C-65/75

JUDGMENT OF 26. 2. 1976 - CASE 65/75

question are likely to constitute an fore a measure having an effect obstacle, directly or indirectly, actually equivalent to a quantitative restriction, or potentially, to imports between especially when it is fixed at such a Member States. low level that, having regard to the general situation of imported products 3. Although a maximum price applicable compared to that of domestic without distinction to domestic and products, dealers wishing to import imported products does not in itself the product in question into the constitute a measure having an effect Member State concerned can do so equivalent to quantitative restrictions, only at a loss. it may have such an effect, however, when it is fixed at a level such that 4. By reason of its very nature and its the sale of imported products function in the system of the sources becomes, if not impossible, more of Community law the regulation difficult than that of domestic produces immediate effects and as products. A maximum price, in any such is capable of conferring on event in so far as it applies to parties rights which the national imported products, constitutes there­ courts must protect.

In Case 65/75

Reference to the Court under Article 177 of the EEC Treaty by the Pretore of Padua for a preliminary ruling in the criminal proceedings instituted in that court against

RICCARDO TASCA

on the interpretation of Article 30 of the EEC Treaty and Regulation No 1009/67/EEC of the Council of 18 December 1967 on the common organization of the market in sugar (OJ English Special Edition, 1967, p. 304), especially Article 35,

JUDGMENT

Facts

The judgment making the reference, the indent above. Paragraph (3) fixed 'the procedure and written observations maximum total charges for the wholesale submitted under Article 20 of the or retail distribution of the sugar' Protocol on the Statute of the Court of (compensi massimi complessivi per la Justice of the EEC may be summarized distribuzione dello zucchero all'ingrosso as follows: e al dettaglio) at Lit. 25-70 per kg for the sale of loose sugar and Lit. 26-70 per kg for the sale in cartons or packets and I — Facts and procedure stated that these charges were included in the abovementioned prices. 1. Article 14 of the Decreto Legislativo (Decree-law) No 896 of 15 September Order No 39/1974 of the CIP of 13 1947 (Gazzetta Ufficiale 1947, p. 6087) makes persons who sell goods at prices August 1974 (Gazzetta Ufficiale No 214 higher than those fixed on the basis of of 16 August 1974, p. 5460) set out the the said Decree-law liable to penalties. components, including certain duties and - taxes, making up the maximum prices On 28 June 1974 the "Comitato Inter­ laid down by Order No 28/1974. It gave ministeriale dei Prezzi" (Inter-departmen­ the following figures: tal Committee on Prices, hereinafter — Lit. 323-30 per kg as the maximum referred to as the 'CIP') issued the ex-factory price; 'provvedimento' (Order) No 28/1974 (Gazzetta Ufficiale No 171 of 2 July — Lit 329-30 per kg as the maximum 1974, p. 4463). As from 1 July 1974 price free-at-wholesaler's warehouse 'having regard to the increases laid down anywhere in the national territory; by the Community provisions and to the situation on the market' the first — Lit. 25-70 per kg as the maximum paragraph of the order fixed maximum charge for wholesale or retail distribution. consumer prices for certain categories of domestic or foreign sugar for the whole of the national territory: The abovementioned orders have in the

By order dated 11 July 1975 the national with that of Regulation No 120/67. court asked the Court the following Regulation No 1009/67 also relies on the questions: same machinery for the formation of 1. Does the system of prices established market prices, that is to say, free by the common organization of the negotiation, which is restricted only in sugar sector, dealt with in Regulation order to prevent these prices from falling No 1009/67/EEC, preclude a Member below the intervention price. The fixing State from fixing unilaterally a of a maximum price by a Member State maximum selling price? would damage this machinery.

3. Do the abovementioned Community taken unilaterally, affecting the provisions create for Community machinery of price formation as traders individual rights which the established under the common national courts must protect so as to organization'. render a national system of maximum prices inapplicable as regards them? The rights which individuals derive from Regulation No 1009/67 are not excluded In the grounds of the order the national by the adoption of national rules in the court sets out the following matters: same sector; Mr Tasca should therefore be acquitted. In its judgment of 23 January 1975 in Case 31/74, Galli, [1975] ECR 47, the Court ruled that 'a national system 3. The order making the reference was which, by freezing prices and subjecting registered at the Court's Registry on their alteration to administrative 22 July 1975. authorization, has the effect of modifying In accordance with Article 20 of the

It 221). This consideration likewise applies nevertheless called upon the Italian to Regulation No 1009/67 the price Government and the Commission to system of which is basically identical reply in writing to certain questions.

the necessity of combating inflation, they have not as yet managed to achieve a 2. The first question sufficiently close coordination of their economies to enable the anti-inflation Mr Tasca states that the considerations measures to be adopted to be more or in the judgment in Galli apply equally less the same. The Council in a series of in the present case notwithstanding the resolutions has declared that it is the task fact that the national measures then at of the Member States to ensure that their issue related to the production and efforts are concerted and mutually wholesale stages whereas in the present reinforcing. Whilst recognizing that case the rules at issue apply to all the measures adopted in one country of the marketing stages. The main thing is Community can have profound effects in that the price system introduced by other countries, the Council had Regulation No 1009/67 is identical in recognized 'the specific and changing essence with that enshrined in nature of the inflation problem Regulation No 120/67. In support of this throughout the Community'. statement Mr Tasca gives a detailed analysis of the points which are common If no possibilities existed for Member to the two systems, stressing in particular States to intervene in price formation that they aim at guaranteeing to traders a Member States would be prevented from minimum profit without preventing a fulfilling their obligations under Article larger profit being obtained in a case — 104 of the Treaty, that is, 'to ensure the theoretical at the time when the said equilibrium of [their] overall balance of regulations were adopted but real in the payments and to maintain confidence in present situation where there is a sugar [their] currency, while taking care to shortage and an increase in prices on the ensure a high level of employment and world market — where the prices which the stable level of prices'. There would be are formed freely on the market are the consequent danger to the financial higher than the threshold price laid stability of the Member States which down by the Community. Article 6 (2) enjoins the institutions of the Community not to prejudice. The Italian rules in question are incompatible with the Community rule The Commission first of all describes the (a) because the Member States have lost situation existing in the Member States as all power to intervene in the particular

As regards sugar in particular Article 16 pursuing unilaterally only one of the of Regulation No 1009/67, as amended objectives laid down in Article 39 of the by Regulation No 607/72 of the Council Treaty the Italian State has placed itself of 23 March 1972 (OJ English Special in conflict with the action taken by the Edition 1972, p. 236), provides the Community which is based on a Community with the instruments different concept of the priorities to be necessary to avoid price rises, that is to made among these objectives which are say, an export levy and import subsidies. not wholly compatible. It is significant that the system of import subsidies The judgment in Galli has confirmed, it established by Regulation No 2931/74 is true, that Member States have in had not been operated so as to reduce principle retained the power 'to take the the cost of all sugar imported to the level appropriate measures relating to price of the Community threshold price which formation at the retail and consumption thus continues to act as a kind of stages' as distinct from the production minimum price. The liberal philosophy and wholesale stages. It is possible, of the Community rules with regard to however, to take the view that the Court sugar is the result of a number of factors did not intend to give a definite ruling in and in particular of Article 3 (2) of this respect and that the passage quoted Regulation No 1009/67 according to is explained by reason of the fact that the which 'derived intervention prices shall national rule in question in the Galli be fixed for other areas, account being case related only to the production and taken of the regional variations which, wholesale stages. In reality the following given a normal harvest and free factors support the argument that there is movement of sugar, might be expected to no reason to distinguish between the occur in the price of sugar under natural different marketing stages: conditions of price formation.' — Article 39 (1) (e) of the Treaty requires the Community 'to ensure The fixing of maximum prices for the that supplies reach consumers at last marketing stage necessarily affects reasonable prices'. the prices at the previous stages; these — Article 3 (3) of Regulation No prices can therefore no longer be freely 2931/74 of the Council of 18 formed, as the Community rules assume. November 1974 (OJ L 311, 1974 p. 8) on the introduction of a subsidy on The Italian Government considers that imports of white and raw sugar this question must be answered in the requires a tenderer to abide by a negative. maximum price fixed by the Community at the consumption It cannot be inferred from the judgment stage. in Galli, and it is not correct, that the — A pricing system established within Member States have lost their power the framework of a common unilaterally to fix maximum consumer organization cannot be identified prices. The objective of the national rules

the principle of maintaining the power particular case must be compatible of Member States 'to take the appropriate with the Community objectives. measures relating to price formation'. A national measure comprising the The common organization of the market fixing of maximum selling prices could in sugar is in substance no different from well be in accordance with the objectives that of the market in cereals which was of Regulation No 1009/67, namely to the subject of the judgment in Galli. In achieve a stable market and to guarantee particular the price system which it to growers security of employment and a established also concerns only the fair standard of living whilst avoiding production and wholesale stages; its main over-production. This regulation merely objective is likewise 'to ensure that the prevents such prices from being fixed at necessary guarantees in respect of a level the object or effect of which employment and standards of living are would be to prevent these objectives maintained for Community growers' (2nd from being attained. recital to Regulation No 1009/67). According to the Commission the National rules on prices applicable to the principle confirmed by the judgment in retail and consumer stages is therefore Galli that Member States can no longer incompatible with Regulation No take action unilaterally affecting the 1009/67 only if it indirectly affects the machinery of price formation as prices fixed by the latter, for example by established under the common laying down a maximum consumer price organization of the market in cereals and lower than the intervention price or, in a the market in fats likewise applies to more general manner, by fixing a sugar. This arises from the nature and maximum price in such a way as to affect function of the price system of the Community prices. This is not so in Regulation No 1009/67 which aims at the present case since the maximum the complete liberalization of price fixed by Order No 28/1974 of the intra-Community trade and at the CIP assumes a price ex-factory appreci­ consequential regulation of trade with ably higher than the Community countries outside the Community. threshold price and therefore than the target and intervention prices. On the other hand the judgment in Galli recognized that national measures The United Kingdom Government gives relating to prices at the retail and a detailed analysis of the judgments of consumption stages are compatible with the Court concerned with the the Community rules 'on condition that compatibility or incompatibility with the they do not jeopardize the aims or Community system of national functioning of the common organization interventions in the priceformation of of the market in question'. In order to products subject to a common consider whether this is so in the present organization of the market One lesson case it is necessary to deduct' from the which can be drawn from all these maximum consumer prices fixed by the judgments is that: CIP all the factors contributing to the — In the first place the scope and cost of the goods from the time when purpose of the Community regu- they left the factory to when they are

sold to the consumer (marketing costs, intervention prices are capable of dudes and taxes, transport costs etc.); the involving legal consequences: with re­ price ex-factory is then obtained. The gard to the threshold price, payment of Commission does this; it arrives at the a variable differential levy on goods with conclusions that at the time when the an import price less than it; with regard facts in question took place the price to the intervention price, guarantee of ex-factory so calculated was higher than obtaining it from the intervention agency the threshold price laid down by the in the event of the delivery of the goods Community and therefore a fortiori to to the agency. On the other hand since the target and intervention prices. the basic function of the target price is to Accordingly the maximum prices in regulate production it plays a lesser role question do not jeopardize either the in the later stages. Regulation No aims or functioning of the common 1009/67 transferred only limited powers organization. to the Community relating solely to frontier transactions and to intervention. Apart from these considerations it may The Community was not able to nevertheless be asked whether the establish a too restrictive organization for judgment in Galli does not lead to the agriculture and trade in agricultural denial of any power vested in the products since it had not done so for the Member States with regard to the fixing industrial sector, especially in view of the of agricultural prices. Such a conclusion fictitious nature of the distinction would, however, be hasty since the between agricultural and industrial Community has never claimed an products. Moreover, since the exclusive power in this field, a power the Community is not principally exercise of which would have serious responsible in this sphere of 'general implications in the political and economic policy' in particular with economic spheres. regard to retail prices and consumer selling prices, it would have risked According to the Council the reply extending the effect of its regulation of should be sought partly 'in the prices, if this had been too rigid, to that philosophy of the system of prices of the of the system of retail prices. Finally, the organizations of the markets' and more differences between the economic particularly the common organization of systems of the Member States and the the market in sugar and partly 'in the surplus or deficit nature of their division of powers between the respective productions stand in the way Community and the Member States with of any set of Community rules which is regard to 'general economic policy'. harmonized down to the finest details.

functioning of the common organization of the organization of the market and the of the market in question' must also necessity, no less imperative, of not apply to the previous stages. depriving Member States of the instruments which they need in order to (b) Article 145 of the Treaty gives the carry out their responsibilities in the Council only the task of coordinating sphere of the general economic 'the general economic policies of the equilibrium. This is particularly Member States'. This shows that with the important in a period of crisis. exception of those spheres in which the Treaty expressly gives the Council a If the solution advocated by the power to take 'decisions' (2nd indent of defendant in the main proceedings were Article 145), numerous powers, in accepted, the Community would be particular those relating to prices in obliged to supplement its price rules, for general, to currency, to conjunctural example with the aim of fighting inflation, which would create policy and to expansion remain the considerable difficulties. responsibility of the Member States. For this reason again it is not possible to say that the common organization of the 3. Second question market rules out any national Mr Tasca observes in the first place that intervention in the abovementioned the scope of this question goes beyond spheres. the agricultural sector.

JUDGMENT OF 26. 2. 1976 — CASE 65/75

Certain agreements concluded between The Council does not express a view on the Community and third countries the second question. involved a prohibition similar to that in Article 30 of the Treaty. The Community 4. Third question has never accepted, however, the argument that pricing systems laid down Mr Tasca states that the affirmative under a common organization of the answer to be given to this question stems market have effects equivalent to from the case-law of the Court. quantitative restrictions on imports. The Italian Government admits that in The Commission gives a similar opinion so far as a maximum consumer price laid without however expressing itself down by national authorities is specifically on whether the rules in incompatible with Community rules it

TASCA

What is meant by 'sale to the consumer The Italian Government replies that in Order No 28/1974 of the CIP? In Order No 39/1974 according to its first

JUDGMENT OF 26. 2. 1976 — CASE 65/75

In free-at-wholesaler's warehouse prices but order to help this price to be obtained on is limited to stating these factors, and the the common market the Community has maximum charges intended to cover had recourse to a series of indirect distribution costs, as components of the methods: publication of the fixed target said maximum prices. price, import levies intervention on the internal market and export refunds. In using the expressions 'ex-factory maximum prices', 'maximum prices Before the judgment in Galli the free-at-wholesaler's warehouse', and Commission's position with regard to 'maximum charges for wholesale and measures taken unilaterally by certain retail distribution Order No 39/1974 was Member States in the sphere of not expressed precisely. It was in fact agricultural prices was as follows: concerned with cost factors which had to — As regards production and wholesale be taken into account in fixing the prices Member States could fix maximum consumer prices but which maximum sale prices only in so far as were not made mandatory. this was not likely adversely to affect The Italian Government annexes to its the functioning of the machinery of reply a table containing an analysis of the common organization of the the consumer prices fixed by Order No market or at least to impede it or make it more difficult. Thus to fix a

. . in what circumstances in their opinion national measure would have prevented the price rules of the kind presently in target price from being attained. question may: Finally if the maximum selling prices (1) alter the formation of prices as had been fixed at a level higher than provided for under the common the target price it would have been organization of the market in sugar: necessary to examine each case to see whether or not the national measure (2) in a more general way jeopardize the aims and functioning of this prevented this price from being attained. common organization. — As regards consumer prices, Member Whereas the Italian Government has States retained the power to fix them not given an opinion on this matter the in so far as this was not incompatible Commission has submitted the following with Community provisions taken observations, stating that it is not dealing within the framework of the relevant with the question of the compatibility of common organization. the measures in question with Article 30 Nevertheless, the common organi of the Treaty. zations of the market are capable

of extending their scope also to the could lead to the objection that it is consumer stage as appears from incompatible with the judgment in Article 39 (1) (e) of the Treaty Galli. according to which an objective of the common agricultural policy is During the oral procedure, which took inter alia 'to ensure that supplies place on 16 December 1975, Mr Tasca, reach consumers at reasonable prices'. represented by Dona Viscardini of the To judge whether a maximum Padua Bar, the United Kingdom consumer price laid down by a Government, represented by Gordon Member State is compatible with the Slynn of the Treasury Solicitor's Community prices it is necessary to Department, the Italian Government, inquire what, having regard to the represented by Ivo Maria Braguglia, average profit margins of the middle Vice-avvocato dello Stato, the men, is the price level free-factory Commission, represented by its Legal assumed by the said maximum price. Adviser, Cesare Maestripieri, and the Council, represented by its Legal Adviser, The judgment in Galli leads the M.C_ Giorgi, amplified the arguments set Commission, as regards more particularly out in the written procedure. the present case, to the following

wholesale. The statements of the Italian question of the CIP show, that in Italy Government are not correct in so far as and as regards sugar it is possible 'to control prices without distinction by they allege that Orders Nos 28/1974 and regulating one or the other stage'. 39/1974 apply only to sales to ultimate consumers and that the second of these — Although in its written observations the Commission stated that because orders, in using expressions such as the consumer price laid down by 'maximum ex-factory price' is limited to Order No 28/1974 assumed an taking account of certain cost factors ex-factory price above the without making them mandatory.

In other words the

1 By order dated 11 July 1975 received at the Court Registry on 22 July the Pretore of Padua referred, under Article 177 of the EEC Treaty, three questions on the interpretation of Article 30 of the EEC Treaty and the provisions of Regulation No 1009/67/EEC of the Council of 18 December 1967 on the common organization of the market in sugar (OJ, English Special Edition 1967, p. 304), especially Article 35 thereof. These questions have arisen in the context of criminal proceedings against a trader charged with having contravened Order No 39/1974 of the Comitate Interministeriale dei Prezzi (Inter-departmental Committee on Prices), hereafter referred to as the 'CIP', of 13 August 1974 (Gazzetta Ufficiale No 214 of 16 August 1974) by having charged a price higher than the maximum price under the said order on the sale of 25 000 kg of caster sugar. The Court's reply must enable the national court to decide whether the provisions which the accused in the main proceedings is alleged to have infringed are compatible with the Community rules.

2 Order No 39/1974 stated the factors making up the maximum consumer prices for both domestic and foreign sugar laid down by Order No 28/1974 of the CIP of 28 June 1974 (Gazzetta Ufficiale No 171 of 2 July 1974) which factors comprised inter alia, the 'maximum ex-factory price', the 'maximum price free-at-wholesaler's warehouse' and the 'maximum charge for wholesale and retail distribution'. In the procedure before the Court disagreement was revealed on whether as a whole these orders fixed obligatory maximum prices only for sales in which the immediate buyer is the ultimate consumer or whether they did so also for sales made at previous marketing stages and in particular in respect of sales made by sugar growers. It is not for the Court to settle this dispute, and having regard to the fact that the questions raised by the national court make no distinction between the different marketing

5 As the Court has already indicated (Case 31/74 Galli [1975] ECR 47) in respect of national rules freezing the prices of other products at the production and wholesale stages 'in sectors covered by a common organization of the market — even more so when this organziation is based on a common price system — Member States can no longer interfere through national provisions taken unilaterally in the machinery of price formation as established under the common organization' so that 'a national system which by freezing prices ... has the effect of modifying the formation of prices as provided for in the context of the common organization of the market, is incompatible' with the Community rules. The same judgment stated that the provisions of a Community agricultural regulation involving a system of prices applying to the production and wholesale stages '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 consumption stages, on condition that they do not jeopardize the aims or functioning of the common organization of the market in question.' These considerations which were put forward at the time in respect of Regulations Nos 120/67 and 136/66 on the common organization of the market in cereals and of that of oils and fats respectively are equally valid for the purposes of the interpretation of Regulation No 1009/67 on the common organization of the market in sugar in view of the similarity of the respective price systems established by Regulations Nos 120/67 and 1009/67.

8 According to Article 2 (1) of Regulation No 1009/67 'a target price for white sugar shall be fixed each year for the Community area having the largest surplus' — that is, certain departments in northern France. According to Article 3 (1) and (2) 'an intervention price for white sugar shall be fixed each year' for the said area whereas 'derived intervention prices shall be fixed for other areas, account being taken of the regional variations...' According to Article 9 (1) of Regulation No 1009/67 'intervention agencies designated by sugar-producing Member States shall be required ... to buy in ... sugar ... offered to them ... at the intervention price valid for the area in which the sugar is located at the time of purchase' while Article 10 provides that as a rule they 'may only sell sugar on the domestic market at a price which is higher than the intervention price'. According to the combined provisions of Article 4 (1) and (2) and Article 5 (1) of the regulation 'Each year, for each beet sugar producing area ... a minimum price for beet shall be fixed ... when the minimum price for beet is being established, the intervention price for white sugar in the area in question ... shall be taken into account ... sugar manufacturers buying beet for processing into sugar shall be required to pay at least the minimum price for sugar beet'.

9 During the period in question the derived intervention price for Italy was fixed at a higher level than that of the target price so that it suffices to

TASCA

consider the question raised by the national court with regard to this situation.

13 Article 30 of the Treaty prohibits in trade between Member States all measures having an effect equivalent to quantitative restrictions and this prohibition is repeated in Article 35 of Regulation No 1009/67 as regards the market in sugar. For the purposes of this prohibition it is sufficient that the

JUDGMENT OF 26. 2. 1976 — CASE 65/75

measures in question are likely to constitute an obstacle, directly or indirectly, actually or potentially, to imports between Member States. Although a maximum price applicable without distinction to domestic and imported products does not in itself constitute a measure having an effect equivalent to a quantitative restriction, it may have such an effect, however, when it is fixed at a level such that the sale of imported products becomes, if not impossible, more difficult than that of domestic products. A maximum price, in any event in so far as it applies to imported products, constitutes therefore a measure having an effect equivalent to a quantitative restriction, especially when it is fixed at such a low level that, having regard to the general situation of imported products compared to that of domestic products, dealers wishing to import the product in question into the Member State concerned can do so only at a loss.

14 It is for the national court to decide whether this is so in the present case.

Third question

15 The third question asks the Court to say whether the provisions of Regulation No 1009/67 create for Community traders individual rights which the national courts must protect so as to render a national system of maximum prices inapplicable as regards them.

in answer to the questions referred to it by the Pretore of Padua by order of 11 July 1975, hereby rules:

1. The unilateral fixing by a Member State of maximum prices for the sale of sugar, whatever the marketing stage in question, is incompatible with Regulation No 1009/67 once it jeopardizes the objectives and the functioning of this organization and in particular its system of prices.

2. A maximum price, in any event in so far as it applies to imported products, constitutes a measure having an effect equivalent to a quantitative restriction, especially when it is fixed at such a low level that, having regard to the general situation of imported products compared to that of domestic products, dealers wishing to import the product in question into the Member State concerned can do so only at a loss.

3. The provisions of Regulation No 1009/67 cited by the national court produce immediate effects and as such are capable of conferring on parties rights which the national courts must protect.

Lecourt Kutscher O'Keeffe

Donner Mertens de Willmars Sørensen Mackenzie Stuart