C-223/78

THE COURT

composed of: J. Mertens de Wilmars, President of the First Chamber, Acting as President, Lord Mackenzie Stuart (President of the Second Chamber), P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges,

Advocate General: F. Capotorti Registrar: J. A. Pompe, Deputy Registrar

gives the following

GROSOLI

JUDGMENT

The facts, the procedure and the obser­ the products to traders were to be fixed vations submitted under Article 20 of the in advance at a standard rate by ad hoc Protocol on the Statute of the Court of provisions. Justice of the EEC may be summarized as follows: By Regulation No 2793/76 of 18 November 1976 (Official Journal L 319, p. 24), as last amended by Regulation No 1754/78 of 26 July 1978 (Official I — Facts and procedure Journal L 203, p. 23) the Commission specified the detailed arrangements for the disposal on the Italian market of frozen meat transferred to the 1. In order to stabilize consumer prices intervention agency and constituting the in Italy the Council by Regulation No first consignment of the said transfer: the 2453/76 of 5 October 1976 on the meat was to be sold only to retailers and transfer to the Italian intervention the sale prices to them were set out in agency of frozen beef and veal held by units of account in the annex to the regu­ the intervention agencies of other lation. Member States (Official Journal L 279, p. 3) made available to the Italian intervention agency 40 000 tonnes of The sale of the other consignments of edible frozen meat for the purpose of its beef the subjectmatter of the transfer was sale on the national market before governed by other and subsequent regu­ lations of the Commission. 1 April 1977. This time-limit was ultimately extended by Council Regu­ lation No 1440/78 of 20 June 1978 amending Regulation No 2453/76 2. On 26 July 1977 the Comitato (Official Journal L 173, p. 6) until 31 Interministeriale dei Prezzi [Interde- December 1978. partmental Committee on Prices], here­ inafter referred to as "the Price Committee", which is the Italian The arrangements for applying Regu­ institution having power to fix the prices lation No 2453/76, referred to in of goods and services, decided by Order Article 1 thereof, were adopted by (Provvedemento) No 35/1977 (Gazzetta Commission Regulation No 2697/76 of Ufficiale della Repubblica Italiana No 5 November 1976 (Official Journal L 207 of 29 September 1977) that as from 304, p. 19) as last amended by Regu­ 29 July, 1977 the maximum consumer lation No 2632/77 of 29 November 1977 prices of frozen meat from adult bovine (Official Journal L 306, p. 20). Under animals should over all the national those provisions meat was to be territory be those set out in paragraphs 1 transferred to the Italian intervention and 2 of the operative part of the order. agency by instalments and the prices at Although Regulation No 2453/76 is which the intervention agency was to sell cited in the preamble, the order of the

Price Committee is interpreted to the proceedings against Riccardo Tasca effect that the maximum consumer prices ([1976] ECR 291), held that in even' apply not only to the 40 000 tonnes of case it is for the national court to decide meat made available by the Community whether the maximum prices which it is but to all frozen meat marketed in Italy. called upon to consider produce such effects as to make them incompatible with the Community provisions on sugar. This criterion cannot however, in the 3. In the course of a health inspection Pretore's opinion, be accepted in at the premises of a butcher it was found criminal proceedings, since by formally that the prices he charged for certain parts of frozen meat were higher than permitting a binding system of prices laid down by the authorities to continue to the prices laid down by the above- mentioned order of the Price Committee. exist it ultimately leaves doubt as to its actual application since it thus gives rise The butcher stated that he had bought to serious inequality between producers the parts wholesale from S.p.A. Grosoli or traders who decide to abide by that at prices which were already themselves higher or in certain cases very close to system — possibly selling the product at a loss — and those who consider that those laid down by the Price Committee for retail sale. they are not subject to it and consequently charge prices higher than those laid down by the authorities. On the basis of the report which was sent to him the Pretore, Padua, charged More generally, the national measure Mr Grosoli, the legal representative of adopted by the Price Committee which S.p.A. Grosoli, with selling frozen meat stipulate prices solely for the stage of at prices higher than the maximum prices authorized by the order of the Price retail sale to the consumer infringe, in the view of the Pretore, Article 3 of the Committee. Italian Constitution: a measure which, by binding only retailers to a maximum price, compels them and not other 4. By order dated 15 July 1978 the traders engaged in the commercial sector Pretore requested the Court to give a in question to sell at a loss, thereby ruling under Article 177 of the EEC causing disturbances in the domestic Treaty: economy and ultimately disturbances to national public order and, in the Pretore's view, infringes the principle of "As to the compatibility with the equality. Community rules bf a binding system of prices laid down by the authorities and limited to the retail sector alone, taking into account the fact that in such a case 6. The order making the reference was the question of the constitutionality of lodged at the Court Registry on 5 October 1978. the legislative measures on prices adopted by the Italian State is said to be justified in relation to Article 3 of the Pursuant to Article 20 of the Statute of Constitution of the Italian Republic." the Court of Justice of the European Communities written observations were lodged by Mr Grosoli, represented by 5. The Pretore recalls that the Court, P. Castellini of Padua, by the Italian in its judgment of 26 February 1976 in Government, represented by its Am­ Case 65/75 relating to criminal bassador, A. Maresca, acting as Agent,

A — Observations of Mr Grosoli In his view the measure in question infringes the second paragraph of Article 5 and Article 30 of the Treaty since the Mr Grosoli first of all summarizes the fixing of a price lower than that fixed by judgment of the Court of 23 January the Community institutions is both a 1975 in Case 31/74 relating to criminal quantitative restriction on import and a proceedings brought against Filippo Galli measure having equivalent effect. ([1975] 1 ECR 47) and the judgments of 26 February 1976 in Case 65/75 relating to criminal proceedings brought against He alleges that in any event it compro­ Riccardo Tasca ([1976] 1 ECR 291) and mises in a wide sense the fundamental in Joined Cases 88 to 90/75 Società objectives of the Treaty. Whatever the SADAM and Others v Comitato Intermi­ particular case the incompatible nature nisteriale dei Prezzi and Others ([1976] of -unilateral intervention by States is 1 ECR 323). apparent both from the general principles as defined in the second paragraph of Article 5 and in Articles 39 and 40 of the In his view the answer to the question Treaty and from the regulations on the posed for a preliminary ruling in the common organizations of the market. present case must be that in sectors covered by a common organization of the market, when that organization is Mr Grosoli then considers the regu­ based on a common system of prices, the lations which have implemented the price Member States cannot unilaterally system in relation to beef and veal and in intervene in the process of price particular Regulation No 805/68 of the formation. The only means compatible Council of 27 June 1968 on the common

Further Mr Grosoli claims that the fixing provide for. There is a prospect of an of retail prices has no effect upon the endless succession of contradictory production or wholesale stages because judgments resulting in inequality among increases usually occur at the initial and traders even though they have charged not the final stage, which is why the same prices for the same goods. In producers and wholesalers who cannot the absence of any agreement with the subsequently pass on increases find Community authorities any unilateral themselves forced, in order not to incur intervention by States at the production losses, not to produce or not to buy any­ or marketing stage of products subject to more with the ultimate result in general the common organization and to a that the Community market is distorted system of prices conflicts with the and therefore its objectives compromised. principles of equality and free competition governing the Common Market.

Mr Grosoli is therefore of the opinion that the question put by the Pretore, Padua, should be answered as follows: Consideration of Regulation No 805/68 and in particular Articles 7, 21 and 22 thereof as amended by Regulation No 425/77 confirms in Mr Grosoli's view "A price system established unilaterally the unlawful nature of unilateral by a Member State constitutes in every intervention measures taken by Member case and from every point of view, even States. If this were not so those regu­ at the retail stage, an infringement of the lations would not provide for the Community rules on the common organ­ prohibition of quantitative restrictions or

The Italian Government does not understand the basis of the misgivings of the Pretore, Padua, who fears that the application of the procedure mentioned by the Court in Case 65/75 Tasca might B — Observations of the Italian give rise to inequality between traders Government who decide to observe the national price rules and those who decide to ignore them. What is important in the view of the Italian Government is that the legal After referring to the case-law of the system should allow parties to have Court and the observations which it access to the necessary courts to review made in Cases 65/75 Tasca -and 88 to the lawfulness of the price rules both 90/75 SADAM, the Italian Government from the Community point of view and observes that this case-law does not from that of municipal law. affect the principle that the existence of a common organization of the market does not necessarily mean that Member States have lost all power to regulate agricultural prices at a particular The Italian Government observes that marketing stage, subject to the national the Pretore is referring to municipal laws court's being able to review in each case and to Article 3 of the Italian Consti­ whether or not there is a conflict. tution in suggesting that there may be a breach of the principle of equality because the price fixing affects only the consumer stage. In these circumstances, In the view of the Italian Government in the view of the Italian Government, the courts have a difficult task but it is this aspect does not fall within the ambit not impossible as the Pretore, Padua, of the question put to the Court. In any claims. event the Italian Government refers in

Finally the Italian Government points In this respect it observes that if the out that according to the procedural national measure is confined to fixing documents in the main action there are the maximum consumer prices of the following additional questions at intervention products only, the sale of issue-: Does the officially fixed price also which has already been decided upon apply to wholesale transactions and does and in respect of which the prices to be such price also apply to the sale of charged by the national agencies have frozen beef and veal not included in the been laid down, and if the level of consignment made available to the maximum consumer prices leaves at all Italian intervention agency by Regulation subsequent marketing stages until sale to No 2453/76? the domestic consumer a sufficient profit margin to the traders, the national The Italian Government considers that it measure does not hinder execution of the is for the national court to resolve these Community measures for disposal. The questions in the context of the main Commission adds that otherwise traders action. would be forced to work at a loss in respect of that part of the products already bought or they would refrain from buying from intervention. The measures of disposal would therefore not produce the desired effect. C — Observations of the Commission If these two conditions are fulfilled, the After summarizing the case-law of the national measure may be regarded as Court and explaining the structure of the compatible with the organization of common organization in beef and veal markets even if it may appear to conflict the Commission observes that national with the system of prices or the system measures determining maximum con­ of trade with non-member countries. In sumer prices for frozen beef and veal the Commission's view the conflict has may interfere both directly and indirectly its origin not in the national measure but with the functioning of the common in the Community measure for the organization in question and with the determination of prices. system of intra-Community trade. If the national measure extends to all The Commission analyses the conditions frozen beef or veal marketed in the under which such interference occurs in national territory or in a part of it, it is, order to showa contrario whether and in in the Commission's view, incompatible what circumstances national measures with the system of disposal of inter­ such as those in the present case may be vention products because the result will regarded as compatible with Community be either to distort the formation of law. It recalls that such measures must be tender prices in the context of compatible both with the common Community operations of disposal organization of the markets and with the already decided upon, but the prices of system of intra-Community trade. which have not yet been fixed, or to force the Commission to forego disposal The Commission first of all considers the or to fix in advance prices lower than possibility of interference regarding the those which it would have been able to objectives and the functioning of the obtain in a normal market situation.

As regards the intervention system the Commission observes that the result of These two phenomena might, in the freezing consumer prices of frozen meat Commission's view, occur both in respect of frozen meat and fresh and re­ is to prevent the market prices of fresh meat, where at the beginning they are frigerated meat and live animals.. close to or less than the intervention prices, from rising above the intervention level, so that producers will have more recourse to intervention than if the Although the Pretore might have market conditions had not been contented himself with finding that the Price Committee measure extends adversely affected. without distinction to all frozen meat marketed in the national territory, the Commission has put before the Court the most important facts relating to the The Commission moreover stresses that concrete situation of the markets when in view of the interdependence of guide the measure was adopted and after it prices, market prices and the levels of entered into force. Those facts are as levies and refunds, in certain circum­ follows: the Community measures for stances the national measure ultimately sale of consumer products in the process also influences indirectly the determi­ of implementation; the levels of guide nation of the latter. It follows not only prices and market prices; the figures

JUDGMENT OF 12. 7. 1979 — CASE 223/78

relating to the Italian imports and Castellini), the Italian Government, exports of adult cattle. represented by I. M. Braguglia, Avvocato dello Stato, and the Commission represented by G. Campogrande, a III — Oral procedure member of its Legal Department, acting as Agent, made oral observations. At the hearing on 29 May 1979 Mr Grosoli, represented by F. Capelli and The Advocate General delivered his G. M. Ubertazzi (in substitution for Mr opinion at the hearing on 27 June 1979.

GROSOLI

4 The third reference in the preamble to Order No 35/1977 of the Price Committee refers to Council Regulation (EEC) No 2453/76 of 5 October 1976 on the transfer to the Italian intervention agency of frozen beef and veal held by the intervention agencies of other Member States (Official Journal L 279, p. 3). According to the second recital to that regulation the reason for the transfer measure was the economic situation in Italy at the time, in particular the very high rate of inflation and the transfer was intended to help to stabilize consumer prices. The sale of the meat transferred to the Italian intervention agency was made at flat rate prices fixed in advance by the Commission and only retailers or their authorized agents were allowed to make applications to purchase (Articles 3 and 8 of Commission Regulation No 2793/76 of 18 November 1976 on the detailed arrangements for implementing Regulation No 2453/76 (Official Journal L 319, p. 24)).

5 Although the consumer price of this meat was not laid down by the Community rules, the latter must nevertheless, in view of their anti- inflationary objective, be interpreted as authorizing the Italian Government to fix the prices by means of national provisions, provided that the profit margin allowed to retailers should not be so low as to hinder the disposal of the products in question.

6 Assuming that Price Committee Order No 35/1977 must be interpreted as applicable not only to the meat transferred to Italy under Regulation No 2453/76 but to all frozen meat at the retail stage, the question put by the Pretore, Padua, raises the more general problem of the powers of Member States in relation to prices applicable to agricultural products covered by a common organization of the market.

9 As regards the characteristics of the common organization in beef and veal it should be remembered that it includes a price system and a system of trade. The price system is based on a guide price fixed annually by the Council for adult cattle. Intervention measures are provided in the event of the market prices' falling a certain extent below the guide price. The fresh or chilled meat purchased as a result of intervention measures is frozen and stored by the intervention agencies. The sale of the meat so stored must be decided at the Community level and must be made at prices established by tender or fixed at a flat rate in advance by the Commission. The system of trade with non-member countries involves in particular levies and refunds. The basic levy is determined each month separately for adult cattle and for frozen meat. Flat-rate coefficients applicable to the levies on adult cattle are used to calculate the levy on fresh or chilled meat. As a result of various inter­ national agreements certain derogations have been made from the system.

10 It is apparent from the observations and figures given during the proceedings before the Court that frozen meat on the one hand and fresh or chilled meat on the other do not fully compete with one another on the Community

GROSOLI

markets. Consumer preference may to a certain extent prevent a rigid automatic connexion between the prices of the two classes of meat. The differences in prices of the different cuts, with or without bone, may be another source of uncertainty. These are details of the common organization of the markets in beef and veal which the national court is free to take into account, along with other factors in the organization, to decide whether a national measure jeopardizes its objectives or functioning.

Costs

14 The costs incurred by the Government of the Italian Republic and by the Commission of the European Communities, which have submitted obser­ vations to the Court, are not recoverable and as these proceedings are, in so far as the party charged in the main prosecution is concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT

in answer to the question submitted to it by the Pretore, Padua, by order of 15 July 1978, hereby rules:

(1) Council Regulation No 2453/76 of 5 October 1976 on the transfer to the Italian intervention agency of frozen beef and veal held by the intervention agencies in other Member States, in conjunction with the regulations implementing it, must be interpreted as meaning that the Italian Government is authorized to fix by national measures retail prices for such meat on condition that the retailers' margin of profit is not so small as to hinder the marketing of the products in question.

OPINION OF MR ADVOCATE-GENERAL CAPOTORTI DELIVERED ON 27 JUNE 1979 <apnote>1/apnote>

Mr President, The facts giving rise to this case may be Members of the Court, summarized as follows.

1. Once again the Court is called upon to give a preliminary ruling on the powers of the Member States to fix the prices of agricultural products. This case Council Regulation No 2453/76 of is concerned with establishing whether, 5 October 1976 provided for the transfer where there is a common organization of to the Italian intervention agency of the market (in this case that in beef and 40 000 tonnes of frozen beef and veal veal), a Member State retains the power held by the intervention agencies of the to intervene with its own measures to other Member States, to be placed on control prices; if the answer is in the the Italian market before 1 April 1977 affirmative the extent of such power (which date was subsequently postponed remains to be determined. until 31 December 1978). The Com-

I — Translated from the Italian.