1.

Does the system of prices established by the common organization of the sugar sector, dealt with in Regulation No 1009/67/EEC preclude a Member State from fixing unilaterally a maximum selling price?

2.

In any case do the provisions on the free movement of goods, to which reference is made in Article 30 of the EEC Treaty and those more particularly relating to sugar in Article 35 of Regulation No 1009/67/EEC, especially the prohibition against the application in intra-Community trade of measures having an effect equivalent to quantitative restrictions, prohibit the fixing of maximum prices valid only for the territory of a single Member State?

3.

Do the abovementioned Community provisions create for Community traders individual rights which the national courts must protect so as to render a national system of maximum prices inapplicable as regards them?

(a)

the competence, exclusive or otherwise, of the European Economic Community to exercise legislative power to control the prices of sugar, and the use made of such power in Regulation No 1009/67/EEC and subsequent additions thereto;

(b)

the legality, in relation to a conjunctural policy and to Article 103 of the Treaty, of unilateral interventions by a Member State in the sector concerned, and of the type in question, which virtually determine the maximum price on sale to the consumer exclusively in and throughout the national territory;

(c)

the compatibility with the principle referred to in Article 30 of the Treaty concerning the free movement of goods within the common market, and with the prohibition against isolation of the national markets, of the system of selling the product and of the maximum price imposed, within the confines of the national territory, and of determining the components thereof, the said system constituting a hindrance to the establishment of the said common market and having been justified as an exception by the need to protect the economy from speculative operations and to guarantee the necessary consumer supplies against the upsetting of the conditions on which the Community rules are based both by the deficit in Community production and by the doubling of the world price of this product.

1.

In considering the questions referred I shall compare the national rules with the Community rules.

A circular (No 1237) of 14 November 1969 contained particulars of the price ‘ex-factory’ for sugar. From all this there was little difficulty in deducing the uniform maximum consumer price, the result of the simple addition of various factors, some taken from the provisions of the Community on the fixing of the derived intervention price and others from the provisions adopted by the CIP.

It seems clear therefore, that not only was the maximum price system restored in the said provisions but also these maximum prices applied in practice at the consumer stage and also at the manufacturing stage, that is, on the sale of sugar to processing plants.

The price system so created was applied practically without interruption and in particular was applied in the years 1974 and the beginning of 1975, since Order No 39/74 was not repealed until 18 January 1975. Maximum consumer prices were then fixed by Orders Nos 28 of 28 June 1974 and 39 of 13 August and the profit margins for the manufacture and sale of sugar were laid down.

In view of the close connexion between this price system and the ‘sovraprezzo’ it may probably be said that it is a system which determines the producer's price by means of the consumer price, the ‘sovraprezzo’ and taxation. This was, however, contested in the proceedings and it may therefore be left open, since the courts making the references have worded their questions quite generally, that is, they have not limited them to maximum consumer prices.

2.

The Italian price system must now be considered against the agricultural provisions of the Community in the sphere of sugar prices, that is, it is necessary to examine whether the national system contains elements which are incompatible with the Community system.

Let me in this connexion first remind you that Mr Advocate-General Mayras seriously doubted whether after Regulation No 1009/67 entered into force and the Community sugar prices were introduced, the Italian authorities could still fix maximum prices even at the consumer and retail stages, even if it were only through the system of the price margins relating to the derived intervention price.

In answering the questions raised the judgment of 23 January 1975 in Case 31/74, Galli [1975] ECR 47, is important. That was concerned with a national price-freezing system in connexion with cereals and flour derived from oil seeds for fodder. Whilst the common organization of the market in cereals provides price rules for basic products and even for products of the first processing stage, the Community rules for fats and oils (apart from olive oil, for which a price system was introduced) comprise, as regards to the other products coming under its scope, nothing more than customs protection in trade with third countries reserving the possibility to take protective measures where the market is disturbed.

Furthermore, exceptions were possible to this national system of price freezing. In these circumstances in the judgment in Galli it was declared, with reference to the common price system applicable at the production and wholesale stages, that ‘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’ and that ‘Member States can no longer interfere through national provisions taken unilaterally in the machinery of price formation as established under the common organization’.

In the present cases we are concerned with national rules which, without exception, fix the selling price of processed products, probably in the result at all stages, although Community rules exist for fixing the producer and wholesale price for this product

3.

Moreover, and here I come to a further question from the national court, the price rules are also to be considered in the light of the prohibition contained in Article 30 of the EEC Treaty to which Article 35 of Regulation No 1009/67 refers, that is, the prohibition on measures having an effect equivalent to quantitative restrictions on imports.

Assuming that national price rules at whatever stage are in principle lawful, nonetheless in any event they must not be an obstacle to the free movement of goods. This is referred to by certain passages in the judgment in Galli where it is said in connexion with the fixing of prices at the retail and consumption stages that other provisions of the Treaty may not be infringed. In my view the Commission has convincingly shown by reference to its Directive No 70/50 of 22 December 1969“on the abolition of measures which have an effect equivalent to quantitative restrictions on imports” (OJ English Special Edition 1970 (1), p. 17) that such effects may appear with maximum price rules. Measures having equivalent effect within the meaning of the said provisions include the fixing of different maximum prices for domestic and imported products. This may also be the case where there are rules applying equally to domestic and imported products which lead to the obstruction of imports because the price is fixed at a level which makes the sale of imported goods more difficult, for example because no regard is had to the different profit margins, production costs and the costs necessarily associated with imports.

These observations should suffice in the context of a reference for a preliminary ruling. Whether consequences arise from this in the cases dealt with in the main actions is for the court making the reference to determine on the basis of price comparisons which may be different for the different periods.

4.

In view of what has been said it is no longer difficult to deal with the further question whether the maximum price rules represent a national measure which the Italian Government continued to be entitled to adopt in the context of its own conjunctural policy.

In this respect it is important that the Italian maximum price rules for sugar constituted no hasty measure; these rules had existed already before the establishment of the common organization of the market and continued without interruption. It is thus a permanent system which is not to be ascribed to the difficulties occasioned by inflation and economic trends. As one of the advocates of the parties in the main action observed, we are concerned with a completely “closed” system which exists alongside the Community system and erects what is undoubtedly a national barrier against it.

If it is assumed, however, that this system was part of the national Italian conjunctural policy, it is nevertheless apparent that it was not only an unnecessary repetition of the measures decided upon at a Community level but that it also encroached directly upon the Community sphere.

Support for this is to be found in the judgments of 13 June 1972 in Joined Cases 9-11/71 Compagnie d'approvisionnement [1972] ECR 408 and 24 October 1973 in Case 43/72 Merkur [1973] ECR 1073 where it was said that “by enabling the Council, without obliging it, to “adopt … measures appropriate to the situation”, Article 103 conferred on that body wide powers of appraisal, to be exercised as a matter of “common concern”, and not in the private interest of a particular group of participants in the market”.

Furthermore, in three judgments which were likewise delivered on 24 October 1973, Case 5/73 Balkan [1973] ECR 1108-1110, Case 9/73, Schlüter [1973] ECR 1152/1153, and Case 10/73, Rewe Zentrale [1973] ECR 1189-1191, it was stated:

“On the other hand, Article 103 refers to Member States' conjunctural policies, which they must regard as a matter of common concern. Consequently it does not relate to those areas already subject to common rules, as in the organization of agricultural markets. The real object envisaged by Article 103 is the coordination of Member State's conjunctural policies, and, according to the terms of paragraph 2 of that Article, the adoption of common policies appropriate to the situation …

Although by Article 103 (1) Member States are bound to regard their conjunctural policies as a matter of common concern, the wording does not preclude Community institutions from having power to lay down themselves without prejudice to other procedures set out in the Treaty, conjunctural measures or matters within the spheres of their competence. On the contrary Article 103 (2), by declaring that the Council may, “acting unanimously … decide upon the measures appropriate to the situation”, confers on that body — subject to the condition referred to above — the powers necessary to adopt in principle, any conjunctural measures which may appear to be needed in order to safeguard the objectives of the Treaty.”

Later the judgment of 23 January 1975 in Case 31/74, Galli [1975] ECR p. 63 repeats that

‘a 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.

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

It goes on to say:

‘The 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 price, is for those States to take, at the Community level, the necessary action to 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.’

In the sphere of its conjunctural policy, if consumer protection requires it, the Council can therefore adopt common measures in the field of price formation which apply to the whole area of the Community and are not an obstacle to intra-Community trade. If such measures on the other hand are taken by the Member States individually and without previous agreement, there is the danger that essential Community interests may be adversely effected.

The result of these judgments therefore is to reject the idea that the Member States remain free for the purpose of their policies in combating inflation or the difficulties in supply with regard to certain products to intervene with unilateral measures in the price system of the Community. Such action would be lawful only if the Community itself did not adopt specific measures. We have seen, however, that the Community authorities have adopted such specific measures in the context of the common organization of the market in sugar and the rules adopted in pursuance thereof.

5.

Finally I have still an observation to make on the question relating to the direct applicability of the Community rules relevant in these proceedings or in other words on the possibility of individuals relying on them in opposition to national provisions.

This requires no lengthy comment. In my mind there is no doubt that the Commission is right in proposing that the question raised be answered in the affirmative. In support of this view it is sufficient to refer to the fact that the relevant provisions of the organizations of the market are contained in regulations of the Community which must be applied directly in the Member States. On the other hand, as regard Article 30 of the EEC Treaty, which may also be relevant, it has likewise also been declared in the case-law that it produces direct effects in the sense proposed by the Commission.

6.

In view of the foregoing I propose that the questions referred for a preliminary ruling should be answered as follows: