C-10/79

authority, at the national or regional sanctions for failure to comply with the level, is, by its nature, outside the bounds price laid down in accordance with of the powers given to Member States such legislation does not affect and runs contrary to the principle the incompatibility of the legislation established by Regulation No 804/68, in with the common organization of the particular Article 3 thereof, of attaining a market.

In Case 10/79

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunale Amministrativo Regionale per il Veneto [Regional Administrative Court for Veneto] for a preliminary ruling in the action pending before that court between

GAETANO TOFFOLI and Others

1 — Language of the Case: Italian.

JUDGMENT OF 6. 11. 1979 — CASE 10/79

Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and procedure of the association are subject to the rules and procedure laid down by it. In Italian Law No 306 of 8 July 1975 addition, the members of the association (Gazzetta Ufficiale [Official Journal of are bound to sell the milk through it. the Italian Republic] No 194 of 23 July 1975) comprises, first, measures in For each agricultural year and for each favour of producers' associations in the region the producer price for milk is cattle-rearing sector and, secondly, rules fixed by agreement between the groups relating to the fixing of the producer of traders involved (producers, pro- price for milk. cessors and dairy centres) and on the Article 2 of this Law provides that the basis of the criteria established by production and sale of milk by members Articles 8 and 9 of the Law. The price

TOFFOLI v REGIONE VENETO

Bolletino Ufficiale della Regione subject that the last provision in the regu- (B.U_R_) [Regional Official Gazette] lation, according to which the latter which makes it "binding on the parties to "shall be binding in its entirety and the agreement" (Article 10). directly applicable in all Member States" is not decisive until the concept of the If no such agreement is reached the price "applicability" of Community regu- is fixed by an ad hoc commission lations has been clarified.

Mr Gaetano Toffoli and other businessmen in the milk and milk "Do Community rules, in particular products sector made an application to Regulation No 804/68 on the common the Tribunale Amministrativo Regionale organization of the market in milk and per il Veneto, the main object of which milk products read together with the was to obtain the annulment of the second paragraph of Article 189 of the above-mentioned decision determining EEC Treaty, prevent the Italian State the producer price for milk. As grounds from conferring by law upon its for the application the applicants in the administrative authorities power to fix main action alleged that Law No 306/75 the producer price for milk even if the was incompatible with Regulation No Community has not fixed the target price 804/68 of the Council of 27 June 1968 for milk pursuant to Article 3 of Regu- lation No 804/68?"

Luigi Righetti, Matteo Pagnes and never be produced as long as that price Giangiocomo Pancino, of Venice, by the had not actually been fixed by the Italian Government, represented by its competent Community authorities. Ambassador, Adolfo Maresca, acting as In the grounds for the order making the Agent, assisted by the Avvocato dello reference to the Court of Justice set out Stato [State Advocate], Ivo Maria

examine the question in more detail as regards the compatibility of the Italian II — Written observations legislation with the Community regu- lations and the concept of the applicability of Community regulations, The applicants in the main action make which the national court appears to plce the preliminary observation that the in doubt, and those observations may be summarized as follows : question which has been asked can be answered simply on the basis of the facts. The target price for milk has in fact been fixed by the Community in pursuance of Article 3 of Regulation No 804/68. To The object of the two procedures be more precise, there has always been a introduced by Law No 306/75 is to considerable difference between the nullify the effect of the rules of a free average price for milk, which is fixed in market in the formation of the producer Italy in accordance with the procedure price for milk, contrary to Community rules. The agreements referred to in laid down by Law No 306/1975, and the Article 10 of the Law are to be made, in target producer price fixed by the Community, a difference which shows fact, not between the various parties having an interest therein, as the rules of clearly that the Italian legislation is the market require, but between the incompatible with the Community regu- groups of producers and users for each lations. It need only be remembered that region. That article requires the agreed during the first quarter of 1977 the price to be published in the Regional difference between the price of milk in Official Gazette so as to become binding Italy and the Community target price was in the region of 48%. on the parties, thus eliminating the possibility of competition within any one group. The illegality of the Italian rules This information may make it is brought out even more, however, by unnecessary to examine further the the fact that if no agreement can be question which has been asked, the terms reached under Article 10 the procedure of which would seem to show that the laid down in Article 11 applies and the difficulties concerning interpretation commission (appointed by the regional mentioned by the national court are due administrative authorities) in which solely to the failure on the part of the traders are in the minority compared to Community to exercise its power to fix producers, proceeds to determine the the price. Similarly, that court considers producer price, its decision being valid

for, and binding on, all the groups of According to the Italian Government, producers or users. even if a target price has been fixed for milk, Member States reserve their This means that the objective pursued is general power to control the national not merely to impose a fixed price an all price of the product at each stage in its the parties concerned but also to protect marketing. In support of this argument the Italian Government recalls the unnecessarily the producer group solely at the expense of the users, who are general principle enunciated by the bound by the prices fixed for retail sales. Court (Case 65/75 Tasca [1976] ECR 291; Joined Cases 88 and 90/75, SADAM and Others [1976] ECR 323) These provisions, say the applicants, are in total contradiction to the main according to which "the unilateral fixing objective of Regulation No 804/68, by a Member State of maximum prices which is the attainment of a unified for the sale of sugar, whatever the market, in relation to which the target [marketing] stage in question, is incompatible with Regulation No price should be considered merely as an instrument. 1009/67 [on the common organization of the market in sugar] once it jeopardizes the objectives and the Regulation No 804/68 is directly and functioning of this organization and in immediately applicable in the Italian particular its system of prices". The legal order and totally prohibits the corollary to this principle is that once it imposition of any binding price for milk is acknowledged that Member States and milk products by withdrawing any retain their general power it is for the power in that respect from Member national courts, on the basis, in States and even from the groups particular, of elements of Community involved. law supplied by the Court, to ascertain whether, in the actual case before them, In view of these observations the the unilateral fixing of prices is capable applicants propose that the Court should of jeopardizing the objectives and reply to the question which has been put functioning of the common organization to the effect that Regulation No 804/68 in question. is directly and immediately applicable in the Italian legal order and, consequently, the Italian Law No 306 of 8 July 1975 is unlawful to the extent to which it lays Once it is established that Member States .down a procedure for fixing the have competence to the extent just producer prices for milk. described, the question which has been referred to the Court by the Tribunale The defendant in the main action contests Amministrativo may be examined the admissibility of the question which without taking any account of the has been referred to the Court, a particular supposition set out therein question which would lead the Court to (".. . even if the Community has not assess the lawfulness or validity of Law fixed the target price for milk pursuant No 306/75. Alternatively it claims that to Article 3 of Regulation No 804/68"). this Law is not incompatible in any way In the first place, that supposition is in with Regulation No 804/68. In fact the fact irrelevant in view of the fact that

As regards Law No 306/75 the first system resulting in the authoritative comment made by the Italian fixing of a producer price for milk. Nor is the situation different if those Government is that this does not impose any authoritative price control with regard concerned cannot reach an agreement (Article 10); the decision of the to milk. As may be seen in Articles 1 to 7 commission referred to in Article 11 the obvious objective of this law is to amounts to no more, in a fact, than promote co-operation in the agricultural sphere, especially in the milk sector, method of resolving any conflict there which is traditionally one of the weakest may be among the groups involved, and in Italian agriculture. not an authoritative measure imposed on them. It is important to note in this respect that the decision comes from those involved and that it is only binding In keeping with that objective Article 8 as between the parties, that is to say, that (2) of Law No 306/75 provides that the it binds only members of those groups. selling price for milk is fixed, in principle, "for each different production zone and each marketing year by means To conclude, the national law is of collective negotiation in which all designed to promote and encourage those affected shall take part, having agreements within the trade regarding regard in particular to the forces which the acceptance of a uniform producer contribute to the costs of milk price for milk (at the regional level); by production". The collective negotiations no means, however, does it impose the may be carried out autonomously, on the price or the conditions reached by trade initiative of those affected, or on the agreements, even less does it impose the initiative of the region concerned (Article terms of such agreements, on parties 10). If agreement is reached it shall be (private persons or associations) who are published in the Regional Official not connected with the associations Gazette; it shall be "binding on all the which participated in the collective parties to the agreement" (Article 10, negotiation. third paragraph). If no agreement is reached the producer price for milk shall be fixed, again for each region, by a Now that the content of the national law commission which includes represen- has been clarified it is difficult to tatives of all those operating in the sector. The decision of the commission is conceive of any reason why this law should come into conflict (directly or published in the next Official Gazette indirectly) with the common organi- "... and shall be binding on the parties " zation of the market in milk and milk

lation of the product within the to sell milk at the price they choose. Community (cf. the judgments already Other operators who are not members referred to in Cases 65/75 and 88 to are free to buy milk at a price other than 90/75). The only way in which such an that which has been agreed or fixed. The impact could be produced, bringing with same freedom exists for operators who it the possibility of a direct or indirect are members, in view of the fact that the conflict, would be through a national law contains no sanction even against price system imposed by authority and those members who fail to comply with binding erga omnes. the price which has been agreed or fixed. The method introduced by the Law On the contrary, there could be no such certainly encourages negotiation but by impact once the national rules were no means imposes it. limited to encouraging the agreement of all the groups involved in the matter of It must equally be accepted that the the producer price. national Law does not impose any obligation to take supplies of Italian The possibility of a direct conflict, as milk, whether at the agreed price or at regards the level of the national price, any other price. with the objectives or functioning of the common organization is equally Thus the national rules do not provide precluded in the actual circumstances if any guarantee mechanism for producers; it is borne in mind that the average the only guarantee enjoyed by Italian producer price for milk in Italy is, as a producers, just as any other producers in general rule, slightly above the target the Community, lies in the intervention price. This factor, due simply to under- mentioned in Title II of Regulation No production (as already pointed out) in 804/68. Thus it can also be confirmed the sector, certainly does not constitute an obstacle to the free circulation of the that as they do not create any guarantees additional to that of intervention by the product in Italy. Quite the contrary; it Community, the national rules have no tends to favour Community imports effect on the functioning of the which in fact have continued to increase intervention mechanism at Community even after the entry into force of Law level. No 306/75.

responsibility for determining the "Do Community rules, in particular producer price for milk on the State. In Regulation No 804/68 of the Council on fact, if the negotiation procedure the common organization of the market provided for by Article 10 fails, it auto- in milk and milk products prevent the matically brings into play the procedure Italian State from determining the provided for by Article 11 which is auth- producer price for milk?" oritative in nature (price fixed by the regional commission which is binding on Proceeding then to examine the case-law all). of the Court concerning the powers which Member States have to determine

The second point to be elucidated the price of agricultural products which concerns the last sentence in the question are subject to a common organization of which has been referred to the Court: the market the Commission elicits the

"even if the Community has not fixed following principles : the target price for milk pursuant to Article 3 of Regulation No 804/68". If (a) Unilateral measures adopted by a this sentence is put back into its original Member State are compatible with a context it might be thought that the common organization of the market Italian court itself would reply in the in a particular sector in so far as they affirmative to the question which it has do not hinder, directly or indirectly, referred to the Court "if the Community the achievement of the objectives and has fixed the target price for milk", the normal functioning thereof; whereas the existence of a vacuum as a

In particular, it points out that the organization does not provide for any Moving on to examine the direct or direct intervention in the case of milk. It indirect effects which the national seeks to support milk prices solely by provisions in question may have on the means of an intervention price for common organization of the market in derived products such as butter, skimmed- milk and milk products, the Commission milk powder and Grana Padano and claims that the preceding commentary Parmigiano Reggiano cheeses, an shows that any element foreign to that intervention price with the aid of which organization and capable of slowing it is sought to achieve the target price for down the increase in price to the target milk sold by Community producers in price on the market prejudices the the course of the milk year "on the attainment of the objective of the systems Community market and on external of intervention and protection at the markets" (cf. Article 3 of Regulation No frontier. That would be so, if in the case 804/68). As a means of providing an of milk, the producer price was authori- indirect guarantee for milk producers tatively fixed below the target price. there is in addition a system of levies designed to compensate for the difference between the threshold price If the producer price for milk was fixed and the free-at-frontier price for a at a level above that of the target price particular product in the sector in the conflict with the Community price question. Like the former, this is fixed in system would be just as obvious and the case of each "pilot product" would have adverse effects in various mentioned in Annex I to Regulation No ways. 823/68 of the Council of 28 June 1968 determining the groups of products and the special provisions for calculating levies on milk and milk products In the first place, there would be a real (Official Journal, English Special Edition supplementary guarantee which would 1968 (I), p. 199). The object of this ensure a fixed income for the producers system is to stabilize the Community solely by virtue of selling the milk and market mainly by ensuring that price would be concurrent with the guarantee fluctuations on the world market are not mechanism provided for by the common reflected in prices in force within the organization of the market. Community. Lastly, in order to encourage exportation if the Community price should be higher than the price on Of course, it is possible for the market the world market, refunds are granted price to be above the target price solely, which are uniform for the whole of the for instance, because of the free play of Community, but vary according to supply and demand. There may be inter destination in the case of non-member alia structural reasons for this. According countries. to the Commission, that is in effect what

only an element which is foreign and should result therefrom will be lower, undesirable in relation to the common even significantly lower, than that which organization of the market, but which might be expected if production costs renders or may render ineffective the were determined by natural forces. In very instruments which the Community Italy, however, the only intervention rules have created in order to encourage measure which remains in force is that

the attainment of the target price for concerning Grana Padano and milk. In fact it has or may have an Parmigiano Reggiano cheeses which adverse effect both on the actual absorb practically one-third of the total intervention measures properly so-called milk production. However, market prices and on the measures taken at the for these cheeses are always very high Community frontier and its material and considerably above the intervention consequences might even in the extreme price. Moreover, production is concen- be considered as actually replacing the trated almost entirely in co-operatives, latter. within the framework of which there is

no room for the fixing of the producer price for milk by authority.

As for the measures adopted at the frontiers the levies are directly or indirectly based on the target price for As regards Community trade a national milk. When the producer price for milk measure of the type in question is is artificially fixed at a much higher level, capable of hindering the normal flow of

TOFFOLI v REGIONE VENETO

trade, or at least distorting it. In fact, as (c) that the objectives of the economic experience in this case shows, an policy designed to be attained by abnormally high price for milk in a the mechanisms of the common

provides milk producers with an additional guarantee not provided III — Oral procedure for by the system of the common organization of the market in the sector, which must be applied in a At the hearing on 4 July 1979 the uniform manner in all the Member applicants in the main action, States; represented by Mr Orsoni, Advocate at the Venice Bar, the defendant in the main action, represented by Mr Grimani, Advocate at the Venice Bar, the Italian (b) that such guarantee is concurrent Government, represented by the with and therefore conflicts with Avvocato dello Stato [State Advocate] the instruments expressly provided I. M. Braguglia, acting as Agent, and the for by the common organization Commission of the European Communi- for the purpose of achieving the ties, represented by Mr Campogrande, target price for milk, that is to say acting as Agent, assisted by R. Wain- with intervention in favour of wright, Legal Adviser, submitted oral processed products and with the observations. measures which are applied at Community frontiers, that it therefore nullifies their effects and The Advocate General delivered his that, in the extreme, it replaces opinion at the sitting on 20 September them; 1979.

JUDGMENT OF 6. 11. 1979 — CASE 10/79

Decision

1 By an order of 28 November 1978, received at the Court on 19 January 1979, the Tribunale Amministrativo Regionale per il Veneto referred a question to the Court under Article 177 of the EEC Treaty for a preliminary ruling on the interpretation of Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk products (Official Journal, English Special Edition 1968 (I), p. 176).

intervention prices, introduced by Article 5, for certain derived products, namely butter, skimmed-milk powder and Grana Padano and Parmigiano Reggiano cheeses. The aim of these intervention prices is to ensure that the target price for milk is attained under the conditions set out in Article 3, that is to say, essentially, as dictated by market forces within the Community. To that end the regulation includes also a system of protective measures at Community frontiers, comprising in the main levies intended to compensate for the difference between the threshold price and the free-at-frontier price for any particular milk product. These prices are fixed for each of the "pilot products" referred to in Article 14 of Regulation No 804/68 and listed in Annex I to Regulation No 823/68 of the Council of 28 June 1968 determining the groups of products and the special provisions for calculating levies on milk and milk products (Official Journal, English Special Edition 1968 (I), p. 199). It should also be mentioned that Regulation No 804/68 allows for the granting of export refunds which are uniform for the whole Community but vary according to destination in the case of non-member countries.

6 For the milk year which is concerned in the main action the target price for milk was fixed by Council Regulation No 998/78 of 12 May 1978 (Official Journal No L 130 of 18 May 1978, p. 5) as from 22 May 1978 at 17.70 units of account per 100 kg (Lit 204.26 per kg), and this was after the 1977/1978 milk year had been extended until 21 May 1978 by Council Regulation No 910/78 of 27 April 1978 (Official Journal No L 117 of 29 April 1978, p. 84) and thus also the target price for milk fixed for that year by Council Regu- lation No 872/77 of 26 April 1977 (Official Journal No L 106 of 29 April 1977, p. 17).

affected (producers, associations, processors and dairy centres) and in accordance with the criteria laid down by Articles 8 and 9. By virtue of Article 10 the agreement between the parties, reached if necessary by means of the intervention of the economic committee for the region referred to in Article 3, is published by that committee in the Regional Official Gazette and is binding on the parties. When the agreement referred to in Article 10 has not been reached between the parties within 30 days of the start of the agricultural year the producer price for milk is fixed, pursuant to Article 11, by a commission appointed by decree of the Chairman of the region. This commission comprises the regional "Assessore" [Inspector] for agriculture or his appointee acting as Chairman, five representatives of the milk producers, two representatives of the co-operatives for dairy products, four represen- tatives of the processing industries, one representative of the dairy centres and two specialists in the field of milk products. The decision of the Commission is adopted by a majority vote and is binding on the parties immediately on publication in the Official Gazette.

8 As has already been shown it is a decision which was adopted under Article 11 of the Law of 8 July 1975 which is at the root of the main action.

9 In support of their application in the national court the applicants in the main action claim that the above-mentioned Law is incompatible with Regu- lation No 804/68 of the Council. In reply the Regione Veneto, the defendant in the main action, maintains that there is no such conflict because in the first place so long as the Community bodies have not taken concrete measures to put the provisions of the regulation into effect there can be no question of a conflict between the national law and the Community regu- lation, and in the second place because if and when the target price is fixed by those bodies this is tantamount to a guideline which does not deprive the national legislature of the power to intervene in the actual fixing of the price.

12 In sectors covered by a common organization of the market, a fortiori when that organization is based on a common price system, Member States can no longer take action, through national provisions taken unilaterally, affecting the machinery of price formation at the production and marketing stages established under the common organization. It follows that national legislation designed to promote and encourage, by any method, the establishment of a uniform producer price for milk, by agreement or by authority, at the national or regional level is, by its nature, outside the bounds of the powers given to Member States and runs contrary to the principle established by Regulation No 804/68, in particular Article 3 thereof, of attaining a target producer price for the milk sold by Community producers during the milk year on the Community market and on external markets. It should also be noted that the, absence of sanctions for failure to comply with the price laid down in accordance with such legislation does not affect the incompatibility of the legislation with the common organization of the market.

13 It should, however, be noted that the premise on which the question which has been referred to the Court is based, namely that the Community did not fix the target price for milk for the period in question, does not reflect the situation which existed within the Community. In fact, even though

JUDGMENT OF 6. 11. 1979 — CASE 10/79

according to the terms of the regulations in force the previous milk year had come to an end on 31 March 1978, the target price was still applicable, in order to avoid a break in continuity pending the entry into force of Council Regulation No 910/78 of 27 April 1978 formally extending the preceding year until 21 May 1978, which was the date as from which the target price for milk was fixed by the provisions of Council Regulation No 998/78 of 12 May 1978.

in answer to the question referred to it by the Tribunale Amministrativo Regionale per il Veneto by an order of 28 November 1978, hereby rules:

It is incompatible with the common organization of the market in milk and milk products established by Regulation No 804/68 of the Council

TOFFOLI v REGIONE VENETO

of 27 June 1968 for a Member State to fix directly or indirectly the producer price for milk.

Kutscher O'Keeffe Touffait

Pescatore Mackenzie Stuart Bosco Koopmans

1 — Translated from the German.