Filippo Galli (31/74) · GlobalLawDB

Contents

In Case 31/74Reference to the Court under Article 177 of the EEC Treaty by the Pretura Unificata of Rome, VIIIth Criminal Chamber, for a preliminary ruling in the criminal proceedings pending before that court againstTHE COURTcomposed of: R. Lecourt, President, J. Mertens de Wilmars (Rapporteur) and Lord Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P. Pescatore and H. Kutscher, Judges,Advocate-General: J.-P. WarnerRegistrar: A. Van Houttegives the following

Judgment

Facts

The judgment making the reference and the written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the European Economic Community may be summarized as follows:

I —Facts and procedure

In July 1973 the Italian Government adopted a certain number of provisions regulating domestic prices including, in particular, Decree Law No 425 of 24 July 1973 (Gazzetta Ufficiale No 189 of 24. 7. 1973, p. 5234) ordering large-scale undertakings producing or distributing goods to submit price returns and any changes in those prices and Decree Law No 427 of the same date (GU No 189 of 24.7.1973, p. 5235) fixing maximum prices for important consumer goods.Mr Galli who, among other things, deals in cereals and flour derived from oil seeds is charged with having contravened the first of those Decrees as regards the two aforementioned products.He pleads in his defence that the Italian regulation of prices is, as regards the, products in question, inapplicable not only because those products are subject to price rules laid down by the Community and because Decree No 425 expressly provides that its provisions do not apply in that case — which constitutes entirely a problem of domestic law — but also because national rules regulating the prices of agricultural products are incompatible with the Treaty and in particular with the regulations on the common organization of agricultural markets, at least as regards products subject to such an organization.The two products here in question are subject respectively to Regulation No 120/67 of the Council on the common organization of the market in cereals and to Regulation No 136/66 of the Council on the establishment of a common organization of the market in oils and fats. Regulation No 120/67 establishes a Community price system of a standard type (target price, threshold price and intervention price). Regulation No 136/66 does so only for olive oil, the other vegetable oils and oleaginous oils as well as for derived flours which are simply subject to the Common Customs Tariff (Article 2 of Regulation No 136/66), with however in certain cases the possibility of compensatory levies.Considering that the interpretation of a number of provisions of Community law is necessary, the Pretore of Rome has put the following questions to the Court:(a) Was the legislative power to regulate agricultural prices as it affects cereals and flour derived from oil seeds conferred on the European Economic Community on an exclusive basis?(b) In respect of cereals and flours derived from oil seeds, was the said regulation of prices effected respectively by Regulation No 120/67/EEC and Regulation No 136/66/EEC?(c) Were the mechanisms for the protection and stabilization of the single market in cereals and flours derived from oil seeds and the system of price formation introduced by the aforesaid regulations designed to create and to safeguard a single price system for these products throughout the whole Community?(d) As a result of the above, are the Member States of the EEC prohibited from adopting, in respect of cereals and flours derived from oil seeds, national legislative measures which, in whole or in part, may replace, derogate from or abrogate existing legislative measures of the EEC with regard to the system and regulation of prices relating to such products?(e) Are the principle of the free movement of goods within the Common Market and the consequent ban on the isolation of national markets in such a way as to impede the realization of a single market in Europe, as provided for in Articles 2 and 3 (f) of the Treaty, basic principles of the Community giving rise to individual rights which national courts must protect even if they are infringed by Member States?(f) Under the second subparagraph of Article 40 (3) of the Treaty of Rome, taken together with Article 5 and the legal provisions of Regulation No 120/67 concerning cereals and of Regulation No 136/66 concerning fats and oils, can a Member State be authorized:(1) to compel solely the dealers within its jurisdiction to sell their products at a controlled price in transactions carried out within its territory while the prices of exports to the other countries of the EEC are unrestricted?(2) to leave exporters from other Member States free to export their products into the territory of the State where prices are controlled, without imposing similar restrictions on the prices of those products?(3) to impose, in respect of the abovementioned agricultural products, the obligation to comply with controlled prices, a ban on sales at prices not expressly authorized, and a duty to submit and comply with a price return for sales during periods of time laid down in advance solely and exclusively affecting dealers whose turnover in the first six months of 1973 was in excess of 5 thousand million lire?(4) Does not imposition of the aforesaid obligations relating to sales and of controlled prices constitute an infringement of Article 30 of the Treaty in so far as they may represent measures having an effect equivalent to a quantitative restriction on imports?The order for reference of 26 April 1974 was lodged at the Court Registry on 13 May 1974.Upon hearing the report of the Judge-Rapporteur and the opinion of the Advocate-General, the Court decided that there was no need for any preliminary inquiry.On the basis of Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the Commission of the European Communities, by Mr Galli and by the Government of the Italian Republic.

II —Observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the European Economic Community

A —Observations of the Commission

The Commission states that whilst it intends to submit its observations on the questions put to the Court, the relevance of a number of these questions to the decision to be given by the national court is open to doubt. In respect of cereals, there is no need to examine the Community rules applicable in this field, since their object has never been to publish prices nor to ensure correspondence between the prices declared and those actually in force.As regards derived flours, it is easy to reply that Regulation No 136/66 on the establishment of a common organization of the market in oils and fats does not establish a system of Community prices and that its interpretation is therefore unnecessary.Before replying to the questions put to the Court, the Commission makes an examination of: (a) the economic situation in Italy in July 1973; (b) the regulation of prices in the Member States; (c) mechanisms for price fixing in the common organizations of markets.

As to (a)

The situation in Italy in July 1973 was characterized in particular by a very great rise in prices justifying, as the Commission had emphasized in a Communication to the Council (COM (73) 1030 of 20 June 1973), ‘an increase in price surveillance, the obligation to publish these prices and the rationalization of commercial circuits …’. The Italian measures therefore fit into the framework of measures recommended by the Council in its resolutions of 5 December 1972 on measures to be taken against inflation (OJ C 133/12 of 23.12.1972), of 14 September 1973 on further measures to be taken against inflation (OJ C 75/1 of 19. 9.1973) and of 17 December 1973, on measures to be taken against rising prices and the maintenance of a high level of employment in the Community (OJ C 116/22 of 29. 12. 1973).

As to (b)

As regards the regulation of prices within the Member States of the EEC, the Commission points out that such a system of regulation exists in all Member States and that the plea of incompatibility with Community rules has always been rejected by the national courts which have never resorted to the procedure under Article 177 of the Treaty.

As to (c)

As regards the common organizations of markets, the Commission recalls that there exists for cereals an organization which offers producers a maximum price guarantee, which is based on a number of basic prices, namely a target price, a threshold price and intervention prices, and which is coupled with a system of levies on imports and refunds on exports.

(1)As to the direct effect of the principle of free movement of goods (question (e))

In the Commission's opinion the principle of the free movement of goods and the other principles laid down in Articles 2, 3 (f) and 5 of the Treaty, although they are, without doubt, among those fundamental to the Community legal order, are not, in themselves, directly applicable in the sense that they create individual rights which the national courts must protect.In reply to this question the Commission submits that the principle of free movement of goods within the Common Market does not create in itself, in other words, apart from any link with the special provisions intended for its implementation, individual rights which the national courts must protect.

(2)As to the problem of national powers with regard to the regulation of prices (questions (a), (b), (c) and (d))

In the Commission's opinion the problem only arises in relation to the prices of agricultural products subject to an organization of the market which prescribes the fixing of prices. In the present dispute, this is the case in respect of cereals but not in respect of derived flours marketed by the accused.The starting point for any analysis in this connexion is the statement that the realization of a common agricultural policy deprives Member States, as regards the whole area of application of the Community legal order, of the power to enact provisions which either reproduce Community provisions or derogate from them.On the other hand, the aim of a market organization providing for a system of prices is actually to bring about a market price which is neither lower nor higher than the target price.Taking into account these observations, it must be stated that, on the one hand, the maximum Italian prices represent something very different from the Community prices and that, on the other hand, the Community system does not expressly prohibit Member States from introducing maximum prices. This being the case, it must be concluded, in the Commission's opinion, that action on the part of Member States is contrary to the Treaty if it jeopardizes, impedes or renders more difficult the proper functioning of the organization of the market. If this is not the case, such action is permissible. Consequently, the fixing of a maximum price which is lower than the intervention price would most certainly be prohibited and the same would probably hold true in the case of a maximum price which is lower than the target price. Account must also be taken of the fact that Community prices — as regards cereals — are wholesale prices whereas the national maximum prices — in particular in Italy — relate to any one of the marketing stages. However, it is possible that a maximum price imposed at a more advanced state of marketing may prevent the attainment of the Community price level at an earlier stage. Therefore, in reply, the Court can go no further than to affirm the general criterion proposed by the Commission, a criterion which only the national court can apply to the actual case.

(3)As to the possible limits to this power

If it is assumed that the application of the criterion proposed above leads to the conclusion that, in the particular case, the Member States retain the right to fix maximum prices for agricultural products, it must be examined whether this right is not limited in other ways by Community law, and, in particular, whether the imposition of maximum prices should not be considered a measure having an effect equivalent to a quantitative restriction on imports in contravention of Article 30 of the Treaty.The Commission thinks that in principle the reply is negative; since maximum prices constitute a charge imposed indiscriminately on national products and on imported products they are comparable to many national rules affecting trade which are compatible with the free movement of goods even though they may create difficulties in respect of trading. It would however be different if the national regulation of prices was instituted in such a way as to impede imports, whereas the sale of domestic products did not suffer from the drawbacks attached to such regulation. This would be so where the fixing of a maximum price did not take account of the special costs connected with importation or of the differing profit margins for imported and domestic products.The Commission refers in this connexion to Article 2 (3) (d) and (e) of Directive No 70/50/EEC. Account must also be taken of the fact that a national regulation of prices which does not have this restrictive effect on trade at any given time, may have such effect following a change in market conditions.The Commission proposes to reply to questions (a), (b), (c) and (d) in the following manner:‘The target price, the intervention price and the threshold price have been fixed, as regards cereals, by Regulation No 120/67/EEC. No Community price has however been fixed for derived flours referred to in Regulation No 136/66/EEC. The fixing by the Council of common prices for agricultural products within the framework of the common agricultural policy has the consequence that Member States are no longer free to fix, in an independent manner, prices which perform a function or have effects similar to those of Community prices and which are different from the latter.Member States are not prohibited from fixing maximum prices for products subject to a common organization of the market so long as they do not constitute an obstacle to the effective realization on the market of the target price, where one exists.Furthermore, Member States are not allowed to fix maximum prices if the latter, even though formally applicable equally to products coming from other Member States and national products, are likely to render the sale of products imported from other Member States more difficult than that of national products’.

(4)As to the methods of national price regulation (question (f))

If Member States are considered to be able still to regulate the prices of agricultural products, then the questions set out under (f) are devoid of any purpose. Article 40 (3) seeks to prevent the common organization of markets from creating discrimination only between producers or between consumers of agricultural products. This rule does not therefore apply to action on the part of the State outside the sphere appertaining to the common organization of the market.It is in any case logical that the short-term economic measures, which involve the control of prices, only deal with the stability of the national market and do not apply to exported products. Conversely, foreign exporters cannot dispose of their products in Italy without recourse to an importer or a trader who is established in Italy and who is automatically subject to the obligations prescribed by Decree Law No 45.As to the distinction between large and small undertakings, a difference in the treatment of the two categories can be justified on the ground that their position is not comparable.The Commission proposes the following reply to question (f):‘The function of the second paragraph of Article 40 (3) is to prevent the common organization of markets from being the source, within the Community, of discrimination between producers or between consumers of agricultural products. This provision does not apply to measures adopted by the Member States within the framework of the exercise of powers which remain outside the common market organizations.’

For oils and fats, the common organization prescribed by Regulation No 136/66/EEC distinguishes between:— oils and fats in general for which there exists no price regulation and to which the Common Customs Tariff is simply applied;— olive oil, for which producers are given a price guarantee;— oil seeds and oleaginous fruit, for which a target price and a basic intervention price, both fixed at the wholesale stage, are provided.Derived flours, the product in question in the main action, fall into the first category.Moving on to examine the questions put by the Italian Court, the Commission proposes to examine, first, question (e), relating to the direct effect of the principle of the free movement of goods, so as to be able to deal next with the question whether the regulation of prices of agricultural products comes within the exclusive jurisdiction of the Community and, if the answer to this question is in the negative, what are the limits, if any, on the jurisdiction of Member States (questions (a), (b), (c) and (d)). Question (f) will be examined thereafter.

B —Observations of Mr Galli

I —Preliminary observations

Mr Galli states, first, that the point of view he is expounding is only of a subsidiary nature since it is his opinion that the dispute before the national court must be resolved on the basis only of national law constituted in this case by the last paragraph of Article 1 of Decree Law No 425 of 24 July 1973, which states that ‘the above obligation (relating to the submission of price returns) does not apply to commercial undertakings which produce or distribute exclusively goods whose prices are subject to another regulation’. The observations advanced are therefore only valid in so far as the Italian State claims that Decree Law No. 425 applies to the agricultural sectors subject to Community legislation.

II —As to the illegal nature of the national measures imposing limits to the free determination of prices on the agricultural markets (questions (a), (b), (c) and (d))

Moving on to discuss the questions put by the Pretore of Rome, Mr Galli maintains, first, that the national measures imposing limits to the free determination of prices on the agricultural markets are illegal.Having asserted that a mandatory price policy is in contradiction with the policies which the EEC Treaty has chosen and accepted as the fundamental principles of the system, as can be see from the Council's repeated stand on this matter, even in respect of the fight against inflation, Mr Galli maintains that in relation to agriculture the control of prices is incompatible with the mechanisms of regulation supporting the entire Community agricultural system. In several measures which were adopted by the Commission for the purpose of dealing with cases of market disturbance and which had, in compliance with Article 39 of the Treaty, to reconcile different interests among which figures the need to ensure reasonable prices for consumers, the measure chosen is presented in the recitals of these acts as the ‘only one accepted and authorized’, thereby excluding in all cases recourse to price control measures.Moreover, the integral and exclusive nature of the competence of Community institutions in the agricultural sectors formed into ‘European market organizations’ derives from the consistent body of case-law of the Court of Justice (Judgment of 30 January 1974, Case 159/73, Hannoversche Zucker, [1974] ECR 121, and Judgment of 12 December 1973, Case 131/73, Grosoli, [1973] ECR 1555) according to which any lacunae in a system of organizing agriculture cannot be filled by Member States (Hannoversche Zucker) since the institution of a European market organization has deprived Member States of their original legislative power (Grosoli).Case 18/72 (Judgment of 30 November 1972, Granaria v Produktschap voor Veevoeder, Rec. 1972, p. 1163) is even more significant since in that case the Court held that Member States are not entitled ‘unless otherwise provided by Community law, to have recourse to national measures which may adversely affect the application of this law’. The statement of principle made by the Court in that case, concerning the question whether a Member State was entitled to exempt an import from levies, indicates, according to Mr Galli, that the mechanisms for determining the formation of prices are under the exclusive control of the Community institutions. Member States can lawfully exercise only the powers conferred on them by the Community institutions.Although Article 40 (3) includes among the measures necessary to attain the objectives defined in Article 39, the regulation of prices, a measure which exists moreover in several sectors, there is no provision in Community rules on agriculture, and in particular in those relating to the market in cereals, which authorizes Member States to legislate on prices. Hence the national regulation of prices cannot cover the sector of agricultural products without conflicting with Community law.The fact that Member States are deprived of the power to implement independently certain instruments of economic policy does not prevent in any way a rapid solution of short-term economic problems. The Judgment of 24 October 1973 (Case 9/73, Schlüter v Hauptzollamt Lörrach, [1973] ECR 1135) indicates that the Community institutions have a conjunctural power both in the areas subject to common rules, such as the organizations in respect of agricultural markets (action taken under Article 40 (3)) and in areas not yet unified (action taken under Article 103 of the Treaty) and that in areas already subject to common rules this competence is exclusive. Likewise, there can be no question, in the single agricultural market, of applying Articles 108 and 109 providing for alternative intervention measures, without the prior express authorization of the institutions.It does not necessarily follow from the above that in the agricultural sector alone can general measures be taken, the application of which extends to all the Member States. The possibility of recourse to Article 103 and established practice in the matter show that conjunctural measures may concern only one of the Member States and it would therefore have been possible to invoke this power so as to resolve the particular problems linked, in Italy, to a situation of poverty and of inflation and to the appreciable rise in prices resulting from this situation.The absence of legislative power on the part of Member States in the agricultural sectors has been expressly recognized by the Commission in Decision No 74/287/EEC (OJ L 152 of 8. 6. 1974) which, while authorizing the Italian Republic to impose certain monetary restrictions on imports, emphasizes that the search for common solutions ‘cannot be allowed to prejudice the Commission's right to take the decisions which are its responsibility at the appropriate time’. Hence, national measures which relate to the sectors subject to a common organization of agricultural markets and do more than merely implement the Community rules enacted for this purpose, always require the authorization of the institutions.In Mr Galli's opinion, before the introduction of the European agricultural rules, national intervention measures with regard to prices were always concerned with consumer prices and never with the costs of production. With the adoption, in agriculture, of detailed Community rules rejecting the principle of price control, any possibility of changing this orientation has been excluded. Furthermore, these rules have, at all levels, created a ‘Community spirit’ in which it is accepted that action taken for the provision of rules in agricultural sectors must be a matter solely for the Comunity institutions. This is the approach generally adopted by the Italian courts, including that adopted in the interpretation of Decree Law No 425.Consequently, if the national authorities made use of their discretionary power to fix prices, even for a limited period and respecting the price limit fixed by the Community authorities, this action would be incompatible with the Community regulation of prices because such intervention seeks to alter prices, the formation of which has already been determined by Community rules.

III —As to the infringement of the principle of free movement of goods and of non-discrimination (question (f), 1, 2, 3 and 4)

Mr Galli examines secondly the question put to the Court relating to the discriminatory nature of the Italian price legislation, a discrimination arising from the fact that the obligation to submit a price return and to control prices only applies to undertakings having a turnover every six months in excess of five thousand million lire.In this connexion, the question first of all arises whether Community law contains rules which are directly applicable and which prohibit discrimination of this nature. The reply to this question has been given in the case-law of the Court and in particular by the judgment of 21 March 1972 (Case 82/71, SAIL, Rec. 1972, p. 119) in which the Court held that any definitive organization of the agricultural market, even though it might be incomplete in certain aspects, had, under the terms of the second sub-paragraph of Article 40 (3), to be conceived in such a way as to exclude any discrimination between producers or consumers within the Community. It follows from this statement that prohibition of discrimination is a rule which is directly applicable and that, a fortiori, this is the case where, as in the cereals sector, the market organization is particularly well advanced.Mr Galli refers to the opinion of Mr Advocate-General Trabucchi in Case 2/73 (Geddo, [1973] ECR 865) which clearly supports the argument that the general principle of non-discrimination and its application in Article 40 (3) of the Treaty are directly applicable.If, as is stated in the said opinion, ‘the task of identifying the situation in which there is discrimination takes second place to assessment of the “comparative” nature of each situation taken separately’ this comparison raises no difficulties since it has only to concern ‘undertakings’. Community law can without doubt distinguish between ‘undertakings’, by reason of certain of its particular purposes (Article 86), but Member States cannot be considered to possess the power to define particular characteristics of certain undertakings in such a way as to be able to exempt them from the general treatment prescribed by Community law. This is precisely what the Italian Republic has done by referring to ‘certain undertakings’, mainly undertakings which are (a) Italian and (b) have a half-yearly turnover in excess of 5 thousand million lire.In this connexion, Mr Galli asserts that the need to establish complete equality between Community dealers entails an absolute prohibition of discrimination based on territoriality, even if the discrimination is solely to the detriment of the citizens of the State practising it. In addition, a distinction based on the size of an undertaking is not to be found in Community law.The different treatment accorded to undertakings coming under the provisions of the Decree Law is reflected in the disadvantage caused to commerce and competition. The rapid rise in the price of agricultural products on the international market above the levels of 28 June 1973 obliged undertakings subject to the restrictive measures to sell their goods at a loss on the Italian market whereas the other undertakings were able to sell at the price freely determined on the market. This was the case for small Italian undertakings and for Community or ‘foreign’ undertakings.In Mr Galli's opinion, there is no point in fixing agricultural levies and common refunds for all the countries of the European Community with a view to placing all Community dealers on the same competitive level, if a Member State is allowed to require certain undertakings to incur considerable losses for the benefit of other dealers in the same sector.

IV —As to the infringement of the prohibition of measures having an effect equivalent to quantitative restrictions (question (f) 4)

The basic regulations in the sectors relating to cereals and to oil seeds (Article 18 of Regulation No 120/67/EEC of the Council, OJ No 117 of 19. 6. 1967, p. 2269, and Article 3 of Regulation No 136/66, OJ No 172 of 30. 10. 1966, p. 3025) prohibit, in relation to transactions with third countries (besides those with countries of the EEC), not only charges having an effect equivalent to customs duties, but also quantitative restrictions and measures having equivalent effect and this prohibition is of immediate application. The measures provided for by Decree Law No 425 constitute measures having an effect equivalent to quantitative restrictions. Since the price control precluded the making of any profit, the actual effect of those measures was to cause the ‘large’ Italian undertakings to stop their activities and in particular their imports, even though it is in fact on the large-scale undertakings that the importation of cereals into Italy essentially depends. The immediate result of the suspension of this activity is much more than a simple restriction of imports, for the replacement of these undertakings in their capacity as importers by other undertakings, even if it is possible, can only be a slow and gradual process.The system of referring to the prices ruling in Italy on 28 June 1973, without taking into account the effect of world prices on the prices of imported products constitutes an infringement of Article 2 (3) (e) of Commission Directive No 70/50 OJ L 13 of 19 January 1970) according to which measures having an effect equivalent to quantitative restrictions must be taken to those measures which ‘fix the prices of products solely on the basis of the cost price or the quality of domestic products at such a level as to create a hindrance to importation’. Since the devaluation of the lira entailed a rise, for Italian dealers, in the costs of the imported product, the provision controlling prices also infringes Article 2 (3) (d) of Directive No 70/50 which includes among measures having an effect equivalent to quantitative restrictions those measures which ‘preclude any increase in the price of the imported product corresponding to the supplementary costs and charges inherent in the importation’.

V —The relevance of Community law in the national criminal proceedings

Examining the question whether and to what extent the national criminal court is obliged to take account of Community law, Mr Galli distinguishes between three categories of Community rules:— those which are only directed to Member States and Community institutions and which create rights and obligations only in respect of them;— those which create in respect of individuals rights and obligations which the national court must protect;— those which are of a general nature (because they are not solely addressed to Community institutions or to Member States) but the legal content of which is not expressed in terms which are sufficiently clear and precise as to render them directly applicable.In Mr Galli's opinion, the criminal court must in all cases take account of rules which create individual rights. As to the rules belonging to the first category, it is desirable that the criminal court should take account of them so as to declare the exemption of the accused from liability in respect of the illegal action which the national criminal law punishes in contravention of such a rule. But, whatever the circumstances, it is not only just but also extremely appropriate that the court should take account of the rules in the third category so that, by reason of the gradual and ever greater realization of the principles expressed in these rules, it is recognized, that, before even the stage of direct applicability is reached, the rules must be ‘taken into consideration’, at the very least in criminal proceedings.Moving on next to examine to what extent the Italian national legal system can take account of this attribute of Community rules, Mr Galli asserts that the provisions of Articles 51 and 59 of the Penal Code which provide for exemption from criminal liability founded on rules of law which lie outside the criminal law also applies in the case of rules of Community law. This exemption from liability also applies to rules which do not create individual rights and to rules of general scope, the uncertain formulation of which has given rise to divergent interpretations. In Mr Galli's opinion, the Community rule therefore has a wide scope extending beyond its application by the national court. To take account of this, the Court must specify the ‘secondary effects’ of Community law in the national proceedings so that the criminal court has no doubt as to the need to take it into consideration.

C —Observations of the Italian Government

1.As regards the question whether, as a general rule, the institution of a Community market organization excludes the possibility of legislative action at national level in respect of that sector, the Italian Government contends that such action is permissible when it represents measures favouring or facilitating the establishment of the common market organization or eliminating obstacles which may jeopardize its development. Hence, national rules relating to the administrative control of prices have always been considered permissible because they are concerned with cooperation and seek to attain the objectives of the common agricultural policy laid down in Article 39 of the Treaty of Rome.On the other hand, the common market organizations established seek to realize a common agricultural policy within the meaning of Article 39 of the Treaty and result in the fixing of target prices and not prices which are binding. The fixing of different categories of prices provided for in the regulations establishing the agricultural organizations (intervention price, guaranteed minimum price, threshold price . . .) is intended to prevent prices in the Community from falling lower than the intervention price. It is therefore possible to accept a national administrative control introducing a maximum sale price with the aim of protecting consumers more effectively and in full harmony with the objectives of the common policy laid down in Article 39 of the Treaty.The Italian rules in dispute are justified, according to the Italian Government, by the need for action to contain the prices of important consumer products, while awaiting the more specific and direct action in respect of the mechanism of price formation.The stabilization of the prices mentioned in the returns of the most important producer and distributor undertakings has met this need, given the considerable influence which those undertakings have on the market, their capacity to orient it and their power to absorb short-term pressures and tensions.The disputed rules do not embody a fixing of prices by the administration but only a temporary stabilization based on a return adopted freely by the undertaking in accordance with its appraisal of the present conditions of the market prospects in the immediate future. Price changes have not been precluded, but only subjected to the approval of the competent authorities.Furthermore, the system was of a wholly temporary nature, since the period of its operation was limited (from 24 July 1973 to 30 June 1974).By reason of its aim of the stabilization of prices, especially those of certain agricultural products which are important consumer products, for the purpose of stopping certain purely speculative increases, not only do the rules in dispute appear not to conflict with the Community provisions recalled in the order for reference but in fact are autonomous, being directed towards the same objectives as the common agricultural policy, namely to stabilize markets, assure the availability of supplies and to ensure that supplies reach consumers at reasonable prices.These considerations lead the Italian Government to conclude that the Community rules mentioned by the ‘Pretore’ must be such as to authorize Member States to take measures similar to those contained in Italian Decree Law No 425.

2.As regards the specific contents of the questions put by the Pretore of Rome in the order for reference, the Italian Government considers that the Court, in its reply to the first three questions (a), (b) and (c)) should rule that whereas, without doubt, in the sectors where a common market organization has been established, it is for the Community institutions to fix the price rules envisaged in the regulations establishing the common organization, that does not prevent a system of national rules on consumer prices from fixing maximum sale prices.The same observation is valid for the fourth question (question (d)) the formulation of which is, in the Italian Government's opinion, rather general and irrelevant to the question of substance which must be decided in the criminal proceedings.The Italian Government has no particular observations to make on the fifth question (question (e)).As to the sixth question (question (f)), the Italian Government points out, as regards discrimination, that the determination of the addressees of the measure in question, in other words, undertakings having an annual turnover of more than ten thousand million lire has been based on an absolutely objective criterion and in accordance with economic data related, in practical terms, to the aims of the said measure which coincide with those of Community policy.Furthermore, the measure does not contain, even indirectly, any quantitative restriction on imports, especially if account is taken of the fact that the market prices charged in Italy for the products in question at the time when this measure was adopted were higher than those fixed by the Community.As a measure of restraint and coordination, intended to ensure a balanced national economy and having the effect of ensuring that the level of prices in Italy does not differ appreciably from the target price fixed by the Community institutions, not only is the action undertaken by the Italian authorities not in contradiction with the powers of the Community, but it is even embodied in a form of cooperation and collaboration with the Community in which the Member States must partake by virtue of the express provisions of the Treaty.

III —Oral Procedure

1.At the oral proceedings on 10 and 22 October 1974 Mr Galli, represented by Professor M. S. Giannini, F. Capelli and Professor G. M. Ubertazzi, the Italian Government, represented by G. Zagari and the Commission, represented by C. Maestripieri, submitted their oral observations.

2.The Advocate-General delivered his opinion on 19 November 1974.

Law

1By order of 26 April 1974 lodged at the Court Registry on 13 May, the Pretura of Rome raised, under Article 177 of the EEC Treaty, a number of questions on the interpretation of Articles 2 and 3, the second paragraph of Article 5, and Articles 30, 39 (1) and 40 (3) of the EEC Treaty and the provisions of Regulation No 120/67/EEC of the Council of 13 June 1967 (OJ p. 2269) on the common organization of the market in cereals and Regulation No 136/66/EEC of the Council of 22 September 1966 (OJ p. 3025) on the establishment of a common organization of the market in oils and fats.

2These questions have arisen in the context of criminal proceedings against a dealer charged with having contravened, through the sale of cereals and flours derived from oil seeds, the provisions of Italian Decree Law No 425 of 24 July 1973 (Gazzetta Ufficiale No 189 of 24. 7. 1973) controlling the prices of goods produced or distributed by large-scale undertakings.

3This Decree Law required commercial undertakings producing or distributing goods sold according to weight, measure or number and having a turnover in the first six months of 1973 in excess of five thousand million lire to submit a price return which could be changed only sixty days after notification to the competent authorities and provided that the latter raised no objection during this same period of time.

4According to the findings of the national court, the products which were sold in contravention of the said Decree Law are cereals to which Regulation No 120/67 applies and flours derived from oil seeds to which Regulation No 136/66 applies.The replies to the questions raised must enable the national court to decide on the compatibility with the Treaty and with Regulations Nos 120/67 and 136/66 of the provisions of Decree Law No 425, in so far as the latter applies to the said products.

5The first four questions ((a), (b), (c) and (d)) relating to the price system applicable in the areas covered by Regulations Nos 120/67 and 136/66 seek, essentially, to ascertain whether, and to what extent, a Community price system established within the context of a common organization of the market may exclude a national price control system.

6The Court is also asked, with the same purpose in view, and with reference to Articles 2, 3 and 5 of the Treaty, whether the principle of free movement of goods within the Common Market and the consequent ban on the isolation of national markets in such a way as to impede the realization of a single market are basic principles of the Community legal order giving rise to individual rights which national courts must protect if they are infringed by Member States (Question (e)).

7A similar question is put to the Court in respect of Article 30 of the Treaty which prohibits quantitative restrictions on imports and all measures having equivalent effect (Question (f) (4)).

8Regulation No 120/67 on cereals, adopted within the framework of the common agricultural policy, is intended to establish a common organization of the market within the meaning of Article 40 of the EEC Treaty.This common organization of the market is intended, as is emphasized repeatedly in the preamble to Regulation No 120/67, to create for the Community a ‘single market’ in cereals subject to common administration.

9In order to bring about this single market, the regulation established a system comprising a set of material rules and of powers, including a framework of organization calculated to meet all foreseeable situations.

10In fact, a central place in this system is held by the ‘price … system’ provided for by Article 1 of the regulation and applicable, by way of Article 2 (3), at the production and wholesale stage.

11The purpose of this price system is to make possible complete freedom of trade within the Community and to regulate external trade accordingly, all in accordance with the objectives pursued by the common agricultural policy.

12So as to ensure the freedom of internal trade the regulation comprises a set of rules intended to eliminate both the obstacles to free movement of goods and all distortions in intra-Community trade due to market intervention by Member States other than that authorized by the regulation itself.

13This objective is emphasized by the fifteenth recital of the preamble, according to which ‘the establishment of a single market in cereals involves the removal at the internal frontiers of the Community of all obstacles to the free movement of the goods in question’ and by the sixteenth recital, according to which ‘the establishment of a single market based on a common price system would be jeopardized by the granting of certain aids’.

14The appropriate provisions in this connexion are to be found in Articles 21 and 22 of the regulation itself.The purpose of the above articles is to apply to the sector of the market at issue the provisions of Articles 2, 3 (in particular subparagraphs (a), (d) and (f)), 9 and 30 of the Treaty which seek to create a single market through the removal of all obstacles to the free movement of goods.

15Such a system excludes any national system of regulation impeding directly or indirectly, actually or potentially, trade within the Community.Consequently, as concerns more particularly the price system, any national provisions, the effect of which is to distort the formation of prices as brought about within the framework of the Community provisions applicable, are incompatible with the regulation.

16Apart from the substantive provisions relating to the functioning of the common organization of the market in the sector under consideration, Regulation No 120/67 comprises a framework of organization designed in such a way as to enable the Community and Member States to meet all manner of disturbances.

17In this connexion, it must first be stressed that it is one of the objectives of Article 39 (1) of the Treaty that supplies reach consumers at reasonable prices.

18Articles 19 and 20 of the regulation have therefore made express provision for such cases by empowering the Council to take all necessary measures where the Community market is disturbed or threatened with disturbance by price rises on the world market which jeopardize the normal functioning of the price machinery established by the regulation.

19Article 20 indicates precisely the procedures for common action by the Council, the Commission and the Member States in cases of serious disturbance.

20In addition to the powers which the regulation reserves for the Council and the Commission, the Treaty itself entrusts the Commission with the general task of supervision and initiation of measures.

21It is also necessary to draw attention in this connexion to the role played by permanent consultation, in the management of the sector at issue, by means of the ‘Management Committee’ established by Article 25 of the regulation. Besides the tasks with which it is specifically entrusted, the Management Committee may, in fact, in the words of Article 27 of the regulation, ‘consider any other question referred to it by its Chairman either on his own initiative or at the request of the representative of a Member State’.

22It is therefore apparent that the framework of organization of Regulation No 120/67 reserves for every Member State the power, in conjunction with the Community institutions, to take the necessary action, in the shortest possible time, where the normal operation of the price machinery established by the regulation is ineffective in the face of undesirable tendencies in the movement of prices in its territory.

23A Member State cannot base the justification for its unilateral intervention in the movement of prices in the sector in question on the provisions of Article 103 of the Treaty relating to conjunctural policy.

24Article 103, which refers to Member States' conjunctural policies, does not relate to those areas already subject to common rules such as the organization of agricultural markets.

25It is necessary to examine next whether the preceding considerations are also applicable to the market in oils and fats dealt with in Regulation No 136/66.

26This regulation also establishes a common organization of the market based on the unity of the market in the products concerned through the removal of obstacles to the free movement of goods and on common management.Its special nature consists in the fact that, in respect of the most sensitive sectors of production, including in particular that of olive oil, it establishes a price system whereas, in respect of other products falling within the sphere of application of the regulation, it provides simply for customs protection in trade with third countries and for the possibility of protective measures to combat market disturbances.

27Although the incompatibility of national measures intended to influence the formation of prices may be particularly apparent in the case of market organizations comprising a Community price formation system, it is none the less true that the very existence of a common organization of the market in the sense of Article 40 (2) (c) has the effect of precluding Member States from adopting in the sector in question unilateral measures capable of impeding intra-Community trade.

28Article 36 of the regulation, moreover, reserves expressly to the Council the powers necessary to adopt, in respect of the common organization, any provision amending or derogating from the regulation and intended to take account of ‘special conditions’ which may affect both types of product.

29/30It must be concluded that in sectors covered by a common organization of the market — even more so when this 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. It is apparent, therefore, that a national system which by freezing prices and subjecting their alteration to administrative authorization, has the effect of modifying the formation of prices as provided for in the context of the common organization of the market, is incompatible both with the regulations in question and with the general provision of the second paragraph of Article 5 of the Treaty according to which Member States must abstain from ‘any measure which could jeopardize’ the attainment of the objectives of the Treaty.

31Since the power to take the measures necessary to combat a rise in prices on the markets in question is reserved to the Community institutions, any unilateral measures taken by Member States in this sector cannot be imposed on private persons who are subject to the Community regulations.

32The only way compatible with Community law of enabling Member States to attain, in a sector covered by a common organization of the market, the objectives sought by national legislation and intended to combat a rise in prices, is for those States to take, at the Community level, the necessary action for the purpose of prompting the competent Community authority to institute or authorize measures which are consistent with the requirements of the single market set up by Regulations Nos 120/67 and 136/66.

33/34In the market sectors under consideration, these regulations ensure, with direct effect in favour of private parties, the free movement of goods, in particular by eliminating quantitative restrictions and all measures having equivalent effect. It must however be stated that the price system established by Regulations Nos 120/67 and 136/66 is applicable solely at the production and wholesale stage, with the result that these provisions leave Member States free — without prejudice to other provisions of the Treaty — to take the appropriate measures relating to price formation at the retail and consumption stages, on condition that they do not jeopardize the aims or functioning of the common organization of the market in question.

35The final question asks whether under the second subparagraph of Article 40 (3) of the EEC Treaty, taken together with Article 5 and Regulations Nos 120/67 and 136/66 it is permissible for Member States to adopt, in the field of price control, provisions the effect of which is to discriminate between producers or consumers within the Community.

36The second subparagraph of Article 40 (3) lays down rules which must be observed within the framework of the common organization of the markets.Without prejudice to the possibility of applying, by analogy, this provision to national organizations which may continue to exist in certain sectors in conformity with the Treaty, this question, relating to the appraisal of national provisions adopted in areas subject exclusively to Community legislation, is in this case without any purpose.

Costs

37The costs incurred by the Government of the Italian Republic and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable, and as these proceedings are, in so far as the parties to the main action are concerned, a step in the criminal proceedings pending before the Pretura of Rome, the decision on costs is a matter for that court.

Operative part

On those grounds,THE COURTin answer to the questions referred to it by the Pretura of Rome by order of 26 April 1974,hereby rules:

1.In sectors covered by a common organization of the market, and especially when this 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 as established under the common organization;

2.a national system which, by freezing prices and subjecting their alteration to administrative authorization, has the effect of modifying price formation as provided for within the framework of the common organizations of the market referred to, is incompatible with Regulation No 120/67 on the common oganization of the market in cereals and with Regulation No 136/66 on the establishment of a common organization of the market in oils and fats;

3.Regulations Nos 120/67 and 136/66 ensure, in the market sectors concerned, and with direct effect in favour of private persons, the free movement of goods, in particular by eliminating quantitative restrictions and all measures having equivalent effect.

Delivered in open court in Luxembourg on 23 January 1975.