61988C0372

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Mr President,

Members of the Court,

1 . In this reference, the High Court of Justice, Queen' s Bench Division, asks the Court to deliver a preliminary ruling on the legality, under the Community rules, of a number of aspects of the British system of Milk Marketing Boards (" MMBs ").

The relevant legislation is described in the Report for the Hearing, to which I would refer . I shall confine my general observations in this Opinion to the following .

2 . The MMBs are milk-producers' organizations which were set up in the 1930s . Within the framework of machinery in which the various categories of operators on the milk and milk-products market participate, the MMBs play a key role in fixing the prices of the relevant products and, as a result, the incomes of the operators concerned .

In order to carry out those tasks of market management the United Kingdom legislation conferred on the MMBs a number of fundamental prerogatives . In the first place, they have an exclusive right to purchase milk produced in the United Kingdom . The milk so purchased is subsequently resold at differing prices according to the commercial use to which it is put : in this way, a higher price is charged for milk intended for human consumption while lower prices are charged for milk used for processing into other products . For their part, milk producers are paid an average price with respect to the prices realized by the MMBs on resale and, as a result, the proceeds of the MMBs' marketing activities are distributed evenly amongst milk producers .

In a nutshell, therefore, the price policy pursued by the MMBs - which, as I have mentioned, is also an income policy - is based on two key elements : equalization of prices paid to producers and differentiation of resale prices . Naturally the MMBs could not play that role if they did not have have a statutory monopoly to purchase milk produced in the United Kingdom .

3 . This scheme, which is typically dirigiste and, I might add, corporative in its approach, was integrated into the common organization of the milk market when the United Kingdom joined the Community .

In that connection, it was stated in a declaration annexed to the Accession Treaty that Regulation No 804/68 ( 1 ) - the basic regulation governing the milk and milk-products sector - did not affect the freedom of a producer organization "by its own decisions to consign milk wherever it chooses in order to get the best return for its members, to pool its financial returns and to remunerate its members as it wishes ". ( 2 )

To that end Council Regulation No 1421/78, ( 3 ) amending Regulation No 804/68, was adopted . The second recital in the preamble to Regulation No 1421/78 states that :

"certain activities of the Milk Marketing Board existing in the United Kingdom have helped to channel the predominant quantity of milk produced in this Member State into direct human consumption; ... the Milk Marketing Boards have certain prerogatives to ensure that they operate effectively; ... they have in principle the exclusive right to purchase milk from producers established in their area ".

Accordingly, Article 1 of the regulation, which amends Article 25 of Regulation No 804/68, confirms that the MMBs are compatible with the Community system and, in particular, authorizes the grant to the MMBs of the exclusive right to buy all the milk produced in the area in question and of the right to equalize the prices paid to producers, irrespective of the use for which the milk purchased for them is intended .

4 . In the light of those particulars it is now possible to analyse the questions submitted by the national court . The questions are concerned essentially with two points : the scope, ratione materiae, of the MMBs' purchasing monopoly and the legality, from the point of view of Community law, of a number of contributions and related penalties to which milk producers are subject under the United Kingdom legislation .

As regards the first point, it must be observed that the English version of Article 25(1)(a ) of Regulation No 804/68, as amended by Regulation No 1421/78, provides that the exclusive right which may be granted to organizations like the MMBs relates, ratione materiae, to milk produced and marketed "without processing ".

5 . The defendant in the main proceedings, which made direct sales of pasteurized milk to various types of purchasers ( final consumers, dairies, shops and supermarkets ), maintains that pasteurization constitutes a process within the meaning of Article 25(1)(a ). It argues therefore that the milk which it sold in that way was not covered by the MMBs' monopoly .

6 . In that regard, I consider it appropriate to point out that according to previous decisions of the Court, "the need for a uniform interpretation of Community regulations necessitates that (( the passage in question )) should not be considered in isolation, but that, in cases of doubt, it should be interpreted and applied in the light of the versions existing in the other ... languages ". ( 4 ) Furthermore, Community provisions must be interpreted by reference to the purpose and general scheme of the rules of which they form a part . ( 5 )

7 . Having said that, it must be admitted that, in itself, the phrase "without processing" is not unambiguous . It may refer either to the processing of the milk into another product or merely to the treatment of milk in order to preserve it . If a comparison is made with the other language versions, the phrase seems to be given the first meaning in, for example, Article 10(2)(a ) and ( b ) of Regulation No 1422/78 ( 6 ) and Article 3(1)(c ) of Regulation No 1565/79; ( 7 ) in contrast, it seems - again from a comparison with the other language versions - to be given the second meaning in Article 5(1 ) of Regulation No 1422/78 .

8 . In order to establish the meaning with which the phrase is used in Article 25(1)(a ) of Regulation No 804/68 it is necessary first to effect a comparison with the other language versions .

In the German version, the phrase "without processing" is rendered by the words "in unverarbeitetem Zustand", which indicate fairly clearly that the milk must not have been subjected to processing operations, that is to say it must not have been converted into a product which is a different commodity, and not that the milk must not have undergone mere treatment, such as, precisely, pasteurization .

The other language versions utilize more general expressions which to a greater or lesser extent could refer both to unprocessed milk and to simply untreated milk . This is the case with the French phrase "en l' état", the Italian "nello stato in cui si trova", the Dutch "ongewijzigde staat", the Danish "uforarbejdet stand", the Spanish "en su estado natural", the Portuguese "em natureza" and the Greek "** ****".

9 . Having said that, two observations relating to the scheme of the legislation must be made . To begin with, where those regulations sought to make precise reference to treatment operations - as in the case of Article 5(1 ) of Regulation No 1422/78 - the language versions other than the English ( which again employs the term "processing" indiscriminately ) consistently use a specific expression which, above all, does not correspond to the aforementioned expressions used in each version of Article 25(1)(a ) of Regulation No 804/68 to denote the milk which is not covered by the MMBs' monopoly .

Secondly, in the versions other than the English the expression used in Article 25(1)(a ) of Regulation No 804/68 is, when adopted in other provisions, consistently utilized to distinguish unprocessed milk from processed products . This is the case with Article 7(1)(a ) and Article 10(2)(b ) of Regulation No 1422/78 . This means that the expression in question is used unambiguously in all the language versions except the English to denote precisely milk which is marketed in the form of milk and, on the other hand, does not cover milk which has been made into other milk products .

10 . This outcome, which has been arrived at on the basis of a literal and systematic interpretation of the relevant legislation, is borne out by the logic underlying Article 25(1)(a ) of Regulation No 804/68 .

The MMBs' monopoly is recognized in so far as it is necessary to ensure the effectiveness of the policy of price differentiation and equalization which they pursue . It has already been pointed out that the MMBs apply an administered price to milk intended for human consumption which is higher than the price applied to milk intended for other uses; moreover, that price is higher than the average price which is paid by the MMBs to producers supplying them with milk . It is therefore obviously advantageous to sell milk on the market direct, rather than through the MMBs; it is also clear that it is necessary to obviate, or at least strictly control, the possibility of such direct sales in order to prevent the policy of administered and differentiated prices from being seriously undermined .

11 . But if this is the economic justification for recognizing the MMBs' monopoly, it follows that that exclusive right must be able to be exercised in relation to any type of milk which may be marketed for human consumption, irrespective as to whether the milk has or has not been pasteurized or subjected to other preservation treatment . In other words, the MMBs' monopoly applies to liquid milk in so far as it may be intended for human consumption ( to which milk the higher administered price applies ) and cannot be restricted on account of particular treatments which have no effect on that intended use . Moreover, as has rightly been pointed out on the basis of an a contrario argument, if that interpretation were not accepted it would be relatively easy for any milk producer to evade the MMBs' exclusive right by subjecting the milk itself to preservation treatment and then selling it directly for human consumption, in order to take advantage of the higher administered price .

12 . Conversely, as the Commission' s expert stated at the hearing, it is logical that the MMBs' monopoly should not cover milk used directly in order to be converted into other products . Each producer is in fact completely free not to consign his milk to the MMBs if, for instance, he wishes to use it to manufacture butter or cheese . This is because the MMBs sell milk intended for such uses at lower prices, as we have observed : direct use of the milk to manufacture such products is therefore not liable to jeopardize the MMBs' price policy . Instead, it must be considered that normally it will be to milk producers' advantage to deliver the milk to the MMBs at the intermediate equalized price and then buy it back, again from the MMBs, at the MMBs' lower price in order to make it into other products .

13 . In conclusion, it seems to me that both the wording and the purpose of the legislation suggest that the MMBs' exclusive right of purchase applies to liquid milk which may be used as such for human consumption, and therefore includes both unpasteurized milk and milk which has been pasteurized or subjected to other preservation treatments which are not such as to change its commercial characteristics .

14 . Now that I have answered the first question in the negative, I must consider the other questions put by the national court . Those questions are concerned with the compatibility with Community law of a number of contributions required of milk producers under the MMB system and of the remedies and penalties prescribed for failure to pay those contributions .

15 . I would make it clear straight away, in answer specifically to the third question put by the national court, that the legality of the contributions in question must be assessed in the light of their characteristics and nature, regardless of the marketing stage ( wholesale or retail ) at which the producers liable to pay the contributions operate .

16 . According to the order of the national court, the contributions in question are of various types . First of all there are the "capital contributions", which are payable annually by all producers and are calculated by reference to the total quantity of milk sold ( these contributions have not been levied since 31 March 1986 ). On top of these, there are other contributions, the "producer-processor contributions" ( PP contributions ) and "producer-retailer contributions" ( PR contributions ), which have the special feature that they are not due from all producers alike, but only from those who, by agreement with the MMB, are released in respect of a specific quantity and for a specific period of time from the obligation to deliver their milk to the MMB . Consequently, under an agreement, those producers are permitted to make direct sales on the market; the contributions which they have to pay are calculated so as to make up the difference between the higher price which they succeed in obtaining by selling directly on the market and the lower intermediate price which they would otherwise be paid by the MMB . In other words, the function of those contributions is to place on an equal footing, on the one hand, producers who sell milk to the MMBs and producers contractually authorized to make direct sales and, on the other hand, purchasers from the MMBs and those who have purchased directly from producers .

17 . It is above all the compatibility of the second type of contributions ( PP and PR contributions ) with Community law which the defendant in the main proceedings is contesting . It maintains that the regulations do not expressly authorize the MMBs to levy such contributions and that, in any event, the contributions are unlawful inasmuch as they do not represent the value of any services provided but constitute a charge which serves the MMBs' policy of administered prices and is specifically designed to neutralize competition from producers who can sell directly onto the milk market .

18 . That argument does not seem to me to be well founded . In that regard I would point out in the first place that, in declaring that the MMBs are substantially compatible with the structure and objectives of the common agricultural policy, Regulation No 1421/78 recognizes that "the Milk Marketing Boards have certain prerogatives to ensure that they operate effectively ... in principle the exclusive right to purchase milk from producers established in their area ".

That monopoly, which is authorized in general terms, is subject to only three exceptions : the two exceptions provided for in subparagraphs ( a ) and ( b ) of Article 7(1 ) of Regulation No 1422/78 and that set out in Article 8 of that regulation . In addition to those exceptions, which, moreover, are clearly defined, there is the case, which is also provided for in Article 7 of Regulation No 1422/78, where the exclusive right is suspended by virtue of an agreement between a producer and the MMB .

19 . The rationale for the latter provision seems to me to be sufficiently clear : since the exclusive right is intended to guarantee the sound operation of the MMBs, it constitutes a disposable right which the body in which it is vested may inter alia renounce if it deems such action to be expedient .

However, it is clear that such waiver is optional for the MMBs . As a result, they are free to withhold their agreement to direct sales of milk . Similarly they should be regarded as being free - at least in principle - to subject such agreement to certain conditions, without the need for express authorization .

20 . Certainly, it cannot be ruled out, although it seems to me to be somewhat academic, that the imposition of absolutely unjustified conditions might be deemed unlawful inter alia in the light of the limits which under Article 25(3)(a ) of Regulation No 804/68 the MMBs are required to observe in exercising their rights .

21 . But this does not seem to me to be the case here, since it is not contested that the contributions in question are designed to prevent operators who sell to and purchase from the MMBs from being placed in a worse position that those producers who are authorized, exceptionally, to operate on the market directly, that is to say without, as is normally the case, going through the MMBs . In other words, it seems clear to me that in levying the contributions at issue the MMBs kept within the limits and the aims of the exclusive right which they have under the Community legislation .

22 . Furthermore, it must be observed that the defendant itself does not deny that the contributions required of it are entirely correlated to the rights and prerogatives vested in the MMBs . What the defendant actually seems to be complaining about - as became clear at the hearing - is the very existence of the MMBs' exclusive right, and not the way in which it is exercised : in other words, what it finds unacceptable is the fact that it is not free fully to compete with the MMBs on the market in milk for human consumption .

23 . Whether a possible deregulation of that market is or is not desirable depends on the point of view which each person is entitled to hold with regard to such dirigiste organizations . Naturally, it must not be overlooked that the differing prices practised by the MMBs cannot be equated simplistically to any embodiment of market power; they are part of a much more complex system, and must be assessed in that context, in so far as they can, inter alia, equalize the incomes of milk producers . Consequently, whilst that policy may in some cases not serve the interest of some operators who wish to have greater independence, it does nevertheless constitute a fairly certain economic guarantee for milk producers as a class, taken as a whole, and a means of trying to impose on the relevant market - which, as a whole, continues to be beset by notorious structural difficulties - a somewhat more regular trend .

24 . But, apart from those general considerations, there remains from a strictly legal point of view one single factor which seems to me to be incontrovertible : the full recognition granted by the Community regulation - whose validity, moreover, no one has challenged - to the organization of the MMBs and to the rights and prerogatives which are needed in order to operate .

25 . I therefore consider that the PP contributions and the PR contributions are compatible with Community law in so far as they are consistent with the actual exercise of those rights .

26 . As for the capital contributions, it seems to me that, contrary to the defendant' s contentions, they are intended to finance activities which fall within the functions which the MMBs were set up to carry out . In principle I do not consider it possible to contest the fact that the MMBs' commercial activity, albeit carried out through a formally separate body, cannot be separated from the broader function of intermediation and management of the milk market which was vested in them initially by the United Kingdom legislation and subsequently by Community legislation .

27 . Finally, as regards the remedies and penalties laid down by the United Kingdom legislation, there does not seem to be any reason for doubting their legality, since they are intended to secure compliance with obligations compatible with Community law, provided that those remedies and penalties do not entail consequences which are disproportionate to the aims which they are intended to achieve . It is for the national court to ascertain whether in fact they are proportionate to those aims, without prejudice to the possibility of its requesting the Court for a ruling on that matter .

28 . I therefore consider that the Court should answer the national court' s questions as follows :

"( 1 ) The exclusive right of purchase enjoyed by the MMBs under Article 25(1)(a ) of Regulation No 804/86, as amended by Regulation No 1421/78, applies to liquid milk which is capable of being marketed for human consumption in that form and therefore includes milk which has been pasteurized or subjected to other preservation treatments which are not such as to change its commercial characteristics .

( 2 ) Community law does not preclude the levying of contributions such as 'capital contributions' , 'PP contributions' and 'PR contributions' or the application of the remedies and penalties laid down for failure to pay the said contributions ."

(*) Original language : Italian .

( 1 ) Regulation ( EEC ) No 804/68 of the Council of 27 June 1968 ( OJ, English Special Edition 1968 ( I ), p . 176 ).

( 2 ) Declarations on liquid milk, pigmeat and eggs annexed to the Treaty of Accession; see Documents concerning the accessions to the European Communities, p . 106 .

( 3 ) Council Regulation ( EEC ) No 1421/78 of 20 June 1978 ( OJ 1978, L 171, p . 12 ).

( 4 ) See the judgment of 5 December 1967 in Case 19/67 Bestuur der Sociale Verzekeringsbank v Van der Vecht (( 1967 )) ECR 345, and the judgment of 12 July 1979 in Case 9/79 Worsdoerfer, née Koschniske v Raad van Arbeid (( 1979 )) ECR 2717 .

( 5 ) See the judgment of 27 October 1977 in Case 30/77 Regina v Bouchereau (( 1977 )) ECR 1999, in particular paragraph 14 .

( 6 ) Council Regulation ( EEC ) No 1422/78 of 20 June 1978 ( OJ 1978, L 171, p . 14 ).

( 7 ) Commission Regulation ( EEC ) No 1565/79 of 25 July 1979 ( OJ 1979, L 188, p . 29 ).