are incompatible with the regulation.

16 Apart from the substantive provisions relating to the functioning of the common organization of the market in the sector under consideration, Regulation No 120/67 comprises a framework of organization designed in such a way as to enable the Community and Member States to meet all manner of disturbances.

17 In this connexion, it must first be stressed that it is one of the objectives of Article 39 (1) of the Treaty that supplies reach consumers at reasonable prices.

22 It is therefore apparent that the framework of organization of Regulation No 120/67 reserves for every Member State the power, in conjunction with the Community institutions, to take the necessary action, in the shortest possible time, where the normal operation of the price machinery established by the regulation is ineffective in the face of undesirable tendencies in the movement of prices in its territory.

23 A Member State cannot base the justification for its unilateral intervention in the movement of prices in the sector in question on the provisions of Article 103 of the Treaty relating to conjunctural policy.

24 Article 103, which refers to Member States' conjunctural policies, does not relate to those areas already subject to common rules such as the organization of agricultural markets.

25 It is necessary to examine next whether the preceding considerations are also applicable to the market in oils and fats dealt with in Regulation No 136/66.

26 This regulation also establishes a common organization of the market based on the unity of the market in the products concerned through the removal of obstacles to the free movement of goods and on common management.

Its special nature consists in the fact that, in respect of the most sensitive sectors of production, including in particular that of olive oil, it establishes a price system whereas, in respect of other products falling within the sphere of application of the regulation, it provides simply for customs protection in trade with third countries and for the possibility of protective measures to combat market disturbances.

31 Since the power to take the measures necessary to combat a rise in prices on the markets in question is reserved to the Community institutions, any unilateral measures taken by Member States in this sector cannot be imposed on private persons who are subject to the Community regulations.

32 The only way compatible with Community law of enabling Member States to attain, in a sector covered by a common organization of the market, the objectives sought by national legislation and intended to combat a rise in prices, is for those States to take, at the Community level, the necessary action for the purpose of prompting the competent Community authority to institute or authorize measures which are consistent with the requirements of the single market set up by Regulations Nos 120/67 and 136/66.

33/34 In the market sectors under consideration, these regulations ensure, with direct effect in favour of private parties, the free movement of goods, in particular by eliminating quantitative restrictions and all measures having equivalent effect. It must however be stated that the price system established by Regulations Nos 120/67 and 136/66 is applicable solely at the production and wholesale stage, with the result that these provisions leave Member States free — without prejudice to other provisions of the Treaty — to take the appropriate measures relating to price formation at the retail and

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consumption stages, on condition that they do not jeopardize the aims or functioning of the common organization of the market in question.

35 The final question asks whether under the second subparagraph of Article 40 (3) of the EEC Treaty, taken together with Article 5 and Regulations Nos 120/67 and 136/66 it is permissible for Member States to adopt, in the field of price control, provisions the effect of which is to discriminate between producers or consumers within the Community.

in answer to the questions referred to it by the Pretura of Rome by order of 26 April 1974,

hereby rules:

OPINION OF MR WARNER — CASE 31/74

1. In sectors covered by a common organization of the market, and especially when this organization is based on a common price system, Member States can no longer take action, through national provisions taken unilaterally, affecting the machinery of price formation as established under the common organization;

2. a national system which, by freezing prices and subjecting their alteration to administrative authorization, has the effect of modifying price formation as provided for within the framework of the common organizations of the market referred to, is incompatible with Regulation No 120/67 on the common oganization of the market in cereals and with Regulation No 136/66 on the establishment of a common organization of the market in oils and fats;

3. Regulations Nos 120/67 and 136/66 ensure, in the market sectors concerned, and with direct effect in favour of private persons, the free movement of goods, in particular by eliminating quantitative restrictions and all measures having equivalent effect.

DELIVERED ON 19 NOVEMBER 1974

My Lords, dates, 5 December 1972, 14 September For over two years, inflation has been a 1973 and 17 December 1973, are dominant problem in the Community. It significant, and of which the contents has been the subject of successive evince the growing, and understandable, Resolutions of the Council, of which the anxiety of that Institution about it.