C-323/93

'Each insemination centre shall serve an area in which only that centre is authorized

* Original language: Danish. 4. In 1985 CEIAM brought an action against 1 — JORF of 29 December 1966, p. 11619. the Crespelle Centre before the Tri-

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bunal de Grande Instance (Regional Court), 5. The Cour de Cassation referred the fol­ Rennes, contending that the Crespelle Cen­ lowing questions to the Court: tre had infringed its exclusive right to act as an insemination undertaking in the Depart­ ment of Mayenne and claiming that the Cre­ spelle Centre should be ordered to pay dam­ ages for the loss CEIAM had suffered as a result of that infringement and to cease its unlawful activity. The Tribunal de Grande Instance upheld CEIAM's claim and ordered '1 . Is it contrary to Articles 5, 86 and 90(1) the Crespelle Centre, which did not deny of the Treaty establishing the European that it had infringed the exclusive right, to Economic Community for domestic pay considerable damages and imposed fines legislation such as that at issue in this on the undertaking in the event of future case to establish insemination centres infringements. The judgment was confirmed which alone are authorized to operate in by the Cour d'Appel (Court of Appeal), a defined area and do those provisions Rennes, which rejected inter alia the Cre­ grant them the right to charge for addi­ spelle Centre's contention that the French tional costs where breeders in the area rules on geographical monopolies for insem­ within which the centre has exclusive ination centres were contrary to Community rights request the supply of semen from 2 law. approved production centres of their choice?

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6. Observations were submitted to the ture in advance of the implementation of the Court by both parties to the main proceed­ common agricultural policy envisaged in the ings, by the French Government and by the EEC Treaty. 6 Commission.

9. The basic rule for the improvement of 7. It emerges both from the questions and stock breeding is, as I have mentioned, that from the observations in this case that a dis­ this must take place within centres, whether tinction should be drawn between those production centres or insemination centres, aspects of the French system concerning the approved by the Ministry of Agriculture. It provision of actual insemination services and appears from Article 5(3) of the Law that those concerning the provision and storage such approval is given in consideration above of the product — bovine semen — used in all 'of equipment already existing, of the rel­ connection with the provision of services. evant centre's ability to make a contribution to the genetic improvement of the cattle population and the guarantees which the centre offers in particular as regards both qualified staff and working material and breeding animals ...'

The background, content and practical application of the French legislation

13. The insemination centres have the exclu­ sive right to effect insemination within a given geographical area. It may be seen from the preparatory studies for the Law 9that such an exclusive right was regarded as nec­ essary inter alia to avoid price competition, 11. It appears from the same provision that which might be damaging to the centres car­ the operations of insemination centres con­ rying out a valuable breeding programme. sist in 'insemination of female animals of the The French Government has also given the species described in Article 1 of the Law of following explanation of the background to 28 December 1966' and that 'the insemina­ the exclusive right: tion centres may be authorized to maintain stocks of animals approved for reproduction supplied by production centres; in that case the insemination centres themselves shall undertake the collection, treatment and stor­ age of the semen from the relevant stock of animals'. 'The monopoly, which attracts the member­ ship of professionals and is the result of a permanent collaboration between manage­ ments and the profession, pursues a twofold aim, first to guarantee a constant supply of semen to the breeders of the area, but above all to promote, in the general interest, genetic progress by evaluating genetic value precisely within the programmes of selection accord­ ing to progeny. Testing is in fact a long and costly activity necessitating stable operations 12. The French Government has stated in its capable of paying for themselves. In fact the answers to questions from the Court that there are in all 23 production centres, some of which are approved for the breeding of a single breed of cattle, whereas others are 8 — The government has stated that 'the approved insemination centres are exclusively agricultural co-operative societies approved for the breeding of several breeds. governed by the Law of 10 September 1947 ... In accordance There are in all 54 insemination centres. The with Article L 521.1 of the Rural Code they arc special groups, either general or commercial societies whose object centres are run by agricultural co-operatives is the joint use by farmers of all means appropriate for facil­ itating or developing their operations. Their objective is or groups of such co-operatives. All but therefore not to make a profit but to offer their members seven of them are members of a country­ advantageous conditions of supply and marketing.' 9 — Sec the report of the committee on economic affairs submit­ wide union, the Union Nationale des ted at the time of the consideration of the draft Law in the Coopératives Agricoles d'Elevage et Senate — Documents de l'Assemblée Nationale, Sénat, Pre­ mière Session Ordinaire de 1966-1967, Document No 63, d'Insémination Artificielle (UNCEIA). The p. 33.

14. The exclusive right is thus based partly on guaranteeing supply within the area con­ cerned, partly, and above all on the wish to ensure a sufficiently large number of cattle on which tests may be carried out. In addi­ 16. The insemination centres generally tion there is a financial aspect, which is dealt obtain the semen for insemination from the with in greater detail in Annex 3 to the production centres with which they have observations of the French Government, concluded contracts. The insemination cen­ which states inter alia the following: tres have a duty to enter into such contracts so as to ensure that there is at all times an adequate supply of semen. Moreover such

18. However, the duty to ensure the supply of semen by contract does not preclude the possibility of supply from other sources. The 19. These rules were made more explicit and French legislation does not prevent individ­ supplemented in Article 10 of the decree of ual breeders or insemination centres from the Ministry of Agriculture of 17 April 12 applying to foreign producers direct for the 1969 on authorization for the operation of purchase of semen. insemination centres, as amended by decree 13 of 24 January 1989. That amendment was occasioned by a reasoned opinion sent by the Commission to the French Government. It is not stated whether the opinion dealt with other matters of complaint. In the ver­ sion at present in force Article 10 is worded The rules on this are to be found inter alia in as follows: Article 5 of the 1966 Law, already men­ tioned, according to which

— breeders may apply to their local insemi­ 'The insemination centres shall normally be nation centre to provide them with supplied with breeding animals or with

11 — See the French Government's explanation of this, as men­ 12 — JORF of 30 April 1969, p. 4349. tioned in paragraph 12 of Case 161/82 Comnmsion v 13 — Article 2 of the decree of 24 January 1989, JORF of 31 Jan­ Fmnce, discussed infra. uary 1989, p. 1469.

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semen by the centre or centres approved for importation of semen from other Member production and established on the territory States. of one of the Member States of the European Economic Community with which they have concluded a contract in accordance with the 1 provisions of Article 12. 4

21. According to the information supplied, Any other economic operator importing some sectors of the French farming commu­ semen originating in another Member State nity are dissatisfied with the monopoly sys­ of the European Economic Community shall tem. That is presumably, inter alia, because deliver it to an approved insemination or artificial insemination is the main method of 15 production centre of his choice.' inseminating cattle used by farmers and that the cost of a single insemination is not inconsiderable — it is stated to be in any case not less than FF 100 and normally sub­ stantially more. Apparently there are consid­ erable differences in price in certain cases. It has been stated for example that CEIAM's 20. The French Government has stated prices in 1987 were some 30% higher than that no import licence is required for the those of the Crespelle Centre. The monop­ oly system has given rise to actions before the French courts originating in the opera­ tion of unauthorized insemination centres or 14 — Article 12 of the decree provides that: 'Each insemination centre shall conclude contracts with one in inseminations effected by inseminators or or more production centres. veterinary surgeons without the necessary Such contracts shall guarantee regular supplies of semen in the area concerned, regard being had to the requirements permission from the local centre. arising, and for sufficiently long periods to conclude testing activities successfully. Such contracts shall include an undertaking on the part of the insemination centre to take part in testing programmes implemented by the production centres to which it is linked. That undertalting shall take into account the possi­ 15 — It may be seen from the expert report used for calculating bilities available within the area for the implementation of damages in the main proceedings that in 1987 CEIAM test programmes and an estimate of the medium-term effected more than a quarter of a million inseminations and requirements of approved breeding animals within the that in the same year the Crespelle Centre effected some area.' 100 000 in the department of Mayenne alone.

23. The Court has previously had occasion in two cases to decide as to the legality of various aspects of the French system as regards Article 37 of the Treaty on State monopolies of a commercial character and certain of the Council directives on breeding animals. One — Case 161/82 Commission v France — concerned a failure to fulfil Treaty obligations, and the other — Case 271/81 Société Coopérative d'Amélioration 25. In the reference for a preliminary ruling de l'Elevage et d'Insémination Artificielle du two inseminators, prosecuted for infringe­ Béarn v Mialocq and Others — was a refer­ ment of an insemination centre's exclusive ence for a preliminary ruling; the Court gave right, claimed that the monopoly system was 16 contrary to Article 37 of the Treaty. The judgment in both cases on 28 June 1983. court of reference stated that the breeders were required to have the insemination per­ formed by the insemination centre for their locality and to buy the semen of their choice there, and on those grounds requested a pre­ liminary ruling as to whether the provision of services was 'of a commercial character' within the meaning of Article 37, since it was 24. In the case first mentioned the Court required to be provided by a State monopoly found in favour of France and dismissed the and since the State was thus enabled to direct a branch of the national economy. The Court declared that Article 37 referred to trade in 16 — [1983] ECR 2079 and 2057 respectively. goods and could not relate to a monopoly

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However, the Court did not find that in that specific case such evidence had been adduced as to indicate that the monopoly was being carried on in a manner contrary to the rules of the Treaty on the free movement of 26. It should be remembered that the ques­ goods. The Court declared in paragraphs tions from the Cour de Cassation concern 11 and 12: three aspects of the French system. The Court is first asked whether the exclusive right granted to insemination centres within a defined geographical area is in itself con­ trary to Community law. Next the question is raised of the significance of Community law for two more specific aspects of the 'The circumstances referred to in the judg­ French system, namely on the one hand the ment making the reference and those which duty of every operator to have the bovine have come to light in the course of the pro­ semen stored at approved insemination cen­ ceedings before the Court are not, however, tres and on the other hand the right of sufficient to support the view that legislation insemination centres to require breeders to of the kind which in France governs the arti­ pay for additional expenses in connection ficial insemination of cattle indirectly estab­ with the purchase and storage of semen from lishes a monopoly hindering the free move­ suppliers other than the centre's normal sup­ ment of goods. pliers.

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27. The Cour de Cassation asks in particular have any significance for the settlement of for an interpretation of Article 90(1) of the the dispute. It is not the Court's task in this Treaty in conjunction with Article 86 in case to interpret Community law so as to order to determine whether the aspects of determine the limits which it, and particu­ the system which have been mentioned larly its competition rules, lay down for the might lead to conduct such as to distort insemination centres' performance of their competition contrary to the Treaty and for duties. an interpretation of Article 30 in order to determine whether the aspects mentioned may lead to illegal obstacles to trade between the Member States.

29. It is also important to remember, in answering the questions, that the Crespelle The question whether the insemination Centre is relying on Community law in centres' exclusive right conflicts with order to obtain a declaration that the exclu­ Article 90 of the Treaty in conjunction with sive right granted to CEIAM in pursuance of Article 86 French legislation, on which CEIAM's claim is based, is contrary to Community law and cannot therefore be a lawful basis for the claim. CEIAM is in my view right in stress­ ing that the questions raised must be under­ stood and considered against that back­ ground. It is the monopoly system as such which is under attack. Only if the actual geo­ graphical monopoly introduced by the 30. The first question raised by the Cour de 1966 Law or if essential aspects of the sys­ Cassation concerns the interpretation of tem, as interpreted and applied, are contrary Articles 90(1), 86 and 5 of the Treaty in to Community law will Community law order to determine whether it is contrary to

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those articles for a national system to be 33. The point of departure is still in confor­ introduced giving the insemination centres mity with the wording of Article 90(1), that the exclusive right to perform inseminations is, that the grant of exclusive rights is not in and the opportunity to charge breeders the itself contrary to Community law. Thus in additional costs which may be involved in the two judgments which are of most impor­ ordering semen from other than the centres' tance in this case — Case C-41/90 Höfner normal suppliers. and Elser and Case C-179/90 Merci Conven- 19 zionali Porto di Genova — the Court has declared that 'the simple fact of creating a dominant position by granting exclusive rights within the meaning of Article 90(1) of the Treaty is not as such incompatible with Article 86'.

when such rights are liable to create a sit­ -fixing and possibly also with regard to uation in which that undertaking is restricting the opportunities which according induced to commit such abuses' (para­ to the existing rules there might be for oth­ graph 17 of the Merci Convenzionali ers, for example the breeders themselves or Porto di Genova judgment). veterinary surgeons, to carry out insemina­ tions. Possibilities of abuse presumably exist also in other respects. But the monopoly sys­ tem itself does not — as postulated in the case-law I have just quoted — induce the undertakings to commit such abuses, and moreover in both French law and Commu­ nity law there are provisions making it pos­ 35. It is common ground that the insemina­ sible where appropriate to penalize such tion centres are granted exclusive rights forms of specific abuse. within the meaning of Article 90(1).

In the Commission's opinion it is contrary 39. The Commission's view is linked to its to Community law for payment to be assessment of the opportunities for breeders demanded for expenses which the insemina­ and others to purchase semen through the tion centre has not really incurred. In addi­ centres and the centres' right in that connec­ tion the requirement of an individual written tion to demand payment to cover additional application to the centre, if it is to make the expenses. The Commission refers particu­ purchase, is a disproportionate burden and larly to the fact that a breeder who requires unreasonably restricts breeders' chances of semen other than that provided by the cen­ procuring semen from other than the cen­ tre's regular supplier or suppliers are to tre's regular suppliers. make an individual written application for it and to pay the extra costs.

The Commission mentions that the breeder has two choices, namely either to enter into an agreement direct himself with a supplier of his choice or to apply to the insemination 40. On the other hand the Commission, like centre to purchase semen from his chosen CEIAM and the French Government, thinks supplier. that the requirement to store all semen pur- chased with approved production or insemi­ nation centres is sufficiently well founded on zootechnical and sanitary grounds. Reference is made to the fact that Article 4 of Directive 87/328 supplementing Directive 77/504 with a view to a gradual liberalization of intra- Community trade as regards pure-bred The Commission contends that in the first breeding animals of the bovine species pro­ case there would be no reason for the insem­ vides that 'Member States shall ensure that,

44. It is difficult to see that the requirement of an individual written application from a breeder who wishes the local centre to pur­ chase semen from other than its regular sup­ 42. However, during the oral procedure the plier or suppliers should bring the French Commission expressed doubts as to whether system into conflict with the Treaty. The the storage requirement under Article 10 of requirement does not seem to be particularly the 1969 decree, already quoted, was burdensome and, according to the Commis­ intended to apply only to imported semen. sion's own statements, applies only if the The French Government and CEIAM have breeder requires the centre's assistance and claimed that the storage requirement was does not undertake the purchase himself — applicable generally. The information pro­ where appropriate through the commercial vided by the French Government on this undertakings which, according to the infor­ point may be regarded as correct. mation provided, do in fact exist in France and which import semen from other coun­ tries.

43. The centres' right to require the breeders to pay for additional expenses in connection with the delivery of semen from other than the centres' regular suppliers is not in itself of such a nature as to induce the centres to commit abuses contrary to Article 86. It is 45. In these circumstances my view is that, undeniable that such special deliveries according to the evidence produced in the involve certain expenses which it is accept­ case, it cannot be assumed that the aspects of able that the breeders should bear. It is clear the system discussed here lead to an abuse of that the right would be abused if the centres the centres' dominant position which would

20 — This makes it unnecessary to consider whether the centres have a dominant position in a substantial part of the com­ 50. Likewise it cannot be accepted that the mon market and whether any abuse affects trade between Member States. In case the Court were to come to a con­ requirement is contrary to Article 30 of -the clusion other than that which I suggest, it may be men­ tioned that an individual insemination centre can hardly Treaty. have a dominant position in a substantial part of the com­ mon market but that the centres considered together undoubtedly have and that — if the French system is regarded as leading to abuse — it would be appropriate to consider the comprehensive effect of the centres' exclusive rights, for which purpose the condition of Article 86 on this point would be met. If the Court finds that the system leads to abuse the reason will undoubtedly be inter alia the sys­ tem's restrictive effect on breeders' opportunities to obtain semen from alternative sources, for which purpose the con­ 51. A requirement of storage such as that at dition of Article 86 with regard to trade will also be met. issue here is not of such a nature as to be

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capable of hindering, directly or indirectly, cerned and there is no evidence to indicate actually or potentially, intra-Community that the requirement affects marketing of trade within the meaning of the judgment in semen from other Member States differently Case 8/74 Dassonville [1974] ECR 837, pro­ from the marketing of domestically- vided that it applies to all persons concerned produced semen. Moreover it cannot be operating undertakings within the country excluded that the requirement — even if it and that it affects the marketing of national were possible to point to differing factual products and those from other Member effects — may be based on zootechnical and 21 States in the same way in law and in fact. hygienic considerations which, as has been mentioned, are the background to the 22 requirement.

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which the exclusive right is granted to perform inseminations in a given geograph­ ical area and which authorizes them to invoice amounts for additional expenses in cases in which breeders residing in the area in which the centre has an exclusive right apply for the delivery of semen from production centres of their own choice.

Article 30 of the Treaty, Article 2 of Council Directive 77/504/EEC of 25 July 1977 and Article 4 of Council Directive 87/328/EEC of 18 June 1987 must be interpreted as meaning that they do not preclude national provisions such as those referred to in the proceedings, which require operators who import semen from one of the Member States of the Community to deliver it to an approved insemi­ nation or production centre with a view to its storage at the centre.

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