C-5/79
ECLI:EU:C:1979:238
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of domestic products. That is in 6. Having regard to its material sphere particular the case of national price- of application, Article 85 of the EEC freeze rules which, by preventing Treaty does not relate to national increases in the prices of imported price-freeze rules. products from being passed on in selling prices, freeze prices at such a If the application of such rules by a low level that, having regard to the Member State to products subject to a general situation of imported products common organization of the market compared to that of domestic contravenes the principle laid down in products, dealers wishing to import the second paragraph of Article 5 of the products in question into the the Treaty by jeopardizing the Member State concerned can do so objectives or the functioning of that only at a loss or, in the light of the common organization the assessment level of the frozen prices of national of the compatibility of those rules products, are induced to give pref with Community law does not depend erance to the latter. on the provisions of Article 85 of the Treaty but rather on the provisions governing the said organization.
In Case 5/79,
REFERENCE to the Court under Article 177 of the EEC Treaty by the Cour d'Appel, Rouen (Criminal Chamber), for a preliminary ruling in the proceedings pending before that court between
PROCUREUR General at the Cour d'Appel, on the one hand, and
Hans Buys, Han Pesch, Yves Dullieux and DENKAVIT France S.A.r.l. on the other,
on the interpretation of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176), of Regulation No 804/76 of 7 April 1976 (Official Journal L 93, p. 22) and of Regulation No 974/71 of 12 May 1971 (Official Journal, English Special Edition 1971 (I), p. 257) as well as'of Articles 30 to 34, 5 and 85 of the EEC Treaty,
JUDGME NT OF 18. 10. 197 9 — CASE 5/79
THE COURT
composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart and G. Bosco, Judges,
Advocate General: J.-P. Warner Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts and Issues
I — Facts and procedure within the framework of the EEC agricultural policy were also exempted; 1. Order No 76-86 P of 22 September 1976 on prices at production level and at — At distribution level the system the various stages of distribution of all differed according to two categories products effected a general price freeze of products: in France until 31 December of the same year: the level of prices was not to (a) As regards fresh agricultural and exceed that reached on 15 September fisheries products distributors 1976. were able to maintain the absolute value of the margins in In the terms of Article 2 of the order the effect at the date of the price measures freezing prices did not affect freeze. Distributors could thus "fresh agricultural and fisheries add to the sales prices applied at products". The scope of this exception that date increases in producer was explained in two press notices dated prices which subsequently took 23 September and 1 October 1976 place (and, for imported relating to the application of these products, increases in c.i.f. prices measures. free at frontier), so as to maintain the absolute value of the margin These press notices stated that: in effect on 15 September 1976. On the other hand they were — At production level fresh agricultural required to allow their customers products were exempted from the to benefit from any reductions freeze and, as regards other agri which might take place in supply cultural products, those whose prices prices as their right to maintain were governed by decisions adopted the margin of profit in force on
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15 September 1976 did not — A decision as to whether the pros include that of increasing the ecutions in question are justified margin owing to such reductions; involves an assessment of the validity of the price freeze order, No 76-86 P (b) As regards the other agricultural of 22 September 1976, in the light of products subject to the market Community law. rules of the Community such as appear on List II annexed to the press notice, their prices were also excluded from the area of The court therefore decided by a application of the afore judgment of 13 December 1978 to stay mentioned ministerial order at the proceedings and to refer the the wholesale stage. They were following questions to the Court of on the contrary subject to the Justice in pursuance of Article 177 of the price freeze at the later stages of Treaty: distribution.
1. As regards the fixing of prices at the Milk powder appeared among the production or wholesale stages, must products on List II. Milk-feed products milk-feed products for calves of the were not mentioned on that list. nature and composition stated above be included among the products subject to the rules of the common 2. Denkavit France, S.a.r.l., a producer organization of the agricultural of animal feeding-stuffs, put on sale in markets? In particular, do they come September and October 1976 six milk- either within the definition of milk feed products for calves containing a products (Article 1 of Regulation No high percentage of milk products, in 804/68 of 27 June 1968) or within particular milk powder. that of animal feeding-stuffs (Article 4 of Regulation No 990/72 as amended Those products were put on sale at by Regulation No 804/76 of 7 April prices prohibited by the order of 22 1976) or within any other class of September 1976 and criminal pro agricultural products subject to ceedings were commenced against the Community legislation under Article directors of the company, Hans Buys, 38 of the Treaty of Rome? Han Pesch and Yves Dullieux, before the Tribunal de Grande Instance, Rouen. By a decision of 12 May 1978, the court 2. Are such feeds subject to the acquitted the three accused of the charge compensatory amounts provided for raised against them. in Regulation No 974/71 of 12 May 1971, and if so does this in itself mean The Procureur General [Public Pros that they are subject to the common ecutor] at the Cour d'Appel, Rouen, organization of the markets under appealed against that decision. Article I (1) of the said regulation?
The Cour d'Appel, Rouen, took the view If the answers to Questions 1 and 2 that: are to the effect that the products in question are subject to Community — Community law has precedence over legislation, the Court of Justice is national law and must be applied by requested to answer the following national courts; questions:
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3. Does the common organization of the departmental committee for questions of market in milk and milk products laid European economic co-operation, acting down in Regulation No 804/68 of 27 as Agent, and the Commission of the June 1968, either alone or in European Communities, represented by conjunction with the common organ J. C. Séché, Legal Adviser to the ization of the market in beef and veal Commission, and B. Hoff-Nielsen, a laid down in Regulation No 805/68, member of the Commission's Legal prohibit Member States from applying Department, acting as Agents, submitted national price freeze rules to the milk- written observations in accordance with feed products for calves defined Article 20 of the Protocol on the Statute above? of the Court of Justice of the EEC.
4. Do the rules on the free movement of On hearing the report of the Judge- goods laid down in Articles 30 to 34 Rapporteur and the views of the Advocate General the Court decided to of the Treaty of Rome, and more particularly Article 22 of Regulation open the oral procedure after putting a No 804/68 as regards milk products, written question to the Commission of prohibit the application to the said the European Communities. products of national price freeze rules which prevent increases in the purchase price of raw materials or finished products from being passed II — Written observations sub on in selling prices? mitted in pursuance of Article 20 of the Protocol on the Statute of the Court 5. Does the common organization of the of Justice of the EEC. market in milk products (Regulation No 804/68) prohibit Member States from applying national price freeze A — Observations of the accused parties rules which do not contain special provisions for agricultural products governed by decisions of the EEC? So as to reply to Question 1, Buys, Pesch, Dullieux and Denkavit France S.à.r.l, the accused parties in the main proceedings, 6. Do the combined provisions of first of all consider the composition of Articles 5 and 85 of the Treaty of the products in dispute which, contrary Rome prohibit Member States from to what has been recorded by the court applying national rules freezing the of reference, is as follows: prices of products subject to Community legislation? — skimmed-milk powder: 60-65 %
3. A copy of the judgment in question — whey powder: 12-20% reached the Court on 3 January 1979. — maize starch: 4-7 %
The accused parties, represented by G. M. Ubertazzi and F. Capelli of the — fats: 15-20 % Milan Bar, the French Government, represented by M. Daudelot, the Secretary General of the inter — additives: 0.3 %.
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All those raw materials, except for the animal feedingstuffs according to Article additives, are agricultural products 4 of Regulation (EEC) No 990/72 subject to common organizations of the (Official Journal, English Special Edition market. 1972 (II), p. 428). as amended by Regu lation (EEC) No 804/76. By reason of their composition the milk- feed products must be classified under Question 2 merges in essentials with subheadings 23.07 B 1 a 3 and Question 1. The applicability to a certain 23.07 B 1 a 4 of the Common Customs product of specific rules resulting from Tariff. the common agricultural policy — in this case monetary compensatoryamounts —
Since prepared animal fodder referred to confirms that the product is in fact in Chapter 23 of the Nomenclature of subject to the common organization of the Common Customs Tariff appears in agricultural markets. the list which is the subject of Annex II to the EEC Treaty it should be It may be seen from Commission Regu considered as an agricultural product. It lation (EEC) No 572/76 of 15 March corresponds in fact to the definition of 1976 (Official Journal L 68, p. 5) as products of first-stage processing as set amended by Commission Regulation out by the Court of Justice in the König (EEC) No 2232/76 of 14 September judgment, 185/73 ([1974] ECR 607). Its 1976 (Official Journal L 253, p. 1) that close economic interdependence with compensatory amounts were fixed not basic agricultural products is proved by only for the majority of raw materials the fact that the products in question used in the composition of milk feed but contain 99.7 % of agricultural raw also for milk-feed products themselves. materials and that the price of these substances amounts to 85-90 % of the The system of monetary compensatory price of the finished product. amounts is necessarily applicable to products of first-stage processing such as Milk-feed products — as agricultural milk feed which is composed as to products within the meaning of Article 99.7 % of agricultural raw materials 38 (1) of the Treaty — are moreover subject almost entirely to that system and expressly governed by the system of containing at least 60 % skimmed-milk common organizations of the agri powder, a product for which intervention cultural markets within the meaning of measures are laid down by Article 5 et Article 40 of the Treaty, by virtue of seq. of the basic regulation for the milk Article 1 (g) of Regulation (EEC) No sector, No 804/68. 804/68 on the common organization of the market in milk and milk products. This is confirmed by the fact that milk- feed products have always been subject It follows therefore from the foregoing to the system of monetary compensatory considerations not only that the products amounts since Regulation No 974/71 in question contain products covered by first came into force. a common organization of the market but also that they are themselves subject Once it has been established that the to a common organization. products in question are subject to the system of monetary compensatory Moreover, provided that they contain at amounts, that proves that they are least 60 % of skimmed-milk powder, "products whose price depends on the they also come within the definition of price" of products "covered by
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intervention arrangements under the the markets at the production and common organization of agricultural wholesale stages is moreover recognized markets" and that they "are governed by in legal theory and even by the French the common organization of markets or Government as is clear from the written are the subject of a specific arrangement observations submitted by that under Article 235 of the Treaty" within government in Case 88/77 (Minister for the meaning of Article 1 (2) of Regu Fisheries v C.A. Schonenberg and Others lation No 974/71. [1978] ECR 473).
Since milk-feed products are not subject In this case the question is of applying to a specific arrangement under Article those principles to milk-feed products at 235 of the Treaty it follows irrefutably the production stage. Those products are that they come under the common subject, as has been seen, to the common organization of agricultural markets. organization of the market in milk and milk products so that the Member States As to Question 3 it must be emphasized no longer have any power to intervene in that, as is clear from the first sentence of the machinery for the formation of their Question 1 and from the character of the prices. products in question, it concerns the problem whether a national price freeze The foregoing conclusion is all the more may be applied to milk-feed products at valid inasmuch as the common organ the production and wholesale stages. ization covering the products in question is based on a common price system. In this connexion the case-law of the Court of Justice regarding the The price level for milk-feed products is compatibility of national price control infact decisively governed by the measures with the system of the common decisions adopted within the framework organizations of agricultural markets of the common agricultural policy and in may be recalled (judgments in the cases particular by the common price system of Galli 31/74; Tasca 65/75; Sadam according to the common organization 88-90/75 and Dechmann 154/77). of the market in milk products. The conclusions to be drawn from this The following facts which support that case-law are that: statement may be recollected: — No unilateral intervention of a Member State in the price formation (1) Milk-feed products are composed machinery for products coming as to 99.7 % of agricultural raw under a common organization of the materials, the prices of which are markets at the production and wholesale stages is compatible with governed by decisions adopted within the framework of the common agricultural Community agricultural rules; policy. — At the stages of retail sale and consumption, national price control rules are incompatible with the (2) The composition of these feeding- common organization only if they stuffs is — in particular as regards the are of such a nature as to endanger most expensive raw material, that is to the objectives and functioning of say, skimmed-milk powder — rigorously such an organization. fixed by Community agricultural rules which make the grant of aid for the The categorical non-applicability of skimmed-milk powder used in animal national price control rules in the fields feeding-stuffs dependent on the presence covered by the common organizations of in the finished product of at least 60 %
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of that raw material. The amount of that — The trend of market prices for aid is so high that it would be proteins competing with skimmed- economically impossible to give it up. milk powder. Producers of milk feed thus have no opportunity to reduce the level of the prices of their finished product by adapting its composition. This system of aids therefore itself forms a Community price policy, specifically applicable to cattle feeding-stuffs having a basis of milk powder. (3) In consequence of the need to incorporate at least 60 % of skimmed- milk powder in milk-feed products, the It is clear that a rigid national system of intervention price for that raw material — in combination with the aid referred maximum prices is of such a nature as to "distort" an assessment of the criteria to above — governs the level of prices of indicated above and, consequently, to milk feed. The intervention price was affect the establishment of the amount of increased on 16 September 1976 (one the Community aid in question. day after the reference date for the price freeze imposed by Order No 76-86 P), which proves a fortiori the impossibility of national rules freezing the level of (5) Milk-feed products are subject as prices of products governed by that such to the system of compensatory Community decision. amounts laid down to compensate for the differences in the price level of products subject to a common organ (4) If Community aid on the skimmed- ization which might have resulted milk powder used in animal feeding- between Member States following the stuffs is compared with the price of the monetary measures. finished product during the period in question it will be noticed that that aid is so high that the price of the finished It would be precisely contrary to the product depends decisively upon it. The purpose of that system if Member States amount of the aid is fixed in accordance could cause subsequent differences with the criteria of Article 2a of Regu between the price levels of the said agri lation (EEC) No 986/68 (Official cultural products in the various countries Journal, English Special Edition (1), p. by the application of unilateral measures 260), as amended by Regulation (EEC) such as a price freeze. No 666 /74 (Official Journal L 85. p. 58) and particularly having regard to: (6) In trade with non-member — The intervention price for skimmed- countries import levies and export milk powder applicable during the refunds are fixed for milk-feed products. milk year in question; That system can function well only on condition that the price formation machinery for the products concerned — The trend of the supply position for skimmed milk and skimmed-milk within the Community is not altered by the unilateral intervention of a Member powder and their use in animal State. If the position were different feeding-stuffs; Community rules applicable to the sector in question within French territory would — The trend of prices for calves; bring about distortions. Aid for milk
JUDGMENT OF 18. 12. 1979 — CASE 5/79
powder and monetary compensatory contrary to the free movement of goods amounts would for example turn out to even if they are applied without be too low whilst on the contrary the distinction both to national products and refunds and levies applicable to trade in to foreign products. the products in question with non- member countries would turn out to be too high. According to that case-law which, as it was evolved in cases relating to the stages of retail trade and consumption, As regards Question 4 the accused applies a fortiori to the production and parties remark that its purpose is to wholesale stages, national price rules, so discover, in the event of a negative as not to impede the free movement of reply's being given to Question 3, goods, must be limited to fixing either a whether a national price freeze can be maximum or a minimum margin of profit compatible with the rules for the free as the case may be. movement of goods when it freezes not only profit margins but also freezes the level of prices at the level reached on an It must be concluded therefore that any arbitrary date fixed by internal rules. national price rules which apply without distinction both to national products and to imported products are incompatible After recalling that all national rules with the rules of the free movement of capable of hindering, directly or goods inasmuch as they do not permit indirectly, actually or potentially, intra- the variations in the purchase prices of Community trade are to be considered as imported products to be reflected in the a quantitative restriction or a measure sales prices of such products. having equivalent effect, whether or not there exists, in the sector to which they are applied, a common organization of National rules of the type in question, the markets, they consider the problem applicable to agricultural products, are in the context of national rules on prices no doubt contrary to the provisions of for the products. Articles 30 to 34 of the EEC Treaty.
In this respect they emphasize that, In fact, the different common organ according to an opinion supported by the izations to which agricultural products Commission during the first years of the are subjected lay down as a fundamental existence of the EEC, national provisions principle the system of the unity of prices on the prices which are applicable both throughout the Community. The to national products and to imported absolute level of these prices and its products do not necessarily constitute variations are very high in relation to the quantitative restrictions or measures profit margins of manufacturers of having equivalent effect. Subsequently, processed products or of wholesalers. however, the Commission took the view Consequently, if the variations in the expressed in the case-law of the Court purchase prices of agricultural products according to which both maximum prices could no longer be reflected in sales which, because they are loo low, oblige prices as a result of the unilateral rules of importers to sell at a loss and minimum a Member State such products could no prices which, because they are too high, longer be imported except at a loss. are apt to eliminate the competitive advantage which importers might have as a result of a cost price lower than that The accused company had in fact to face for products manufactured abroad are such a situation although its net profits
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— as is usual for trade in agricultural that a Member State should institute an products — formed a very low absolute freeze on the prices of a percentage (1 1/2 %) of its turnover. product of first-stage processing within the meaning of Article 38 of the Treaty without controlling the price of the raw As emerges from a table illustrating the materials. Such a practice would auto variations in the prices of the most matically compel the producers of animal important raw materials at the end of feed to sell at a loss since the variations each quarter in the years 1975, 1976 and in the level of prices for the raw 1977, such variations were so high in materials are considerably higher than comparison with Denkavit's net profit the normal profit margins of the manu margin that the company could not facturers and would thus endanger the refrain from recouping them by means of objectives and functioning of the its sales prices if it was not to sell at a common organization in question. Since loss. The general price freeze laid down they could no longer be used in the by Order No 78-76 P in fact stopped it manufacture of milk feed, the raw from doing so and thus made it materials, and in particular the skimmed- impossible for the company to import milk powder, would be either exported, raw materials from other Member States which would involve an alteration of in which prices were not frozen. patterns of trade, or else sold to the relevant intervention body. In the opinion of the accused parties if Question 5 were to be retained as The statement that the price system formulated by the court of reference the applicable to milk feed must necessarily question would merge with the third question and would no longer need to be be the same as that applicable to the considered. agricultural raw materials is also supported by the following consider ations: To avoid this it should be understood as inquiring whether a Member State can — If, as Mr Advocate General Warner apply a different price system to agri cultural raw materials on the one hand stated in Case 31/74 (Galli), a and to products of first-stage processing prohibition on controlling the prices on the other. of a basic product must logically imply a prohibition on controlling the prices of the derived products, a In the context of the third question it has fortiori that conclusion is valid for a already been proved that the prices for derived product which is itself animal feed are governed by decisions governed by the common organ adopted within the framework of the ization of the markets; Community agricultural policy. However, a still more fundamental question is whether a member State can — The Community authorities use all subject a product of first-stage the price control instruments which processing containing 99.7 % of agri apply to the raw materials equally for cultural raw materials to a system of milk-feed products; prices other than that for the raw materials themselves. — Even the consequences of a given temporary set of rules regarding a It could never be accepted under the raw material have been taken into common organization of the markets consideration by the Community
JUDGMENT CM 18 12. 1979 — CASI 5/79
authorities for fixing compensatory case-law of the Court it emerges amounts for milk-feed products. therefore that competition is the fundamental "asset" which must be protected on the market. With regard to Question 6 the accused parties recall first of all that the authors of the EEC Treaty selected, amongst A measure laying down a total price several possible options, that of a market freeze at the level reached by under economy based on the principle of free takings on a given date gravely affects competition. that "asset". It simply does not distinguish between undertakings which have adapted their own prices to market To guarantee observance of this principle prices before the date of the freeze and on the pan of undertakings, the EEC those which were unable to do so, as was Treaty laid down a prohibition on the case with Denkavit, which had agreements and concerted practices proposed to increase its prices on which might affect trade between 20 September 1976 as a result of the Member States and which have "as their increase in the prices of the raw object or effect the prevention, materials used in its products. Other restriction or distortion of competition undertakings in the sector which may within the Common Market". have increased their prices before 15 September 1976 (the date of the freeze) were thus enabled undeservedly Article 85 does not merely prohibit to occupy an advantageous competitive undertakings generally from making position during the whole period of the agreements capable of limiting price freeze. competition but by way of example it adds a list of prohibited "agreements" amongst which there occur, first, Furthermore, observance of the prices agreements which "directly or indirectly imposed by the authorities implies the fix purchase or selling prices or any total and radical elimination of any form other trading conditions". There is of rivalry and competition between nothing surprising in that in view of the undertakings. This amounts to a most fact that it is precisely in the free serious blow, at the highest level, against determination of the price of a product competition and is the kind of that the most elementary form of occurrence against which the competition between undertakings may Commission and the Court of Justice be seen. have taken action even when it has made its appearance in much less striking ways. For that reason the Commission also has been particularly strict with regard to agreements having a bearing on prices, One might have been tempted to object to the point of refusing its authorization in this respect that the Community rules to an agreement which provides simply on competition apply only to under that a producer shall pass on to his takings and not to States. However, that competitors the essential elements of his objection is unfounded. When the Court, price policy. in its judgment in Case 40/73 (Suiker Unie and Others) annulled the fines inflicted by the Commission on certain From a consideration of the Italian sugar undertakings which had Commission's attitude as well as of the been accused of restricting competition
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on the Italian market. the Court limited Community law in view of the fact that itself to recording the state of necessity they produce effects capable of adversely in which these undertakings were obliged affecting or distorting the operation of to operate by reason of the Italian rules the market. They put a particular then in force, but it by no means restraint on the decisions made by recognized the legality of the behaviour traders and are thus all the more of the Italian State, contrary to the models of freedom selected by Community law. It may be This position is moreover confirmed by seen from the case-law of the Court of the judgment in Case 13/77 (GB-INNO- Justice that Member States, whilst they B. M. v ATAB) in which the Court may ask traders to carry out certain emphasized that competition will be formalities which are not forbidden by adversely affected even where the Community law, cannot apply, in case of restriction on competition necessarily an infringement, anything but adminis flows from rules laid down by a Member trative sanctions which moreover are not State. of a compelling nature.
Under Article 5 of the EEC Treaty If Community law permits only the therefore Member States are obliged to application of administrative sanctions refrain from adopting internal rules which, further, are not forceful ones, which might have as their effect the that means that the legal "asset" elimination of competition between protected by national rules is not parti undertakings. In view of the fact that the cularly appreciable from the Community French rules applicable in this case point of view. radically suppress competition between undertakings in the sector in question, a Faced with the fundamental principle of reply should be given in the affirmative freedom of competition laid down by to the question put by the court of Community law, Member States, even if reference. they were free to regualte prices rigidly, and also under the threat of penalties, After considering the questions on which cannot adopt sanctions of such a nature a preliminary ruling is requested the as to prevent traders from observing that accused parties observe that they were principle. referred to the Court of Justice by a criminal court. The questions therefore raise the problem of the compatibility of In conclusion, as regards the position of national criminal rules in relation to national penal sanctions with Community law, three hypotheses may Community law. be envisaged: A system of penalties such as that laid down by the French legislation seems — The incompatibility with Community contrary to Community law for various law of the national provision (civil or reasons. It diverges in fact from the administrative) which forbids certain actions. In that case it is clear that machinery by which as a rule Community law regulates the operation the criminal rule also which provides of the market, that is to say in particular a penalty for infringement of that means which do not involve price freezes provision is not applicable. and a system of penalties intended to guarantee the freeze. — The incompatibility with Community law of the penal provision as such. In The penalties laid down by French this case, too, the internal rule cannot legislation are irreconcilable with be applied.
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— The influence of Community law as level of the incidence in their sale regards factors capable of supplying price of the said raw material; justification or reasons for not pre ferring a charge. According to legal — Under Regulation No 986/68 they theory the fact of having acted in benefit from an aid the sole purpose of which is, however, to facilitate the conformity with a Community provision might, if such behaviour marketing of the surplus skimmed- were penalized by a national milk powder. provision, involve the existence of a factor capable of supplying just No price guarantee in the form of an ification (for example the exercise of intervention price determined in the a right) or, at least, a reason for not context of the common agricultural preferring a charge if the person policy is thus granted to milk-feed concerned had acted in the products as such, which is explained conviction, perfectly justified by moreover by the industrial nature of the Community law, that his conduct was products concerned. This nature is lawful. shown very clearly by the following considerations:
Each of the three above-mentioned — As milk powder is itself a product of hypotheses might apply to this case. first-stage processing, milk-feed products which result in their turn from the processing of the milk B — Observations of the French powder can only constitute a product Government of second-stage processing; — The extent of the added value The French Government seeks to show (average 35%) shows the complexity first of all that animal milk-feed products of the processes undergone by the are not subjected to price provisions in raw materials incorporated into the the framework of the common organ feeding-stuffs and thus shows clearly ization of the market in milk products that the final product is an industrial and are thus not excluded from the one. matters to which the Ministerial Order No 76-86 P of 23 September 1976 Having stated that, the French applies. Government observes that the Member States retain without any doubt power in In this connexion it observes that, principle to regulate the prices of although these products appear in Article products not subject to price provisions 1 of Regulation No 804/68 of the in the context of the common organ Council on the common organization of izations of the market. the market in milk and milk products, The compatibility of such measures with Community law is nevertheless subject, — They have no Community price according to the case-law of the Court guarantee, as an intervention price is of Justice, of the condition that they laid down simply for the raw material (skimmed-milk powder) which forms shall not damage the proper functioning and the objectives of the common a considerable though not a pre ponderant part of their composition; organizations of the market. Order No 76-86 P satisfied that — They are not subject to monetary condition. An analysis of Denkavit's compensatory amounts except to the prime costs and sale prices shows that
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skimmed-milk powder, whilst con organization of the market in milk stituting 60% of the raw material, products." represents only 38% of the sale price of the finished product, which singularly restricts the incidence of the freezing C — Observations of the Commission of measures. the European Communities
The rates for skimmed-milk powder intended for animal feeding-stuffs were After recalling the essential aspects of the not affected by the measure in question common organization of the market in and even underwent an increase of 7% milk and milk products, and in particular for the whole of the year 1976. The Community rules determining the price percentage of milk powder denatured formation of milk-feed products for during the period of the price freeze cattle, the Commission considers the (15 September to 31 December 1976 ) questions put to the Court of Justice by was slightly higher than the percentages the court of reference. noted during the same periods in the years 1975 and 1977. As regards Question 1 it remarks that an affirmative reply would allow the Court Finally, in support of that statement it to give its views on the compatibility of may be recollected that the Commission the price freeze measure adopted by the of the European Communities also took national authorities with the common the view in its reply to a written question organization of the market under which from Mr Cointat. a Member of the the products in dispute are said to come. European Parliamentary Assembly, that the French Order No 76-86 P of 23 September 1976 had not affected the In its opinion an affirmative answer is functioning of the common organization necessary because the products in dispute of the market in milk and milk products. are products of first-stage processing directly related to basic products within For these reasons the French the meaning of Article 38 (1) of the EEC Government suggests that the following Treaty, in accordance with the criteria reply should be sent to the questions put for interpretation which emerge from the by the court of reference: case-law of the Court. In fact, the price of the basic agricultural raw materials used in the production of milk feed "(1) Milk-feed products for animals are which is composed as to 60% of milk products of an industrial nature and and as to 20% of whey) amounts to 70 not subject to any price provision in to 85% of the price of the products of the context of a common organ processing. Far from being marginal, it is ization of the markets. It was therefore altogether decisive, which therefore perfectly legal for them to implies an economic interdependence be subjected to the French rules between the basic products and the temporarily freezing industrial products of processing, irrespective of prices. the number of operations involved in the production process. Having regard to the (2) The price freeze for milk-feed percentage of milk products (more than products laid down by Order 76-86 50%) which they contain, the products P of 23 September 1976 did not run in question come under the common counter to either the objectives or organization of the market in milk and the functioning of the common milk products.
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To Question 2, in which the court of Secondly, although it is true that reference asks whether the fixing of Community law does not guarantee the monetary compensatory amounts for a realization of the target price, all the product involves its being subject to a machinery for the organization of the common organization of the market, the markets inescapably aims at obtaining answer must be that the system which is this result. However, it might be that laid down by Regulation No 974/71 is price freeze for milk-feed products, the converse: monetary compensatory having regard to an increase in the amounts can be applied only to products intervention price for skimmed-milk coming under a common organization of powder, might bring about an excessive the market. Milk-feed products for reduction in the margin of profit of the calves have always been subject to the manufacturer of these products and system of compensatory amounts. consequently might have an indirect incidence on the formation of the price Once it has been established that the of skimmed-milk powder and consequently on the price of the milk products in question are governed by the which, thus, could not approach the common organization of the market in target price. milk and milk products, the question arises whether and to what extent the freezing of prices by a Member State is Thirdly, it is essential for the Community compatible with the rules of the common to be able to dispose of a pan of the organization. excess production of milk products in the manufacture of animal feeding-stuffs. With reference to this problem, which is This purpose could not be attained if the raised by Question 3, the Commission national price freeze were to restrain or states that, in accordance with the prevent the production of milk-feed case-law of the Court, although Member products. States in principle retain the power to regulate the sale prices of agricultural Finally, having regard to the products, they must nevertheless refrain interdependence between Community from any action capable of prices and the fixing of refunds and compromising the realization of the levies, the national price freeze might common agricultural policy. indirectly affect trade with non-member countries.
The national price freeze measures adoped by the French Government risk, In this case, these risks materialized, at in abstracto, a clash with the Community least to some extent. price system.
It is possible in fact to take the view that, First, although there is no intervention so as to permit an increase in the price of price for milk-feed products, it must not liquid skimmed milk corresponding to be forgotten that the intervention price the target price, the market price for for powdered milk constitutes in this skimmed-milk powder would have to be case 70 to 85% of the total cost of the about 5% above the intervention price. raw materials. If the maximum price fixed by the price freeze measure were lower than that price the Member State The price freeze in France occurred at a concerned would in fact be preventing time when the price for skimmed-milk the obtaining of a price level guaranteed powder was between the intervention by Community law. price and the presumed level of the
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target price for milk. This meant that it governed by decisions adopted within the made more difficult, on the one hand, context of the common agricultural the actual realization of the target price policy and that it is for the court of and, on the other hand, the sale of reference to determine whether the skimmed-milk powder in public stores. internal administrative distinctions made in this respect are in conformity with the Even if the freeze had occurred at a level order bringing the price freeze into effect. above the target price for milk it would have had the same consequences. In fact as a result of the operation of the Question 6, asking whether the national machinery of the common organization, measures in question are compatible with prices tend to fall to reach at most the the combined provisions of Articles 5 level of the target price, above which and 85 of the EEC Treaty, does not call they can only remain for a brief period. for any reply in this case. In fact, the question of the compatibility with Community law of a national measure In these circumstances, having regard to must above all be assessed, if there is a the time-lag between the purchase of the raw material and the sale of the finished common organization of the market for a given product, with regard to that product, the freeze had the effect in this organization and to the rules relating to case also of prohibiting a producer who the free movement of goods. The has purchased the raw material before incompatibility of the national measures the price rise from passing the rise on in in question with Community law is the sale price of his products during the already clear from the answers proposed period in which the prices of the raw to Questions 3 and 4, so that Question 6 material are high. has lost its purpose.
The purpose of Question 4 is to inquire Having regard to the observations set whether the national measure in question out above, the Commission proposes that may constitute a measure having an the following answers should be given to effect equivalent to quantitative restric the questions referred to the Court: tions within the meaning of Article 30 of the EEC Treaty. "1. Milk-feed products for calves coming under tariff subheading According to the case-law of the Court 23.07 B and containing more than the answer should be that a general price 50% of milk products are subject to freeze at an absolute level which Regulation No 804/68 on the completely excludes the passing on in common organization of the market sale prices of the increase in purchase in milk and milk products. prices of the raw materials or finished products does in fact come within that The Community aid provided for in concept, since it tends to abolish or Article 10 of the regulation referred restrict the opportunities for import both to above is granted to the extent to for the finished products and for the raw which such milk-feed products materials to be used in the manufacture contain inter alia at least 60% of of such products. skimmed-milk powder.
As regards Question 5 it may be noted 2. For the marketing year 1976/1977 that the French measures do in fact lay milk-feed products coming under down special provisions for agricultural Regulation No 804/68 were subject products the prices of which are to the monetary compensatory
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amounts fixed by Regulation No price for milk-feed products, the 572/76. increase in the purchase prices of the raw materials or of the finished 3. Regulation No 804/68 must be products imported from another interpreted as prohibiting national Member State. rules imposing a price freeze on milk-feed products for calves at the production and distribution stages since they endanger the objectives or III — Oral procedure the functioning of that common organization of the market, in The accused parties and the Commission particular of its price rules. of the European Communities presented 4. Article 30 of the EEC Treaty and oral argument at the hearing on 3 July 1979. Article 22 of Regulation No 804/68 must be interpreted as prohibiting unilateral rules by a Member State to The Advocate General delivered his freeze prices which exclude the opinion at the hearing on 19 September possibility of passing on, in the sale 1979.
Decision
1 By judgment of 13 December 1978, which was received at the Court on 3 January 1979, the Cour d'Appel, Rouen, referred to the Court under Article 177 of the EEC Treat certain questions relating to the interpretation of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176), of Regulation No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257) as well as of Articles 5, 30 to 34 and 85 of the EEC Treaty.
2 Those questions arose within the context of criminal proceedings brought before the French courts by the Ministère Public against four directors of Denkavit France S.à.r.l. and against the company itself, a producer of animal feeding-stuffs, regarded as civilly liable, who are accused of having infringed Ministerial Order No 76-86/P of 22 September 1976, published in the Bulletin Officiel des Services des Prix on 23 September 1976.
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3 Article 1 of the aforesaid ministerial order provides that "until 31 December 1976 prices, inclusive of all taxes, charged for products of all kinds are not to exceed, either at the production stage or at the various stages of distribution, the prices lawfully being charged for those products of 15 September 1976 or, failing the latter, on the nearest previous date". Article 2 provides that "the provisions of Article 1 shall not apply to fresh agricultural and fisheries products".
4 Guidance as to the scope of the ministerial order in question and the manner in which it was to be put into effect was provided by two press notices published in the Bulletin des Services des Prix on 23 September 1976 and 1 October 1976 respectively.
5 As regards in particular the application of the freeze on prices at the production stage, the first press notice explains that inter alia Article 1 of Order No 76-86/P does not apply to producer prices
"Of fresh agricultural and fisheries products (cf. Article 2 of the order) and of other products whose producer price is governed by decisions adopted within the framework of the agricultural policy of the European Economic Community.
The term agricultural and fisheries products shall apply only to those products which have not been processed. If such products do not retain their original individual character or are processed in a manner which does not correspond to normal or habitual agricultural practices or which takes place at an industrial or commercial stage they thereby lose their initial character
However, as regards milk products in particular it will as an exception be accepted that butter, cream and cheese, whose producer prices could be freely determined at the date of the entry into force of the order, remain agricultural products even after processing or refining. On the other hand, products such as milk powder, concentrated milk and ice cream are industrial in nature, as are manufactured products such as yoghurt, cream cheese and processed cheese".
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6 The second press notice sets out in particular the detailed rules for the application of the aforesaid price system at the distribution level and distinguishes between, on the one hand, "fresh argricultural and fisheries products" and, on the other, "other agricultural products subject to the market rules of the Community", such as are defined in List II of the annex to that notice, which refers to "cereals (except for the residues of husking)" and "milk powder in bulk". As regards the products on that list it is specified that they "are excluded in implementation of the Community regulations from the scope of Ministerial Order No 76-86/P at both the production and the wholesale stages", whilst at other stages of distribution they remain subject to the "freeze" introduced by that order.
7 The file shows that on 20 September 1976 the accused company increased the prices of its six milk-feed products and that it maintained that increase on sales effected during September and October 1976, after the entry into force of Ministerial Order No 76-86/P. In the course of the present proceedings the accused in the main proceedings have stated — and the point is not contested — that Denkavit delivers the animal feeding-stuffs which it produces exclusively to wholesalers, who resell them to farmers. Furthermore, it is clear from the information as to the composition of those products given in the order for reference together with the details provided in the present proceedings by the accused in the main proceedings and the French Government that the products in question contain a high level of milk products, in particular of milk powder: the level mentioned is 60% according to the order for reference, 60 to 65% according to the accused in the main proceedings and 60% according to the French Government, which, however, refers to a level of 45% skimmed-milk powder as regards the "Denkavit élevage" products. The remaining proportion of the products in question consists of other agricultural products, listed in Annex II to the EEC Treaty, as well as minute quantities of various additives.
8 The accused in the main proceedings have maintained that with the exception of the additives each component of the products in question is covered by a common organization of the agricultural markets, in particular that established in the sector of milk and milk products by Regulation No 804/68. In those circumstances price-freezing measures such as those introduced by Ministerial Order No 78-86/P of 22 September 1976 cannot
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apply to such products without infringing the Community rules to which they are subject and at the same time the rules in the Treaty relating to the free movement of goods and the system of competition within the common market. On the other hand, the Ministère Public has maintained that milk- feed products for calves have never been regarded as falling within the category of products whose prices are governed by Community provisions, that national price rules are lawful in so far as they do not disturb the formation of the prices of the raw materials used in the products concerned and that milk-feed products for calves must be regarded as products of second-stage processing.
(a) The scope of Regulation No 804/68
9 In order to obtain clarification of those points the Cour d'Appel, Rouen, has asked the Court to state first of all whether, "as regards the fixing of prices at the production or wholesale stages", milk-feed products for calves of the nature and composition of the products in dispute are "subject to the rules of the common organization of the agricultural markets" and, in particular, whether they come "either within the definition of milk products (Article 1 of Regulation No 804/68 of 27 June 1968) or within that of animal feeding- stuffs (Article 4 of Regulation No 990/72 as amended by Regulation No. 804/76 of 7 April 1976) or within any other class of agricultural products subject to Community legislation under Article 38 of the Treaty of Rome".
10 Article 1 (b) of Regulation No 804/68 of the Council of 27 June 1968 (Official Journal, English Special Edition 1968 (I), p. 176) provides that the common organization of the market in milk and milk products covers products such as "Milk and cream, preserved, concentrated or sweetened" of heading 04.02 of the Common Customs Tariff which, under subheadings A II and B I, includes "Milk and cream, in powder". In addition, Article 1 (g) extends the scope of the said common organization of the market to "preparations of a kind used in animal feeding" containing the aforementioned products.
11 As has previously been established the products in dispute are "preparations of a kind used in animal feeding" having a high milk-powder content and otherwise containing other agricultural products, the majority of which are
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covered by Regulation No 804/68. In those circumstances it follows that having regard to their composition and the aforementioned provisions of Article 1 (b) and (g) of Regulation No 804/68 those feeding-stuffs fall within the area of application of the said regulation and are thereby subject to the common organization of the market in milk and milk products.
(b) The applicability of Regulation No 990/72
12 The fact that those products are subject to the common organization of the market in milk and milk products does not necessarily preclude the application to them of Regulation No 990/72 of the Commission of 15 May 1972 (Official Journal, English Special Edition 1972 (II), p. 428). That regu lation is, in fact, only a measure adopted in implementation of Regulation No 986/68 of the Council of 15 July 1968 (Official Journal, English Special Edition 1968 (I), p. 260). Since, as is also shown by its preamble, that latter regulation "laying down general rules for granting aid for skimmed milk and skimmed-milk powder for use as feed" occurs within the context of Regu lation No 804/68 and regulates certain specific machinery of the common organization of the market in milk and milk products it follows that, as a measure adopted in implementation of Regulation No 986/68, Regulation No 990/72 also forms part of the rules governing the common organization of the market in milk and milk products. Its application to milk products therefore does not preclude the application of Regulation No 804/68 which established that common organization but, on the contrary, assumes that those products are subject to the latter regulation.
13 For all those reasons the reply to the first question must be that milk-feed products for calves of the nature and composition referred to in the main proceedings are milk products within the meaning of Article 1 of Regulation No 804/68 of the Council of 27 June 1968 and are therefore subject to the common organization of the market established by that regulation.
(c) The applicability of Regulation No 974/71
14 The national court then asks the Court to state whether feeding-stuffs such as the products in dispute are subject to the compensatory amounts provided for in Regulation No 974/71 of the Council of 12 May 1971 (Official Journal, English Special Edition 1971 (I), p. 257) and if so whether this in
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itself means that they are subject to the common organization of the markets under Article I (1) of the said regulation.
15 Article 1 (2) (a) and (b) of Regulation No 974/71 provides that the system of monetary compensatory amounts provided for in Article 1 (1) shall apply inter alia
"(a) to products covered by intervention arrangements under the common organization or agricultural markets;
(b) to products whose price depends on the price of the products referred to under (a) and which are governed by the common organization of the market .. .".
It is clear from that provision that the fact that agricultural products are subject to the common organization of the markets is not a consequence of the application to them of the system of monetary compensatory amounts established by Regulation No 974/71 but on the contrary is in principle one of the conditions precedent for the application of that system. Since, as has already been established, feeding-stuffs of the nature of those in dispute are governed by the common organization of the market in milk and milk products established by Regulation No 804/68 it follows from that provision that the system of monetary compensatory amounts established by Regu lation No 974/71 is also applicable to them.
As regards the 1976-1977 marketing year — during which Ministerial Order No 76-86/P of 22 September 1976 was published — the compensatory amounts applicable to such products were fixed by Commission Regulation No 572/76 of 15 March 1976 (Official Journal L 68, p. 5) which was supplemented as regards France by Commission Regulation No 652/76 of 24 March 1976 (Official Journal L 79, p. 4).
16 In the light of those factors the answer to the second question must be that the milk-feed products in question were subject, at the time of the application of the disputed national price-freeze measures, to the system of monetary compensatory amounts established by Regulation No 974/71.
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(d) The scope of Regulation No 804/68 in relation to national price-control measures
17 In its third question the national court asks the Court to state whether the common organization of the market in milk and milk products laid down in Regulation No 804/68 of 27 June 1968, either alone or in conjunction with the common organization of the market in beef and veal laid down in Regu lation No 805/68, prohibit Member States from applying national price- freeze rules to the milk-feed products for calves in question. In its fifth question the national court also asks whether the common organization of the market referred to above prohibits Member States from applying national price-freeze rules which do not contain special provisions for agricultural products governed by decisions adopted by the Community.
Since the content of those two questions is related they must be considered together.
18 The Court has consistently held (cf. judgment of 23 January 1975 in Case 31/74, Galli [1975] ECR 47; judgments of 26 February 1976 in Case 65/75, Tasca [1976] ECR 291, and in Joined Cases 88 to 90/75, SADAM [1976] ECR 323; judgment of 29 June 1978 in Case 154/77, Dechmann [1978] ECR 1573, and judgment of 12 July 1979 in Case 223/78, Grosoli [1979]ECR) that in sectors covered by a common organization of the market — even more so when that organization 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. That case-law has made clear that the provisions of a Community agricultural regulation establishing a price system which is applicable at the production and wholesale stages leave Member States free — without prejudice to other provisions of the Treaty — to take the appro priate 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.
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19 In the same case-law the Court has also stated that in every case it is for the national court to decide whether the national measures taken in relation to prices which it is called upon to consider produce such effects as to make them incompatible with the Community provisions on the matter. In that connexion the particular nature of the organization of the markets in the sector in question must be taken into account.
As regards the particular characteristics of the common organization of the market in milk and milk products set up by Regulation No 804/68 it must be pointed out that that organization involves a price system and a trading system. The price system is based upon a "target price" for milk, a "threshold price" for certain milk products, including the feed preparations referred to under subheading 23.07 B of the Common Customs Tariff, and an "intervention price", applying in particular to butter and skimmed-milk powder, which are fixed annually by the Council for the following milk year. In addition, provision is made for the adoption of intervention measures by the said common organization if market prices fall to a level which does not allow the target price to be reached. Such measures include inter alia aid for private storage and, in particular, the granting of aid "for skimmed milk and skimmed-milk powder which are produced in the Community and are for use as feeding-stuffs if these products reach certain standards" (Regulation No 804/68, Article 10 (1)). As is shown by Article 2 a of Regulation No 986/68 of the Council of 15 July 1968, which was added by Regulation No 666/74 of the Council of 28 March 1974 (Official Journal L 85, p. 58), such aid shall be fixed each year taking account inter alia of the intervention price and trends in the market prices of competing products compared with that of skimmed-milk powder.
Finally, the trading system provides for a system of levies, fixed on the basis of the threshold price, which covers feeding-stuffs, and for the grant of refund aid, also for preserved milk and cream. Furthermore, as has already been established, milk products, including feeding-stuffs, are subject to the system of monetary compensatory amounts.
21 The constituent elements of that common organization show it to be based upon a system of Community prices which are closely linked to one another. The proper functioning of the common organization of the markets
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presupposes that none of those prices shall be distorted, as regards the conditions under which they are formed, by the effect of measures adopted unilaterally by a Member State. It is established that with effect from 16 September 1976, that is, from the day following that on which the price freeze introduced by Ministerial Order No 76-86/P of 22 September 1976 took effect, the target price for milk and the intervention price for skimmed- milk powder were increased by Council Regulation No 558/76 of 15 March 1976 (Official Journal L 67, p. 4). In addition, Council Regulation No 560/76 of 15 March 1976 (Official Journal L 67, p. 10) also increased the threshold price for compound feeding-stuffs with effect from 16 September 1976.
The fact, pointed out by the French Government, that milk-feed products for calves do not in themselves benefit from a price guarantee in the form of an intervention price fixed within the context of the common agricultural policy cannot preclude the risk of a conflict between the national measures freezing the prices of those products and the Community rules governing the common organization of the market in milk and milk products. Although it is true that there is no intervention price for milk-feed products for calves, the intervention price fixed for milk powder is, as a result of the composition of those products, a constituent element of their price. Furthermore, the fact, emphasized by the French Government, that the national price-freeze rules concerned in this instance constitute a short-term economic contingency measure which in itself has no appreciable influence on the market in question cannot rule out their proving to be incompatible with the provisions of Community law dealing with agricultural matters, since even if it is merely a temporary contingency measure a price freeze may jeopardize the objectives and functioning of the common organization of the market in question. Finally, the distinction drawn by the said Government between those national measures which apply to raw materials subject to the common organization of the market and those which apply to preparations obtained from such materials is not decisive as regards the exclusion of all conflict between the national rules on prices and the rules governing the common organization of the market, since the raw materials and the compound products containing those materials are both covered by the common organ ization of the market and they are closely related as regards price.
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23 The foregoing characteristics of the common organization of the market in milk and milk products are among those which the national court would be free to take into consideration, together with the other features of that organization, in order to decide whether national measures, such as those in dispute, imposing a price freeze at the distribution stage for products coming under such an organization jeopardize the objectives or the functioning of that organization.
24 The answer to the third and fifth questions must therefore be that Regulation No 804/68 of the Council of 27 June 1968 must be interpreted as prohibiting national rules, such as those referred to by the national court, imposing a price freeze at the distribution stage for milk-feed products for calves coming under the common organization of the market established by that regulation where the application of such rules endangers the objectives or the functioning of that organization, in particular of its price rules.
(e) Articles 30 to 34 of the EEC Treaty
25 The fourth question asks the Court whether the rules on the free movement of goods laid down in Articles 30 to 34 of the EEC Treaty, and more parti cularly Article 22 of Regulation No 804/68 as regards milk products, prohibit the application to the said products of national price-freeze rules which prevent increases in the purchase price of raw materials or finished products from being passed on in selling prices.
26 Article 30 of the EEC Treaty prohibits in trade between Member States all measures having an effect equivalent to quantitative restrictions and that prohibition is repeated in Article 22 of Regulation No 804/68 as regards the market in milk and milk products. For that purpose it is sufficient that the measures in question are likely to constitute an obstacle, directly or indirectly, actually or potentially, to imports between Member States. Although price-freeze rules applicable without distinction to domestic and imported products do not in themselves constitute a measure having an effect equivalent to a quantitative restriction, they may have such an effect, however, when prices are fixed at a level such that the sale of imported products becomes either impossible or more difficult than that of domestic
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products. That is in particular the case of national price-freeze rules which, by preventing increases in the prices of imported products from being passed on in selling prices, freeze prices 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 or, in the light of the level of the frozen prices of national products, are induced to give preference to the latter.
27 It is for the national court to decide whether those conditions are satisfied in this instance.
28 In the light of those considerations the reply to the fourth question must be that the rules of the free movement of goods set out in Articles 30 to 34 of the EEC Treaty prohibit the application to milk-feed products for calves coming under the common organization of the market established by Regu lation No 804/68 of national price-freeze rules which exclude the possibility of passing on in selling prices the increase in the purchase prices of the raw materials or of the finished products imported from another Member State when, as a result of the freeze, prices are at such a level that the marketing of the imported products becomes either impossible or more difficult than that of national products.
(f) Articles 5 and 85 of the EEC Treaty
29 Finally, the national court asks the Court to state whether the combined provisions of Articles 5 and 85 of the EEC Treaty prohibit Member States from applying national rules freezing the prices of products subject to Community legislation.
30 The second paragraph of Article 5 of the EEC Treaty lays down the principle that the Member States shall abstain from any measure which could jeopardize the attainment of the objectives of the Treaty. Article 85 prohibits "all agreements between undertakings, decisions by associations of under takings and concerted practice" showing certain specific characteristics in
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relation to the system of competition which is the aim of the Treaty. National rules freezing the prices of products subject to Community legislation which cannot be regarded as an agreement between undertakings, a decision by an association of undertakings or a concerted practice are therefore not covered by the terms of the aforementioned Article 85. If the application of such rules by a Member State to products subject to a common organization of the market contravenes the principle laid down in Article 5 of the Treaty by jeopardizing the objectives or the functioning of that common organization the assessment of the compatibility of those rules with Community law does not depend on the provisions of Article 85 of the Treaty but rather on the provisions governing the said organization.
31 In those circumstances it is sufficient to reply to the sixth question that having regard to its material sphere of application, Article 85 of the EEC Treaty does not relate to national price-freeze rules.
Costs
32 The costs incurred by the French Government and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are 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 questions referred to it by the Cour d'Appel, Rouen, Chambre Correctionnelle, by judgment of 13 December 1978, hereby rules:
1. Milk-feed products for calves of the nature and composition referred to in the main proceedings are milk products within the meaning of Article 1 of Regulation No 804/68 of the Council of 27 June 1968 and are therefore subject to the common organization of the market established by that regulation.
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2. The milk-feed products in question were subject, at the time of the application of the disputed national price-freeze measures, to the system of monetary compensatory amounts established by Regulation No 974/71.
3. Regulation No 804/68 of the Council of 27 June 1968 must be interpreted as prohibiting national rules, such as those referred to by the national court, imposing a price freeze at the distribution stage for milk-feed products for calves coming under the common organization of the market established by that regulation where the application of such rules endangers the objectives or the functioning of that organ ization, in particular of its price rules.
4. The rules of the free movement of goods set out in Articles 30 to 34 of the EEC Treaty prohibit the application to milk-feed products for calves coming under the common organization of the market established by Regulation No 804/68 of national price-freeze rules which exclude the possibility of passing on in selling prices the increase in the purchase prices of the raw materials or of the finished products imported from another Member State when, as a result of the freeze, prices are at such a level that the marketing of the imported products becomes either impossible or more difficult than that of national products.
5. Having regard to its material sphere of application, Article 85 of the EEC Treaty does not relate to national price-freeze rules.
Kutscher O'Keeffe Touffait
Mertens de Wilmars Pescatore Mackenzie Stuart Bosco
Delivered in open court in Luxembourg on 18 October 1979.
A. Van Houtte H. Kutscher
Registrar President