Criminal proceedings against Joseph Danis and others (C-16/79, C-17/79, C-18/79, C-19/79, C-20/79)

I —Facts and procedure

II —Written observations submitted in pursuance of Article 20 of the Protocol on the Statute of the Court of Justice

The defendants in the main proceedings first of all explain in great detail the system for the notification of price increases as required by Belgian law.The practical consequence of the system is that the price of the product to which the notification relates remains in any case frozen until the end of the waiting period. The factors requiring the producer or importer to decide upon a price increase can be passed on by the actual application of a price increase only after the waiting period.There is thus a price freeze which, during that period, prevents the passing on of the immediate pressure of the price increases of imported products. This leads to a reduction in the profit margin or even to a loss for the undertaking concerned, which is obliged to reduce or cease the importation of the products in question.They say that so as to understand better the effect and consequences of the compulsory notification of price increases, it is helpful to consider the structure of prices charged by the Belgian undertakings which produce feeding-stuffs for cattle.The sale price of compound feedingstuffs for cattle consists as to 80^o/o of raw materials, which are for the most part imported, and as to 20 % of value added (the net profit plus financial charges before taxation amount to 3.4 %, the rest of the value added being made up of costs of production, depreciation and so on).The increasing production costs have been maintained at a constant percentage owing to the fact that productivity in the sector concerned has never ceased to rise.It follows that the size of the profit margin depends directly and exclusively on the price of the raw materials.Since August 1972 the prices of raw materials for compound feeding-stuffs for cattle have fluctuated severely, above all in the direction of sudden price rises.As the Belgian manufacturers are only a small group, they have no opportunity to exert any effect on price trends or to protect themselves against increases by long-term contracts. Nor are they in a position to bridge the gap during the waiting period by building up stocks for at least two months: the rotation of stocks is usually more rapid and the building up of bigger stocks would require considerable investments which are beyond the means of the parties concerned.It is therefore necessary to examine, in the light of the Court's case-law, whether the obligation to notify price increases which is required by Belgian law is contrary to Article 30 of the EEC Treaty which forbids quantitative restrictions on imports and all measures having an equivalent effect.As the rules are applicable without distinction to national products and to imported products they cannot be considered in general as incompatible with Community law unless they produce in specific cases an effect equivalent to a quantitative restriction. According to the case-law of the Court this would be the case for example if a maximum price were fixed at such a low level that importers who wished to import could only do so at a loss.The requirement to notify price increases involves, at least during the waiting period, a price freeze, as the price charged at the time of the notification must be considered during that period as a maximum price which cannot be increased.In the event of a sudden increase in the price of imported raw materials the Belgian producer-importer is obliged to work at a loss since he cannot immediately pass the increase on in the sale price of his products. He must therefore turn to similar Belgian raw materials or stop trading or else go bankrupt. In any event the importation of raw materials from abroad is gravely affected. If the person concerned wishes to continue importing the only practicable solution is to build up at any cost stocks capable of sufficing for the entire period during which a price increase which has been notified cannot take effect. However, on the one hand few undertakings have the opportunity to act in that way and on the other such a solution would not mean that the measure which made it necessary was no longer a measure hindering imports.Moreover, a Belgian producer manufacturing the same products from national raw materials does not meet such obstacles. In view of the fact that increases in the prices of Belgian raw materials must also be notified in advance and that such a step is very quickly known in trade circles he may in his turn notify a price increase immediately which would thus be applied simultaneously with that of prices of raw materials.It follows from the foregoing that the sale of products manufactured from foreign raw materials is made impossible or at least more difficult than the sale of the same products manufactured from national raw materials.A second discrimination flows from the fact that the system of price formation on the Belgian market differs from that on foreign markets.The price of raw materials from abroad might become higher by reason of an increase in specific import costs (transport, insurance, port charges and so on) without the price of Belgian raw materials going up at the same time. In that case too, the system of the notification of price rises would make it impossible to pass the increase on in the price of the product for at least two months.From this point of view therefore the Belgian rules ought to come within the definition of Article 2 (3) (d) of Commission Directive No 70/50 which mentions, amongst the measures having an effect equivalent to quantitative restrictions on exports those which ‘preclude any increase in the price of the imported product corresponding to the supplementary costs and charges inherent in importation’. The position is the same as regards an increase in the costs of production in the producing Member State. The impossiblity of passing those price factors on at the proper time in a sector such as that in feeding-stuffs for cattle where the profit margins are already very small would lead in this case too to the necessity of selling at a loss.The defendants conclude by saying that even apart from any concept of discrimination between national and imported goods or products the Belgian requirement to notify in advance increases in price is contrary to Article 30 of the EEC Treaty to the extent to which it leads to a direct restriction on imports.However, in this case, the delay in passing the increase in prices on does not arise (or can at least easily be avoided) for national raw materials and can normally only arise for increases concerning costs connected with imports.This double discrimination is calculated to restrict imports and to make the sale of imported products more difficult than those of national products, if not impossible.The Belgian Government remarks that, according to the case-law of the Court, a national price system applicable without distinction to national and imported products is not in general a measure having an effect equivalent to a quantitative restriction on imports unless it contains specific features which may hinder intra-Community trade.The system for notifying price increases which is laid down in Belgium, on the one hand, makes no distinction according to the origin of products and, on the other hand, contains no specific feature in the sense indicated above.The attitude adopted by the Minister for Economic Affairs following a notification takes account of the costs of all the constituents of a product, including the costs of imported raw materials and thus of any possible increases in them. Further, the same waiting period applies to national products and to imported products.Nor is it possible to maintain that the duty to make the notification delays the passing on of the price increase to such an extent that it may on those grounds be considered as a measure having equivalent effect, since the system provides that a person who is required to make the notification shall himself determine the date of application of the increase.The system in question is therefore in all respects compatible with Community law.The Government of the United Kingdom states that in its observations it wishes to deal with a problem which it considers very important, namely the extent to which Member States should be able to take unilateral action to combat inflation provided that such action does not conflict with their obligations under the Treaty.In the British Government's view the struggle against inflation requires the adoption of a variety of measures which may include a requirement for price increases to be notified in advance.Such requirements not only benefit the Member States concerned but also promote the fundamental objectives of the Community, in particular those set out in Article 2 of the Treaty (‘a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the States belonging to it’).It has been established clearly in previous cases that national systems of price control, even where they impinge on sectors of economic activity, such as agriculture, which are subject to a Community price system, are contrary to Community law only if they jeopardize the objectives and functioning of the common organizations of the market, and in particular their system of prices.A similar principle should be applied when the question at issue is the compatibility of a national system of price controls with Article 30 of the Treaty. There should not be a presumption that price controls constitute an obstacle to imports between Member States. Furthermore the applicability of Article 30 in such cases must be subject to the fundamental objectives of the Treaty, in particular to the objectives set out in Article 2.After these general considerations the British Government deals with points (a) and (b) of the question submitted for a preliminary ruling (it does not reply to point (c)).As regards point (a) it takes the view that the rules in question cannot be regarded as incompatible with Community law in so far as they do not differentiate between imported and domestic products. On the contrary, the general rule in this respect would require that no discrimination should be made, differences in treatment being justifiable only where the circumstances relating to imported and domestic products are different in a material respect.Moreover, in this case the products in question are not imported but include imported raw materials.A very high proportion of manufactured products produced in all Member States contain some imported products or raw materials. Apart from cases in which special treatment may be necessary to avoid distortion of intra-Community trade, to prohibit automatically the application of such national legislation to domestic products containing imported products or raw materials or containing domestic products which in turn incorporate imported products or materials would seriously jeopardize the work of Member States in combating inflation.In any event the requirement of the Belgian regulations has similar consequences for domestically made products and for imported products and it is not evident that such measures need cause greater difficulties to the vendors of imported products or to manufacturers who make direct or indirect use of such products than to vendors or manufacturers generally.With reference to point (b) of the question the British Government notes that the power to delay the passing on of increased costs is a part of measures to combat inflation and to be of value must, within reasonable limits, relate also to increases in costs arising by reason of increases in the price of imported products. The fact that such a power may involve an element of discretion is no objection provided that the discretion is not exercised in such a way as to constitute discrimination against imported products.The Commission of the European Communities, after analysing the Belgian system of compulsory notification of price increases, emphasizes that the effects of this system, by virtue of which it is lawful, for the national authorities to delay price increases for a fairly considerable period, even where they are justified, may, in the case of imported products, be more keenly felt inasmuch as the importer is not always in a position to foresee increases which originate in the exporting countries. By thus making imports more difficult and more onerous the rules in question in fact represent a measure having an effect equivalent to a quantitative restriction on imports within the meaning of Article 30 of the EEC Treaty.Nevertheless, consideration should be given to the question whether such a system might not be justified having regard to the Treaty. Such consideration must naturally take into account very strict criteria in view of the fact that what is in question is a derogation from the fundamental principle of the free movement of goods.First of all it may be noted that the system in question, which is traditional in Belgium, is part of a series of measures of an economic nature the purpose of which is to guarantee price stability. It is true that it involves constraints and effects which are to the disadvantage of the traders concerned but which are intrinsic to the system and do not go beyond what might appear necessary in the interests of its proper operation.Furthermore notification of price increases is required both on importation and in national production. Nothing in the Belgian rules justifies the presumption that they might constitute discrimination with regard to imported products.It should therefore be concluded that, as these are rules applicable without discrimination to imported products from other Member States and to national products, a system of notifying price increases does not constitute a measure having an effect equivalent to a quantitative restriction, in so far as such as system favours the general interest and is necessary in order that imperative requirements may be fulfilled.

III —Oral procedure

Oral submissions were presented during the hearing on 12 July 1979 by the defendants in the main proceedings, represented by Mr Horsmans and Mr Verbiest, of the Brussels Bar, and the Commission of the European Communities, represented by its Legal Adviser, R. Wägenbaur, acting as Agent, assisted by A. Haagsma, of the Commission's Legal Department.The Advocate General delivered his opinion at the sitting on 20 September 1979.

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