OPINION OF MR ADVOCATE-GENERAL CAPOTORTI

DELIVERED ON 27 JUNE 1979 (*1)

Mr President,

Members of the Court,

1.Once again the Court is called upon to give a preliminary ruling on the powers of the Member States to fix the prices of agricultural products. This case is concerned with establishing whether, where there is a common organization of the market (in this case that in beef and veal), a Member State retains the power to intervene with its own measures to control prices; if the answer is in the affirmative the extent of such power remains to be determined.

The facts giving rise to this case may be summarized as follows.

Council Regulation No 2453/76 of 5 October 1976 provided for the transfer to the Italian intervention agency of 40000 tonnes of frozen beef and veal held by the intervention agencies of the other Member States, to be placed on the Italian market before 1 April 1977 (which date was subsequently postponed until 31 December 1978). The Community intended in this way to help to stabilize meat prices in Italy, having regard to the difficult economic situation characterized above all by a high rate of inflation (cf. the second recital in the preamble to the regulation).

The following month the Commission adopted the implementing Regulation No 2697/76 (dated 5 November 1976), which provided (Article 3) that the sale of the frozen meat transferred to the Italian intervention agency should be effected ‘at prices fixed in advance at a standard rate’ by means of ad hoc provisions. As a result Commission Regulation No 2793/76 of 18 November 1976 specified the prices (Article 8 (1) and Annex II) and the conditions of sale (Articles 1 to 5) of the frozen beef and veal representing the first pan of the 40000 tonnes made available to the Italian intervention agency. It should be remembered, amongst other things, that only retailers were allowed to purchase the meat in question (Article 3 (1) (c)). The marketing of the remaining pan of the full quota of meat was governed later by other regulations of the Commission.

In accordance with the Italian legal system the Comitato Interministerale dei Prezzi [Interdepartmental Committee on Prices] hereinafter referred to as ‘the Price Committee’, which has power to regulate the ‘prices of all goods at no matter what marketing stage …’ (Article 4 (1) of Decree No 347 of 19 October 1944), adopted in its turn on 26 July 1977 Provvedimento [regulation] No 35 (Gazzetta Ufficiale No 207 of 29 July 1977) fixing the maximum consumer prices for the whole national territory of chilled and frozen meat from adult bovine animals.

An inspection carried out by the Italian police of retailers of frozen meat in the district of Udine, and leading through the accounts of the retailers to wholesalers, revealed that the company Grosoli, whose registered office is in Cadoneghe (Padua), had sold frozen meat to retailers at prices higher than those laid down by the Price Committee. The Pretore, Padua, opened criminal proceedings against Adriano Grosoli, the director of the company of the same name, in which he was charged inter alia under Article 1 of Law No 63 of 18 April 1977‘with having sold fillet and marrow bone of veal at prices higher than those fixed by the Price Committee’. In the course of the proceedings the Pretore, by order of 15 July 1978, requested the Court of Justice to give a preliminary ruling ‘as to the compatibility with the Community rules of a binding system of prices laid down by the authorities and limited to the retail sector alone, taking into account the fact that in such a case the question of the constitutionality of the legislative measures on prices adopted by the Italian State is said to be justified in relation to Article 3 of the Constitution of the Italian Republic.’

2.First I should like to observe that the form of question conflicts with the requirements of the case-law of the Court (most recently the judgment of 29 June 1978 in Case 154/77 Dechmann [1978] ECR 1573). according to which it is not for this Court to give rulings under the procedure of Article 177 of the EEC Treaty on the compatibility of municipal provisions with Community law. On the other hand there is no doubt that this Court has jurisdiction to provide an interpretation of Community rules so that on this basis the national court may resolve for itself the said problem of compatibility. Therefore in the present case the question from the Pretore, Padua, must be understood as meaning that the Court should rule whether and to what extent the Member States retain the power officially to lay down a price system, in this case restricted to retailers, in an agricultural sector subject to a common organization of the market.

As regards the reference which the national court thought it necessary to make to the possible question of the constitutionality of the Italian legislative provisions in relation to prices, it is scarcely necessary to observe that a problem of this kind is quite outside the interpretation of Community rules.

3.Let us now consider briefly the arguments put forward by Counsel for Mr Grosoli, by the Italian Government and by the Commission.

The first maintains that when in an agricultural sector a common organization of the market with a common system of prices is established, the individual Member States lose all power to control prices of products in that sector. This principle should apply to all production and marketing stages and not only to those such as wholesale and retail sales directly affected by Community action.

In support of this argument it is alleged that every unilateral official action in relation to domestic prices disturbs the system established by the Community in so far as a correction made to a particular marketing stage may have repercussions on the whole organization of the market and may hence jeopardize the objectives and functioning of that organization. The only way compatible with Community law which the States may pursue to counteract the rise in prices in sectors governed by a common organization would therefore be to cause the competent Community authority to adopt the appropriate provisions.

In adopting this point of view Counsel for Mr Grosoli is well acquainted with the direction taken by the case-law of the Court and seeks to bring about a change in it. It is to be observed that in the judgment of 23 January 1975 in Case 31/74 Galli ([1975] 1 ECR 47) the Court laid down the principle that 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. Nevertheless, this general statement was tempered by another: that is that where Community rules are confined to wholesale prices the Member States may control price formation in the retail sector on condition that they do not jeopardize the aims and functioning of the common organization. Subsequent judgments of the Court have developed this latter aspect of the judgment in Galli which has thus become from the point of view of the Court the basic criterion in assessing to what extent the States have retained the power to intervene in the matter of prices. Particularly significant among these judgments are those given on 26 February 1976 in Case 65/75 Tasca [1976] 1 ECR 291 and Joined Cases 88 to 90/75 SADAM [1976] 1 ECR 323; the Court there observed that ‘in the matter of agricultural prices, national rules for the same marketing stages as the system of Community prices will normally run a greater risk of conflicting with the said system than rules applying exclusively to other stages (Tasca, paragraph 6) and therefore concluded that “the unilateral fixing by a Member State of maximum prices for the sale” to the consumer is incompatible with the common organization in the sector “once it jeopardizes the objectives and the functioning of this organization and in particular its system of prices.”’

In the substance Counsel for Mr Grosoli wishes the Court again to place the accent to the principle laid down in the judgment in Galli and to make it even stricter, wholly excluding the possibility of national intervention in relation to prices in agricultural sectors subject to common organizations of the market. This is to overcome the practical inconvenience caused by the direction taken as shown by the said judgments in Tasca and SADAM. This inconvenience lies, according to the argument with which we are concerned, in attributing to the national courts the difficult task of ascertaining in each case whether the national measures are such as to be capable of jeopardizing the functioning of the common organization of the market. It is a difficult task for the national court to make such an assessment which requires profound technical expertise as regards the functioning of the markets. There is the risk of inconsistent judgments from the various courts which may be called upon to examine the compatibility of particular national provisions with the Community rules and ultimately there is danger to the principle of legal certainty, which is also recognized and protected in Community law. The case put forward by Grosoli would have the advantage on the other hand of sparing the national courts the task of assessing in each case the compatibility of national rules with the common organizations of the market. In this way both the risk of inconsistent judgments and the consequent uncertainty of the law in force would be avoided.

4.The Italian Government takes the opposite view. In its opinion the existence of a common organization of the market does not in itself imply that the Member States have lost the power to control agricultural prices at any particular marketing stage. It is for the national courts in the particular case to consider whether there are conflicts between the national measures and Community law.

The Government also observes that any difficulty in ascertaining whether national provisions are compatible with the functioning of a common organization of the market does not justify a search for solutions departing from those suggested by the judgments in Tasca and SADAM, especially as national law allows parties appropriate legal remedies against discrepancies which may arise from inconsistent decisions of the courts of first instance.

Finally, the Commission states that in general any national provision imposing maximum consumer prices is incompatible with the aims and correct functioning of the common organizations of the market where it results, directly or indirectly, in making it more difficult to approximate market prices to the guide price. In any case there can be no compatibility where the national provisions are such as necessarily to jeopardize the functioning of the market. In such instances it is not necessary for the national court to assess in the particular case the consequences which the national provisions have actually produced and whether they do in fact jeopardize the functioning of the common organization of the market. This category of measures to be presumed incompatible includes actions intended to fix the maximum prices not only of those goods subject to Community intervention (for example goods made available to a national intervention agency by similar agencies of the other Member States in execution of a Community decision) but also of all goods of the same kind placed on the domestic market. The same category includes provisions which freeze domestic prices at levels such as to constrain traders to sell goods purchased from the national intervention agency to the consumer at prices less than the purchase price or at least at unprofitable prices. Apart from these and similar cases the national court must examine the facts of the particular case and determine whether the domestic provision jeopardizes the functioning of the common organization of the market.

5.One factor which seems to me to merit emphasis in order to answer the question put by the national court is the specific nature of the measures constituting each organization of the agricultural market. There is no uniform kind of organization nor for that reason is there a fixed classification of the Community provisions which are gradually introduced sector by sector. On the contrary each sector reflects its technical and economic characteristics in an organization corresponding to its own requirements. Certainly, the measures which may be comprised in a common organization of the market have in common the fact of all being instruments for achieving the aims of the agricultural policy as set out in Article 39 of the EEC Treaty, but it is well recognized that those aims too are diverse and there is no specific hierarchy between them. Among the measures in question Article 40 (3) mentions in particular, but only by way of example, the regulation of prices, aids for the production and marketing of the various products, storage and carryover arrangements and common machinery for stabilizing imports or exports. It is thus apparent that the technical methods by which a common organization of the market is realized may vary greatly and that they have a more or less direct and exhaustive influence on the system of the market according to their scope and content.

This being so the first problem to resolve is that of defining the connexion between the special structure of a particular organization of the market and any retention of power by the Member States to control prices. If the argument is accepted that national measures on prices are necessarily incompatible with the mere existence of a common organization of the market, obviously any possibility of the Member States' remaining in a position to adopt provisions on prices is excluded from the very moment when a given agricultural sector becomes subject to a common organization. It may, however, be that the organization contains no provisions at all on prices or confines them, as actually happens, to one or two marketing stages. In a case of this kind, accepting the point of view maintained by Counsel for Mr Grosoli, it would be necessary to say that the mere face that the Community exercises its power to create a common organization of the market would deprive the Member States of any power in that sector. There is no justification for such a statement either in Article 5 of the Treaty or from the wording of the judgment in Galli which I have previously summarized.

We have seen that that judgment stresses the importance of a particular aspect of the common organization of the market in a particular agricultural product (cereals), namely price control. In the final part at paragraph 34 the Court stressed the importance of the particular structure of the organization in a particular sector when it 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 … 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.’ Subsequent judgments of the Court of Justice also concern particular common organizations of the market and thus confirm the tendency to assess each case on its merit in relation to the connexion between the structure of the organization and the powers retained by the States (see the judgments in Tasca, SADAM).

and Dechmann to which I have already referred).

This view seems to me very reasonable and well founded. It is not possible seriously to assert that every national measure concerning prices must of necessity have an adverse effect upon the functioning of the common organization whatever the kind of organization and whatever the nature of the action taken by the State. The Court rightly observed in the judgments in Tasca and SADAM that where the Community and national actions concern the same marketing stage (for example wholesale prices) it is more likely, but not inevitable, that the national system will conflict with that of the Community. On the other hand, where the steps taken by the State concern consumer prices and those of the Community wholesale prices there is less likelihood of the two systems being incompatible. In the same way it is possible to imagine that the organization of the market fixes the prices (wholesale or retail) of the agricultural products to which it relates and that the national steps concern only a very restricted part of such products defined in the terms of particular characteristics (for example frozen beef and veal as against fresh beef and veal). In the case of this kind if the product subject to the national provision is not in competition with the main product because consumer preference in respect of the latter tends to be inflexible it would be unwise to claim that to impose quite moderate maximum prices on the particular product (in our example frozen meat) will necessarily cause a change in consumer preference leading to increased demand for the particular product and correspondingly reduced demand for the main product. There may well be no such effect and therefore in a case of this kind national steps with regard to prices may well cause no disturbance to the functioning of the common organization of the market.

In the order for reference the Pretore, Padua, has put forward certain considerations with which it is necessary to deal.

In the Preatore's view to leave the national court to decide in each case whether maximum prices laid down by national rules produce effects such as to make them incompatible with Community rules ‘cannot be accepted in criminal proceedings, since by formally permitting a binding system of prices laid down by the authorities to continue to exist it ultimately leaves doubt as to the actual validity of that system since it gives rise to absolute inequality between producers or traders who decide to abide by that system — possibly selling the product at a loss — and those who consider that they are not subject to it and consequently charge prices higher than those binding prices laid down by the authorities.’

More simply, the question is as follows: how can traders know precisely whether they must observe a national rule on prices when it depends on the discretion of the court in each case whether the rule remains in force?

In answer to this question it is necessary to recognize that it will not always be an easy task for the national court to decide whether and to what extent the national measures on prices are compatible with the functioning of the common organization of the market. Nevertheless, this type of inquiry does not lie outside a court's jurisdiction.

As the representative of the Commission has rightly pointed out in the course of the oral procedure, in all systems civil and criminal courts are often called upon to make difficult assessments of a technical nature inherent, inter alia, in economic matters. I recall, in particular, that in the case of SADAM the Tribunale Amministrativo Regionale [Regional Administrative Court] for Lazio, by judgment of 7 February 1977, carried out a full examination of the compatibility with Community rules of the Italian system of sugar prices.

Finally, as to the risk of conflicting judgments of various courts it seems to me that this kind of inconvenience is inherent in national legal systems and that the remedy generally lies in the existence of various levels of appellate courts and the binding force of precedent. To cite the principle of certainty of law cannot put an end to the phenomenon of the diverse possible interpretations of each legal provision or general rule.

I have stressed the importance of the specific characteristics and the scope of the set of measures which characterize each organization of the market.

It seems, therefore, to me appropriate to mention briefly the salient features of the common organization of the market in beef and veal created by Regulation No 805/68 of the Council of 27 June 1968. This contained a price system and a system of trade. The price system is based on the determination of a guide price which is the price which the Community wishes a product to attain on average during a particular marketing year on the Community markets. According to the rules at present in force the Council fixes this price each year (Article 3 of Regulation No 805) taking account of prospective trends in beef and veal production and consumption, the situation on the market in milk and milk products and experience gained during the previous marketing year. To maintain the market price as close as possible to that of the guide price and in particular to avoid or reduce appreciable price reductions intervention measures are provided for consisting mainly in aids for private storage and in purchases made by national intervention agencies. Regulation No 2822/72 of 28 December 1972 established ‘permanent intervention’ by requiring the national agencies to purchase at the intervention price (representing as a rule some 90 % of the guide price) at all times and independently of the level of the market prices. The meat purchased by the intervention agencies is frozen by them, stored and subsequently marketed pursuant to decisions taken at a Community level and always in such a way as to avoid any disturbance of the market and to ensure equal access to the goods and equal treatment of purchasers (cf. Article 7 (1) of Regulation No 805/68 cited above).

A further means of stabilizing the markets is by steps in relation to the trade system with non-member countries. In this respect Regulation No 805 provides various instruments: the Common Customs Tariff (Article 9), import levies (Articles 10 to 14), import licenses (Articles 15) and export refunds (Article 18). Finally, intra-Community trade is made completely free (Article 22).

That said, it seems to me possible to say two things on the question of the compatibility of national price regulations with this particular organization of the market. The first is that there is a risk of incompatibility since the organization in question implies a price system. The second is that since such a system comprises two types of prices, the intervention price and the guide price, there is incompatibility each time the national regulations adversely affect one or the other.

An example of such an adverse effect of a national measure is contained in the judgment in Tasca referred to where the case is put of a Member State which ‘fixes maximum selling prices for the wholesale and retail stages at such a low level that the grower finds it practically impossible to sell at the intervention price since, if he were to do so, it would force the wholesalers or retailers, bound by the said maximum prices, to sell at a loss’ (paragraph 10 of the decision). To this should be added the general consideration that prices in the various marketing stages are interdependent: the same judgment in Tasca stated that ‘price rules at the stage of the sale to the ultimate consumer may well have repercussions on price formation at the previous stages’ (paragraph 6 of the decision).

It seems to me difficult to go beyond these statements on a general level. I have shown that the mere existence of a common organization of the market does not necessarily mean that the Member States have no power to intervene in regard to prices, but the necessity remains for review by the national courts to ascertain whether the national regulations adversely affect the functioning of the common organization or jeopardize its objectives.

The Commission does not share this view. It claims that where the common organization, as in the present case, is based on a common system of prices, certain national provisions cannot fail appreciably to disturb the market and therefore must automatically be considered as not open to the States without it being necessary to ascertain in the particular case whether or not there has in fact been distortion. I have already had occasion to mention two examples of provisions of this kind. In particular the Commission's agent, in discussing the effects on the functioning of the common organization in beef and veal of a national provision fixing maximum consumer prices, assumes that such a provision, in order to be compatible with the common organization, must concern ‘only products which have been subject to intervention measures and in which the sale prices on the part of the intervention agencies have already been fixed’ and in the second case should ‘leave a sufficient profit margin to traders at the various marketing stages who buy from intervention and sell the products for domestic consumption’. In the Commission's view therefore this Court should provide the national court with these specific criteria.

It seems to me that no compromise is possible between the two claims set out at the beginning: radical denial of any national power to regulate prices of products subject to a common organization of the market or that only such national measures as do not jeopardize the aims and functioning of the organization are compatible with the Community system. In particular I do not think that if one of the two conditions stressed by the Commission is not satisfied it necessarily means that the national measures are incompatible with the Community system. This appears to me quite arbitrary. It may very well be conceived that the fixing of a maximum consumer price for an agricultural product does not appreciably disturb the organization of the market. This may be the case where the price allows a sufficient profit to the retailer or where it relates to a product which is not in competition, as has been shown to be the case in Italy with frozen meat as against fresh meat. Further, it is possible that the functioning of a common organization of the market is not disturbed even where the consumer price does not leave a profit margin to the seller: if in fact the price laid down is in relation to a product whose market significance is negligible, the variations in the relative demand have no appreciable effect on the price of the main product and therefore cause no adverse effects in the functioning of the organization. It therefore seems to me that the criteria put forward by the Commission are of use only as general principles against which to judge what effects steps taken by the States may have in the particular case on the functioning of a common organization of the market. Moreover, the Commission puts its views very tentatively and repeatedly asserts that it does not wish to depart from the case-law of the Court.

For the aforementioned reasons I conclude by proposing that in answer to the question put by the Pretore, Padua, by order dated 15 July 1978 the Court should rule that ‘the unilateral fixing by a Member State of maximum consumer prices for an agricultural product subject to a common organization of the market which has a common system of prices is compatible with that organization providing that it does not jeopardize the aims and functioning of the organization and in particular its system of prices’.

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(1) Translated from the Italian.