2.2.The defendant in the main proceedings submits the following observations:2.2.1. As regards the first question, since the winegrowers' and dealers' groups are represented on the Board, they constitute an association of undertakings and it is irrelevant that the Board is a quasi-public establishment and does not itself engage in trade.According to the defendant, when the representatives of the two groups meet together to conclude a common agreement on minimum prices, that completely informal meeting of the two groups constitutes an association of undertakings. It is irrelevant that subsequently the inter-trade organization unanimously adopts the provisions of the agreement since the Minister for Agriculture issues an order making the agreement binding because there has first been a meeting of the two groups and their agreement.That view is supported by the Commission's decision of 15 December 1972 (IV/29.883 AROW/BNIC) given against the Board, from which no appeal was made.In that decision, which concerned a similar matter, the Commission took the view that:the inter-trade agreements concluded within the Board, as distinct from the orders making them generally binding, constitute decisions of an association of undertakings;the members of the Board appointed by the Minister represent the trade organizations or groups, which themselves are made up of undertakings ;the measures in question are not taken on the basis of the Government Commissionner's powers to issue regulations;the Board thus constitutes an association of associations of undertakings, which for the purposes of Article 85 may be treated as an association of undertakings.The defendant further points out that the Commission took a similar view concerning the status of the Bureau national interprofessionnel de l'Armagnac [National Inter-trade Board for Armagnac, hereinafter referred to as ‘the BNIA’] in its decision of 26 July 1976 (IV/28.980, Official Journal L 231 of 21 August 1976, p. 24).In that decision, from which no appeal was made to the Court, the Commission took the view that:The prohibition on deliveries of bulk Armagnac of age grades 4 and 5 imposed by the BNIA in its circular 8/74 dated 29 May 1974 is the result of a decision by an association of undertakings. The Armagnac producers, cooperatives, distillers and dealers who are represented through their trade associations in the BNIA are undertakings for the purposes of Article 85 (1). The fact that the BNIA is entrusted with certain functions by decree 62/20 to control quality does not mean that it cannot be considered to be an association of undertakings for the purposes of Article 85 (1). The measure impugned exceeds the scope of measures necessary for the performance of functions assigned to the BNIA by the decree.’In the opinion of the defendant in the main proceedings, the view taken in the present case cannot be different from that taken in the two decisions adopted against the BNIA and the Board itself.Finally, in the view of the defendant in the main proceedings, the fact that the Board's salaried Director, and not its Chairman — as stated by the national court — countersigned the agreement is of no legal relevance, since neither the Board nor, a fortiori, its Director has the power to adopt regulations.2.2.2. As regards the second question put to the Court, the defendant in the main proceedings maintains that there can be no doubt that the fixing of a minimum purchase price for spirits constitutes a concerted practice, but the fact that the inter-trade agreement is made by an association of associations of undertakings would seem to reduce the importance of the question concerning the existence of a concerted practice.2.2.3. As regards the third question, the defendant in the main proceedings begins by describing the technical processes for the production of cognac.He explains that it is a potable spirit which is made from a wine produced from particular vine varieties harvested in a geographical area defined by a Decree of 1 May 1909 and which is protected by a system of registered designations of origin laid down by the Decree-Law of 30 July 1935; entitlement to the designation ‘cognac’ is subject to regulations relating to inspection, distillation, age and marketing.He observes that the cost price of the spirits sold by the winegrower after distillation is determined by two factors, namely the price of the wine used and the cost of distillation.He maintains that it is clear that the fixing of a minimum price for new or matured spirits which is higher than the level resulting from the abovementioned factors which naturally determine the price may affect trade between Member States.Although the great majority of purchasing dealers are established in Cognac or in the area defined by the decree of 1909, there is nothing to prevent a dealer established outside the defined area from buying spirits from the area for the purpose of blending them without losing entitlement to the designation ‘cognac’, whether the spirits remain in France or are exported. The sale of spirits by the winegrowers to the dealers is thus not a strictly national commercial transaction, but may on occasions be international.According to the defendant, it is important to note that those spirits, the minimum price of which is imposed on dealers, constitute the raw material for the finished product, cognac, the importance of which in international trade cannot be denied.The defendant observes that the Commission stated in its aforementioned decision of 15 December 1982 that 80% of cognac sales took place outside France, that sales in the Common Market represented some 52% of total sales and that exports from France to the nine other Member States represented 40% of the total exports.According to the defendant, the fact that the Commission in its decision of 15 December 1982 was examining a situation which was not strictly identical to that of the present case is not decisive; although the application made by AROW which led to the decision in question related to the provisions of the agreement of 7 November 1980 (and to those of 12 December 1978 and 18 October 1979) concerning deliveries of the finished product, cognac, and not Articles 4 and 5, which determine the production price of new or matured spirits, the two situations are similar because, although sales of spirits by winegrowers take place essentially on the French domestic market, the fixing of a minimum price nevertheless affects international trade.Cognac is the only spirit produced in a country of the Community subject to a restrictive organization, since there is no price fixing in the case of other spirits, namely spirits derived from wine (French Armagnac and Italian grappa), spirits derived from fruit (plum, pear and mirabelle) produced in Germany and France or grain spirits (whisky or aquavit produced in England and Denmark).The defendant considers that in those circumstances the cognac dealer is at a disadvantage in relation to French or foreign dealers marketing competing spirits since in determining his sale price he must take into account a purchase price for the raw material which is imposed on him instead of being freely fixed.He observes that that argument would be weak if it related only to a secondary component of the cost price of cognac, such as the cost of labelling or packaging, but that it retains its full weight where the purchase price imposed is that of the primary constituent of the finished product.He refers in that respect to financial statistics which show that the purchase price of spirits represents, in relation to the sale price of cognac, a proportion not less than 40 to 50% of sales in bottles (88% of the market) and 60 to 70% for sales in barrels (12% of the sales); it is only in respect of prices that small dealers can compete with the more powerful dealers, who with their large advertising budgets dominate the market, and it is in the consumer's interest that such price competition should be unfettered.The defendant observes that the question put expressly refers to the fact that cognac enjoys a registered designation of origin and to the fact — which is indisputable — that it is drunk ‘undiluted almost without exception’, which shows that the national court was concerned with the question whether the exclusive nature of the registered designation of origin ‘cognac’ exempted cognac from the Community rules in view of the fact that identical spirits could not be produced in any other Member State or at least not under the same name.In that regard the defendant cites the case-law of the Court (Case 168/78 Commission v French Republic [1980] ECR 347; Case 169/78 Commission v Italian Republic [1980] ECR 383; Case 171/78 Commission v Denmark [1980] ECR 447 and Case 216/81 Cogis v Amministrazione delle Finanze dello Stato [1982] ECR 2701) and contends that the principles propounded in those cases, in the context of proceedings concerning the application or interpretation of Article 95 of the EEC Treaty, apply in the present case, because it is inconceivable that the concept of ‘similar products’ should be interpreted differently depending on whether it is a matter of assessing conditions of commercial competition or the protectionist intervention of a State by means of tax measures.In those judgments the Court held that ‘there are nevertheless, in the case of all spirits, common characteristics which are sufficiently pronounced to accept that in all cases there is at least partial or potential competition’. The Court reached that conclusion after making the following findings:(1) Spirits are produced by distillation and contain, as a principal ingredient, alcohol suitable for human consumption at a relatively high degree of concentration; within the largest group of alcoholic beverages, they therefore form an identifiable whole united by common characteristics.(2) Typical varieties of spirits may be defined by particular characteristics, so much so that some of them are even protected by registered designation of origin.That is how the Court came to condemn the tax measures taken:By France to protect national spirits against whisky and genevas;By Denmark to protect aquavit and schnapps against gin, vodka, geneva, punch, rum and spirits distilled from fruit;and by Italy to protect spirits obtained from wine and marc against spirits obtained by the distillation of cereals and sugar cane.The defendant in the main proceedings maintains therefore that apart from the special feature arising from the designation of origin or the method of consumption the common characteristics of all spirits are sufficient for cognac to be in direct competition with all other existing spirits.It thus concludes that the fixing of a minimum purchase price for spirits intended for the manufacture of cognac prevents free competition, adversely affects trade between Member States, restricts the market without improving quality and consequently is an obstacle to the economic interpenetration intended by the Treaty.
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