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Document 62000CC0137

Konklużjonijiet ta' l-Avukat Ġenerali - Stix-Hackl - 17 ta' Settembru 2002.
The Queen vs The Competition Commission, Secretary of State for Trade and Industry u The Director General of Fair Trading, ex parte Milk Marque Ltd u National Farmers' Union.
Talba għal deċiżjoni preliminari: High Court of Justice (England and Wales), Queen's Bench Division (Crown Office) - ir-Renju Unit.
Artikolus 32 KE sa 38 KE - Regolament (KEE) Nru 804/68.
Kawża C-137/00.

ECLI identifier: ECLI:EU:C:2002:496

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Conclusions

OPINION OF ADVOCATE GENERAL
STIX-HACKL
delivered on 17 September 2002 (1)

Case C-137/00

The Queen
v
The Monopolies and Mergers Commission,
The Secretary of State for Trade and Industry
(now The Competition Commission,
The Director General of Fair Trading)
ex parte: Milk Marque Limited
National Farmers' Union
Third party:
Dairy Industry Federation

(Reference for a preliminary ruling from the High Court of Justice England and Wales)

((Common organisation of the market for milk and milk products – Articles 32 EC to 38 EC – Regulation No 26 of the Council of 4 April 1962 applying certain rules of competition to production of and trade in agricultural products – Permissibility of measures adopted under national competition law relating to agricultural co-operatives on that market))

I ─ Introduction

1. These proceedings relate to a reference for a preliminary ruling by the High Court of Justice of a series of questions on the relationship between national law and Community law as it affects the common agricultural policy. The Court of Justice is essentially being asked to clarify whether national authorities have jurisdiction to apply their domestic competition law in the area of the common organisation of the market for milk and milk products to a co-operative of milk producers that holds a dominant position (2) on the market, and, if so, to identify the Community provisions and limitations to which the exercise of that jurisdiction is subject.

II ─ Legal framework

2. The common organisation of the market for milk and milk products was established by Regulation (EEC) No 804/68 of the Council of 27 June 1968 (3) (hereinafter Regulation No 804/68). One of the things that regulation does is fix a target price for milk annually. In that connection, Article 3 of the Regulation provides in material part as follows:

1. Before 1 August of each year a target price for milk shall be fixed for the Community in respect of the milk year beginning in the following calendar year. ...

2. The target price shall be that price which it is aimed to obtain for the aggregate of producers' milk sales, on the Community market and on external markets, during the milk year.

3. The target price shall be fixed for milk containing 3.77% fat, delivered to dairy. ...

3. The target price for the milk year 1997/1998 was fixed by Council Regulation (EC) No 1190/97 of 25 June 1997 (4) (hereinafter Regulation No 1190/97). The first recital in the preamble to that regulation states: when fixing the common agricultural prices each year, account should be taken of the objectives of the common agricultural policy ... The objectives of the common agricultural policy are in particular to secure a fair standard of living for the agricultural community and to ensure that supplies are available and that they reach the consumers at reasonable prices.

4. Article 1 of EEC Council Regulation No 26 of 4 April 1962, (5) which was adopted on the basis of Articles 42 EC and 43 EC (hereinafter Regulation No 26) provides as follows:From the entry into force of this Regulation, Articles 85 to 90 of the Treaty and provisions made in implementation thereof shall, subject to Article 2 below, apply to all agreements, decisions and practices referred to in Articles 85(1) and 86 of the Treaty which relate to production of or trade in the products listed in Annex II to the Treaty.

5. Milk is one of the products listed in Annex II to the Treaty.

6. Article 2(1) and (2) of Regulation No 26 provides as follows:

1. Article 85(1) of the Treaty shall not apply to such of the agreements, decisions and practices referred to in the preceding Article as form an integral part of a national market organisation or are necessary for attainment of the objectives set out in Article 39 of the Treaty. In particular, it shall not apply to agreements, decisions and practices of farmers, farmers' associations, or associations of such associations belonging to a single Member State which concern the production or sale of agricultural products or the use of joint facilities for the storage, treatment or processing of agricultural products, and under which there is no obligation to charge identical prices, unless the Commission finds that competition is thereby excluded or that the objectives of Article 39 of the Treaty are jeopardised.

2. After consulting the Member States and hearing the undertakings or associations of undertakings concerned and any other natural or legal person that it considers appropriate, the Commission shall have sole power, subject to review by the Court of Justice, to determine, by decision which shall be published, which agreements, decisions and practices fulfil the conditions specified in paragraph 1.

III ─ Facts, the main proceedings, and the questions referred for a preliminary ruling

7. Milk Marque Limited (hereinafter Milk Marque) is a farmers' co-operative society engaged in the collection, distribution and supply of milk. It is the largest co-operative of its kind in Great Britain. In 1997/1998 Milk Marque accounted for 49.6% of supplies of milk in Great Britain.

8. On a reference by the Director-General of Fair Trading on 27 January 1998, the Monopolies and Mergers Commission ( the MMC), a competition authority in the United Kingdom, investigated whether there was a monopoly situation for the supply in Great Britain of raw cows' milk under the Fair Trading Act 1973. The MMC completed its investigation on 26 February 1999 and sent a Report on the supply in Great Britain of raw cows' milk (hereinafter the Report) to the Secretary of State for Trade and Industry (hereinafter the Secretary of State).

9. In the Report the MMC essentially found that Milk Marque had market power in relation to sales of raw cows' milk in Great Britain. It had exercised that power contrary to the public interest, by using its selling system to discriminate in terms of price and to control the supply of milk, and by engaging in other practices that had had the effect of keeping the price of fresh milk higher than it would have been under normal competitive conditions.

10. It is also important for an understanding of elements of the questions referred that the Report's finding to the effect that the manner in which that market power was exercised had caused prices to increase was partially based on a comparison with the target price set for the purposes of the common organisation of the market in milk and milk products. The producer price of milk was consistently below the target price in the United Kingdom, but seems to have moved nearer to the target price during the period under investigation in the Report.

11. One of the MMC's recommendations in the Report was that Milk Marque be restructured by dividing it into several independent and competing bodies. The Report also recommended interim measures temporarily prohibiting Milk Marque from entering into certain contractual arrangements. In particular it was recommended that Milk Marque be prevented from making any further contract processing arrangements, i.e. agreements for the processing of milk.

12. On 6 July 1999 the Secretary of State announced his decisions on the Report (hereinafter the Decisions). He accepted the MMC's findings in relation to Milk Marque's market power and the recommendations as to interim measures, but declined the recommendation that Milk Marque be forcibly broken up. Instead he announced that action would be taken to determine what changes should be made to Milk Marque's sales procedures.

13. Following discussions with the competent authorities to that end, Milk Marque none the less announced in a press release of 17 September 1999 that it proposed to divide itself into three smaller co-operatives as from 1 April 2000.

14. Consequently the Secretary of State agreed not to pursue the interim measures, provided however that the three new co-operatives engaged in milk processing, and he indicated that he would decide at a later stage whether he was satisfied that they were operating independently from one another. The British authorities also informed Milk Marque that the new co-operatives would remain subject to competition law in the usual way and that the Competition Act 1998 prohibitions come into force on 1 March 2000.

15. Despite those events, both Milk Marque and the National Farmers' Union, an organisation representing the interests of farmers in Great Britain (hereinafter the NFU), brought an action before the referring court against the Report and the subsequent decisions of the Secretary of State (hereinafter together the contested measures). The two actions were joined by the court.

16. They submitted in particular that, in asserting jurisdiction over the activities of the members of Milk Marque, and in recommending and taking steps pursuant to the Fair Trading Act to prevent them from obtaining a higher price for their milk, the MMC and the Secretary of State had acted contrary to Community law. Milk Marque and the NFU also contended that, by taking such steps in future pursuant to the Fair Trading Act or the Competition Act, the Secretary of State and MMC would be acting contrary to Community law.

17. The High Court considers that in order to decide the case, clarification is needed on whether the national authorities retain any powers in the area of the common organisation of the market for milk and milk products, and if so the extent of those powers. It has referred the following questions to the Court of Justice for a preliminary ruling:

1. Are Articles 32 to 38 EC ..., Council Regulation 26/62/EEC and Council Regulation (EC) No 804/68, as amended, to be interpreted as precluding a Member State from applying national laws such as the Fair Trading Act 1973 and the Competition Act 1998 to the manner in which producers of milk choose to organise themselves into co-operatives and conduct themselves in regard to the sale and processing of their milk:

(a) in all circumstances; or

(b) where the intended or actual effect is to deprive such producers of the ability to increase the price obtained for the milk; or

(c) where the intended or actual effect is to reduce the price that producers obtain for their milk in circumstances where that price is already below the target price fixed pursuant to Article 3 of Regulation No 804/68; or

(d) in a way which is not consistent with any one or more of the following:

(i) the objectives set out in Article 33 EC ...; and/or

(ii) the policy, aims or functioning of the common organisation of the market in milk and milk products; and/or

(iii) the policy of Article 36 EC... and Regulation 26?

2. Does the function of the target price for milk set by the Council under Regulation (EEC) No 804/68 preclude a Member State from:

(a) making use of the target price as an indicator of the actual price movements due to the common agricultural policy; and

(b) treating the fact that a milk producers' co-operative in that State has achieved for its members milk prices that are below the target price, but are nearer to the target price in one period of time than another, as supporting a conclusion that the co-operative exercises market power which contributes to prices being higher than they would have reached under more competitive conditions.

3. Are Articles 28 to 30 EC ... and Articles 49 and 55 EC ... to be interpreted as precluding a Member State from applying national laws such as the Fair Trading Act 1973 and the Competition Act 1998 in such a way as to prohibit a milk producers' co-operative which has been found to enjoy market power from sending milk produced by its members to be processed by contractors on its behalf, including in other Member States, as a step being taken by the co-operative for the purpose of exploiting its position in the market in its favour ?

4. Where large vertically-integrated dairy co-operatives exist and are permitted to operate in other Member States, is the general principle of non-discrimination, whether independently or as given specific effect in Articles 12 and/or 34 EC ..., to be interpreted as precluding a Member State from applying national laws such as the Fair Trading Act 1973 and the Competition Act 1998 to prohibit a milk producers' co-operative which has been found to enjoy market power from:

(a) acquiring or building further plant for the processing of milk produced by its members, which would give the co-operative the ability to exploit still further its position in the market in its favour; or

(b) sending milk produced by its members to be processed by contractors on its behalf, whether within the Member Sate concerned or in other Member Sates, as a step being taken by the co-operative for the purpose of exploiting its position in the market in its favour?

IV ─ Legal appraisal

A. Admissibility of the questions referred for a preliminary ruling

18. The United Kingdom questions the admissibility of the questions referred to the Court. It points out that the Report and the Decisions have been overtaken by events because, as a result of the voluntary dismembering of Milk Marque, the market power on which the investigation, the Report and all subsequent decisions and recommendations were based has ceased to exist. In so far as they concern possible future competition situations involving agricultural co-operatives, the questions referred for a preliminary ruling are hypothetical.

19. According to established case-law, (6) it is solely for the national court hearing the case, which must assume responsibility for the subsequent judicial decision, to determine, with regard to the particular aspects of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it refers to the Court. The Court may refuse a request made by such a court only where it is quite obvious that the interpretation of Community law sought bears no relation to the actual facts or purpose of the main proceedings or where the problem is hypothetical and the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted.

20. In this case, however, the referring court has provided the Court of Justice with a detailed outline of the factual and legal background to the main proceedings, and of the reasons why it has taken the view that a ruling on the questions referred is necessary for it to give judgment. In particular the national court states in the order for reference that in order to review the Decisions, it will need to consider the application of both the Fair Trading Act and the Competition Act, which came into force on 1 March 2000, and that an answer to the question referred is therefore necessary to enable it to rule effectively on the parties' rights and obligations, the authorities' jurisdiction, and the exercise of that jurisdiction under the two Acts. Moreover, the national court expressly does not concur with the United Kingdom's view that the Report and the Decisions have been overtaken by subsequent events.

21. The questions referred for a preliminary ruling are therefore admissible and call for a reply.

B. The first question referred, on the legality of national measures to combat anti-competitive practices where an undertaking is dominant on a market that is governed by a common organisation

22. It should be recalled at the outset that the United Kingdom was able to secure the integration of its system for organising the domestic milk market, of which the Milk Marketing Boards (hereinafter the Boards) were the principal element, as part of its accession negotiations. Article 25 of Regulation No 804/68, as amended by Council Regulation (EEC) No 1421/78, (7) recognised the status of the Boards, which, amongst other things, had been given a monopoly on purchasing and selling. (8)

23. The Court of Justice has therefore already had occasion to rule on restrictions on competition affecting the market for the production and processing of milk in the United Kingdom. It has considered the conduct of the Boards in a number of judgments. (9)

24. The Agricultural Act 1993 deregulated the milk market by abolishing the Boards. This occurred in 1994, in England and Wales and in Scotland. The Boards were replaced by voluntary producer organisations, and the earlier monopoly situation was brought to an end.

25. The first matter the Court of Justice is being asked to consider is therefore the extent to which the application of national competition rules to such producer organisations ─ in this case Milk Marque ─ is permissible under Community law.

1. Arguments of the parties

26. Milk Marque and the NFU contend that it is contrary to Community law for a Member State to apply national legislation such as the Fair Trading Act or the Competition Act to agricultural co-operatives or the goods they produce and in so doing to adopt a measure, in a sphere governed by a common organisation of the market, that seeks to affect the price of such products ─ in this case, to reduce the producer price of milk.

27. Milk Marque and the NFU then submit ─ on essentially the same grounds ─ that the field of agriculture falls within the exclusive competence of the Community and that the Member States therefore have no jurisdiction in this area.

28. They argue that agricultural co-operatives and the sale of milk are subject to the common organisation of the market for milk and milk products established by Regulation No 804/68. One of the features of this market organisation is the target price which, Article 3 of the Regulation provides, is to be fixed annually by the Council, and which reflects the way in which the Community institutions reconcile the objectives of the common agricultural policy set out in Article 33(1) EC, including in particular that of ensuring a fair standard of living for the agricultural community. In the view of Milk Marque and the NFU it follows from the Court's case-law, particularly the judgment in Toffoli, (10) that the adoption by a Member State of measures that seek ─ even indirectly ─ to affect the producer price of milk infringes the exclusive competence of the Community.

29. In this case the British authorities unlawfully encroached upon that competence in seeking, by the contested measures, to reduce producer prices to competitive levels, even though they consistently fell below the target price set by the Community. The authorities thus unilaterally set a price which they considered to be in the public interest, but which did not reconcile the Community objectives in Article 33 EC, which the target prices reflect.

30. Milk Marque and the NFU also take the view that, even from a competition law standpoint, there is no scope for applying national legislation, such as the Fair Trading Act or the Competition Act. They submit in this regard that, under the second paragraph of Article 36 EC, Community competition law in the agricultural sector is subject to the rules of the common agricultural policy and must be applied in accordance with the objectives of Article 33 EC. The application of competition rules in the agricultural sector is specifically governed by Regulation No 26. That Regulation makes it clear with regard to the subject matter of this case ─ namely the organisation of agricultural co-operatives and the fixing of producer prices for milk ─ that EC competition law only finds limited application. So, although Article 82 EC does apply, Article 81(1) EC does not.

31. Community law has therefore exhaustively established the nature and scope of the competition rules in the agricultural sector. Like the common organisation of the market, the competition law regime for agricultural products excludes the parallel application of national competition law.

32. If the Member States do retain certain powers in the agricultural domain, Milk Marque and the NFU contend that, by seeking to bring about a reduction in producer prices, the British authorities exercised those powers in a manner contrary to Community law.

33. That submission, too, is founded on their allegation that the basis for the contested measures, namely a balancing of the various interests involved, that is to say, a view as to what price is in the public interest, does not reflect the aims and objectives of the common agricultural policy under Article 33(1) EC and is contrary to the target price, which represents a balancing of Community interests. The measures also undermine the effectiveness and uniform application of Community competition law in so far as in the agricultural sector the competition provisions are circumscribed by the objectives of the common agricultural policy. Milk Marque also argues that Member States may not apply their national competition rules in a manner that runs counter to the freedom guaranteed by Article 81(3) EC. (11) That applies a fortiori to the safe haven afforded to agricultural co-operatives by Article 2(1) of Regulation No 26.

34. The Commission, on the other hand, takes the view that the national measures are compatible with both competition law and the rules of the common organisation of the market for milk and milk products in the Community.

35. In regard to competition law, it states that Article 2 of Regulation No 26 excludes only the application of Article 81(1) EC to the agricultural sector. The rules in Article 82 EC on abuse of a dominant position, however, apply to the agricultural sector in the usual way. (12) The Member States are also, as is clear inter alia from the Court's judgment in the Walt Wilhelm case, (13) permitted to apply national competition law in so far as this does not prejudice the uniform application throughout the common market of the Community competition rules and the full effect of the measures adopted in implementation of those rules. There could have been no such prejudice in this case because the Commission has not taken any steps against Milk Marque pursuant to competition law.

36. With regard to the common organisation of the market for milk, the Commission argues that the Member States are not entirely excluded from taking action in this field. They may simply not take any measures that might interfere with the operation of that market organisation. But this does not apply to measures, such as those at issue here, whose purpose is to curtail a dominant position.

37. Both the United Kingdom and the Dairy Industry Federation essentially agree with the Commission. They add that, even if the Member States may not in principle prevent their milk producers from seeking to attain the target price, the price must none the less be arrived at on the basis of the operation of market forces and in competitive conditions. The application of national competition legislation such as that at issue here helps to create such conditions.

2. Opinion

38. The first question referred for a preliminary ruling raises two subsidiary issues which call for separate examination. Are national competition authorities competent to take action under national law against allegedly anti-competitive practices in a sector governed by a market organisation at all? If they are, what are the limits, if any, imposed by Community law on the powers of the Member States?

(a) Competence of national competition authorities

39. Contrary to the view of Milk Marque and the NFU, there can be little doubt that national measures adopted by a national authority on home territory to counter anti-competitive practices are permissible, even where a sector is governed by a market organisation.

40. That is because the agricultural sector is not an area which is free from competition (see (i) below), and because the applicability of Community competition law does not in principle preclude the application of national competition rules (see (ii) below).

(i) Competition is an essential component of the common agriculture market

41. Milk Marque and the NFU are correct in their view that, as a result of Article 36 EC, the application of the Treaty competition rules to the production and sale of agricultural goods is subject to the adoption by the Council of a decision. It does not however necessarily follow from this that the application of the Treaty competition rules to the agricultural sector is to be regarded as exceptional under Community law. (14)

42. Article 36 EC is rather to be understood in the light of the tension between agricultural policy and competition law.

43. The common organisations of the markets established thus far use a range of tools, including in particular common rules on competition, as is clear from Article 34(1)(a) EC. These tools restrict competition on the relevant markets. Competition can develop only if the individual common organisations of the markets leave room for it to do so. None the less, while undoubtedly real, the tension between agricultural policy and open competition should not be overstated, since to some extent agricultural policy creates the conditions for undertakings to be able to compete freely. (15)

44. The interlocking nature of agricultural and competition policy objectives is also illustrated by the other instrument of agricultural policy that is relevant here, namely the target price. Target prices are a feature of common organisations of the markets. The target price for agricultural products, however, is intended to have a regulatory function in two respects. First it contributes to ensuring a fair standard of living for the agricultural community. (16) But it also enables supply and demand to be managed. It is precisely the latter purpose that requires that operators in the individual agricultural markets should be able to make business decisions, which in turn presupposes a certain level of competition. (17)

45. This also explains why the Court has repeatedly held competition to be an essential component of the common agricultural policy. (18) Article 36 EC accordingly has the effect of deferring the application of the Treaty rules on competition to the agricultural sector. (19) In view of the above considerations, this is not to be understood as an exception, but as a necessity for historical reasons. Because the various agricultural markets were very differently structured when the Community began, a common competition policy in the agricultural domain that went further than Article 34 EC was conceivable only after the markets had been integrated and similar competitive conditions created.

46. Given that background it is unsurprising that the Council should have stipulated, in Regulation No 26, that for the most part the competition rules apply. Thus, Article 1 provides that subject to Article 2 the rules in the Chapter in the Treaty on competition apply in principle. Article 2(1) of Regulation No 26 merely contains various exceptions to the prohibition on cartels in Article 81(1) EC, exempting agreements that form an integral part of a national market organisation and those that are necessary for attainment of the objectives of the common agricultural policy set out in Article 33 EC. The Commission, which is supported on this point by the United Kingdom and the Dairy Industry Federation, is correct to emphasise that Regulation No 26 in no way limits the application of Article 82 EC on abuse of a dominant position.

47. The point is therefore that, so far as Community law is concerned, the application of the Community competition rules to the agricultural field generally is not in the nature of an exception but is integral to the system.

48. Contrary to the view of Milk Marque and the NFU, the fact that agricultural co-operatives of the kind at issue here and the sale of milk are subject to the common organisation of the market for milk and milk products under Regulation No 804/68 in no way affects that finding.

49. It is true that the Community enjoys exclusive competence to legislate in this field. (20) Milk Marque and the NFU also, not incorrectly, point to the settled case-law of the Court whereby once the Community has adopted regulations ... establishing a common organisation of the market in a given sector, Member States are under an obligation to refrain from taking any measure which might undermine or create exceptions to it. (21)

50. However it does not follow from that that every measure adopted by a national authority on the basis of domestic law is to be regarded as a measure within the meaning of the case-law quoted above.

51. In that connection I would refer to the Court's definition of a market organisation. Extrapolating from the definition of a national organisation of the market, (22) a European organisation of the market may be defined as a totality of structural measures designed to attain the agricultural policy objectives referred to in Article 33 EC by sovereign regulation of the agricultural market for each specific product.

52. The contested measures do not fall within that definition because they relate precisely to the unregulated section of the relevant market. It may indeed be inferred from the case-law that the prohibition on adopting prejudicial or conflicting measures also relates to measures that do not fall within the scope of the rules on market organisation. (23) The reason for extending the scope of the prohibition is to preserve its effet utile. However, that should be irrelevant in regard to measures of competition law. That is because if it is accepted that sections of agriculture not governed by a market organisation are open to free competition, then measures adopted by the Member States to guarantee such competition may not, for the time being, be treated as measures which, directly or indirectly, prejudice the instruments adopted to implement a market organisation. The United Kingdom is right to make the point in this connection that Member States may, and indeed must, apply their criminal law also and specifically to complement instruments giving effect to a common organisation of the market. (24)

53. It may no doubt be objected that, precisely in view of the abovementioned tension between them, the adoption of a measure of competition policy is most likely to disrupt the effect of measures adopted in pursuance of agricultural policy. In the main proceedings the national competition authorities' intervention, which could bring about a reduction in producer prices, might therefore be seen as constituting disruption, which could in turn lead to producers' livelihoods being endangered contrary to Article 33(1)(b) EC.

54. That objection is not, however, persuasive. Milk Marque and the NFU's alternative submission shows that the objectives of the common agricultural policy can be duly taken into account when the limits of national competence are explored. There is therefore no reason why conflicts between agricultural and competition policy should stand in the way of recognising the principle that national competition authorities do retain competence.

(ii) The applicability in principle of national law alongside Community competition law

55. Milk Marque and the NFU consider that another reason why national competition law may not be applied is that Community competition law has, in Article 36 EC, in conjunction with Regulation No 26, conclusively brought about the necessary reconciliation with various objectives of agricultural policy.

56. That argument is not persuasive either.

57. The Court has clarified the relationship between national competition law and the Community competition rules in the Walt Wilhelm case. (25) According to its judgment in that case, the application of Community law takes precedence over national legislation on cartels. In the absence of any Community rules, on the other hand, there is nothing to prevent the application of national legislation on cartels. The solution devised for Article 81 EC is generally regarded as also applying to Article 82 EC. (26)

58. However, the extent to which that solution may be transposed to the field of agriculture remains open to question, given that it is only via the circuitous route of Regulation No 26 that the competition rules have been rendered applicable to it. What is beyond doubt is that the primacy of Community law applies to both primary and secondary law.

59. In my view there is good reason not to exclude the application of national competition provisions in the field of agriculture by arguing that the reconciliation achieved by Article 36 EC, in conjunction with Regulation No 26, is exhaustive.

60. This is because, as already explained, (27) Article 36 EC does not prevent the competition rules from applying altogether, but merely defers their application. However, the balance between the objectives of agricultural and competition policy in Article 36 EC, in conjunction with Regulation No 26, necessarily applies only to matters which are governed by the Treaty provisions on competition in the first place.

61. Under Regulation No 26, Article 82 EC finds unlimited application in the agricultural field. But as Article 82 only relates to dominant positions on the common market or a substantial part thereof, many situations fall outside the Community competition provisions ab initio. Clearly, then, the balance which Regulation No 26 seeks to achieve in a manner that reflects the primacy, provided for in Article 36 EC, of agricultural over competition objectives cannot be regarded as exhaustive.

62. The balance which Community law seeks to achieve is not, therefore, exhaustive, because it does not apply where, on the facts, there is no Community dimension. Accordingly, the application of national competition law cannot in principle be excluded, as in the Walt Wilhelm case. The only question is the extent to which the application of national competition law is subject to limitations imposed by Community law.

63. We therefore now turn to the limitations on national measures to combat anti-competitive conduct.

(b) Limitations on national competence

64. The limitations on national competence to apply national competition law follow from the primacy of agricultural objectives in the Treaty over competition objectives, which is enshrined in Article 36 EC. (28)

65. National competition law must be applied in a manner compatible with the objectives of the common agricultural policy set out in Article 33 EC.

66. Account must be taken of the principles established by the Court's case-law, which provides that in pursuing the various aims laid down in [Article 33 EC], the Community institutions have a permanent duty to reconcile the individual aims. In principle, therefore, no single aim may be pursued in isolation in such a way as to make the achievement of the others impossible, although the Community institutions may allow one of them temporary priority in order to satisfy the demands of the economic or other conditions in view of which their decisions are made. (29)

67. There seems no reason why the obligation on Community institutions to reconcile the various objectives of agricultural policy in accordance with Article 33 EC should not be extended to national authorities. The Court's recognition that there is a wide discretion when assessing individual objectives which even encompasses temporarily favouring one agricultural policy objective over another is worthy of note.

68. However, the Court has also stressed that the goal of guaranteeing earnings in Article 33(1)(b) EC is one of the main aims (30) of agricultural policy in the milk market.

69. That means, in relation to the main proceedings, that, when applying national competition law, the national authorities must give priority to the objectives in Article 33(1) EC, regardless of the objectives of national law.

70. It appears from the arguments of the parties that one of the factors to which the national authorities had regard was the reasonableness of prices paid by consumers. Article 33(1)(e) EC lists the objective of ensuring that supplies reach consumers at reasonable prices, but there is a clear conflict between that and the objective of ensuing a fair standard of living in Article 33(1)(b) EC. It is for the national court to determine whether the national authorities were excessively one-sided in their pursuit of the first objective.

71. The fact that producer prices were below the target price even before the national competition authorities intervened does not in itself mean that the contested measures contravene Community law. First, having a price as a guideline does not guarantee producers an income reflecting the target price and, secondly, the objective of securing a fair standard of living certainly does not extend to attempts to achieve such a standard of living by abusive means. Article 33(1)(b) EC cannot therefore justify an abuse of a dominant position, nor can measures taken to combat such an abuse be regarded as infringing that objective.

72. I therefore propose that the reply to be given to the first question referred for a preliminary ruling should be that Articles 32 EC to 38 EC, Council Regulation No 26 and Council Regulation (EEC) 804/68, as amended, are to be interpreted as not precluding a Member State from applying national laws to combat abuses by an undertaking in a dominant position, provided that the Member State balances all the various objectives set out in Article 33 EC. It is for the national court to examine whether the national authorities have carried out that balancing operation. The objective in Article 33(1)(b) EC of increasing producers' earnings cannot be relied on to justify an abuse of a dominant position.

C. The remaining questions

1. The second question, on use of the target price for the purposes of national competition law

(a) Arguments of the parties

73. Milk Marque is of the view that use of the target price, within the meaning of Article 3 of Regulation No 804/68, for the purposes described in the second question referred for a preliminary ruling runs counter to the purpose and function of a target price. The price represents an indication by the Council of what it considers to be a reasonable producer price for milk, and the producer has every right to attempt to reach it.

74. The United Kingdom Government considers the second question referred by the national court to be purely academic and not to concern the interpretation of Community law.

75. The Commission, the Dairy Industry Federation and ─ in the alternative ─ the United Kingdom Government contend that there is no objection in Community law to use of the target price in making findings of national competition law, or that this is a matter of national law.

(b) Opinion

76. Article 234 EC provides that the Court of Justice is to give preliminary rulings, inter alia, on the interpretation of the Treaty and acts of the Community institutions. Consequently, according to settled case-law, the Court does not have jurisdiction to interpret national law on a reference for a preliminary ruling. (31)

77. By its second question, the national court is essentially asking whether the common organisation of the market for milk and milk products precludes using the target price under Article 3 of Regulation No 804/68 when analysing an undertaking's market power in national proceedings. Contrary to the view of the United Kingdom, this is a question of Community law and must therefore be regarded as admissible.

78. How an undertaking's market power is to be assessed at national level is a matter of national law. As is clear from my proposed reply to the first question, there is no objection in Community law to the basic principle that national proceedings may be brought to investigate whether a particular undertaking that holds a dominant position is abusing its economic position or not. Nor, therefore, is there in principle any objection to using the target price to evaluate an undertaking's market power, by looking at variations in actual prices in comparison with the target price.

79. This practice does not affect the status of the target price as an instrument of market policy.

80. The reply to the second question must therefore be that the function of the target price under Article 3 of Regulation No 804/68 does not preclude that price being used for the purposes of proceedings before a national competition authority.

2. Third question, on the compatibility of the contested measures with the free movement of goods and services

(a) Arguments of the parties

81. With regard to the third question, Milk Marque refers to the interim measures established by the contested measures, and in particular the fact that Milk Marque was to be prevented from entering into further contract processing arrangements, i.e. milk processing contracts with undertakings in other Member States. The interim measures not only limit the export of raw milk from the United Kingdom contrary to Article 29 EC, they also prohibit imports and exports of milk products between Member States. They therefore constitute quantitative restrictions on imports and exports within the meaning of Articles 28 and 29 EC. By preventing Milk Marque from using processing services in other Member States, the interim measures also infringe the freedom to provide services, contrary to Article 49 EC. Milk Marque says there is no effective justification for these restrictions. They were imposed for purely economic reasons, to secure a supply of inexpensive domestic milk to national processors. The restrictions are also discriminatory. The exceptions in Articles 30 and 46 EC do not apply because this field has already been harmonised by means of the target price system and the common organisation of the market for milk and milk products.

82. The Commission points out that, according to the settled case-law of the Court, Article 29 EC applies only to national measures which have as their specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade, in such a way as to provide a particular advantage for national production or for the domestic market of the State in question. It also observes that Article 28 EC does not apply to goods that are exported purely for re-importation in order to circumvent a provision of national law. In the Commission's view, exporting milk for the purposes of processing in other Member States should not be deemed to constitute a supply of a service but of goods, pursuant to Case 18/84. (32)

83. The United Kingdom and the Dairy Industry Federation concur for the most part with the Commission. Even if the contested measures are deemed to constitute restrictions on the freedom to provide services within the meaning of Article 49 EC, they can, because they are non-discriminatory and indistinctly applicable, be justified on the basis that they are in the public interest or protect consumers or prevent unfair competition.

(b) Opinion

84. By its third question, the national court is essentially asking whether the principles of the free movement of goods or freedom to provide services preclude a national rule whereby, in order to prevent an agricultural co-operative from abusing a dominant position, milk from that co-operative is prohibited from being processed in other Member States.

85. First of all, such a measure must be examined only under the Treaty provisions on the free movement of goods. This may be inferred from the Court's case-law, according to which a service that leads directly to the manufacture of a physical article is to be considered under the free movement of goods rules alone, since the freedom to provide services is, pursuant to Article 50 EC, secondary in nature. (33)

86. The national measure in the main proceedings prohibits the processing of milk on behalf of Milk Marque in any event in the United Kingdom and in other Member States.

87. The first question is whether Article 29 EC precludes a national measure of this kind. Article 29 EC prohibits quantitative restrictions on exports and all measures having equivalent effect. The Commission rightly points out that the Court has consistently interpreted that prohibition narrowly in its case-law. It only applies to those measures which have as their specific object or effect the restriction of patterns of export and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade, in such a way as to provide a particular advantage for national production or for the domestic market of the State in question. (34)

88. Whether the measures in the main proceedings do have this as their object or effect is open to question because they prevent processing in the domestic market as well as in other Member States. It is not necessary to resolve the point, however, since, under the Court's case-law, reliance may not be placed on basic freedoms if they are only invoked to circumvent a national rule. In this connection the Commission rightly cites the Leclerc v Au blé vert (35) case, which decided that Article 28 EC may not be relied on where the goods in question were exported for the sole purpose of re-importation in order to circumvent legislation of the type at issue. (36) It should be noted that the Court only referred to Article 28 EC in that case.

89. The measure at issue here is clearly intended to prevent circumvention, by the export and reimportation of milk, of the national rule prohibiting conduct constituting abuse of a dominant position.

90. The reply to be given to the third question is therefore that Articles 28 to 30 EC do not preclude a Member State from applying national laws of the kind here at issue in such a way as to prohibit a milk producers' co-operative which has been found to enjoy market power from sending milk produced by its members to be processed by contractors on its behalf, including in other Member States, where application of such laws is intended to prevent abuse of a dominant position.

(3) The fourth question on the prohibition of discrimination

(a) Arguments of the parties

91. Milk Marque and the NFU argue in relation to the fourth question that the contested measures place Milk Marque at a disadvantage compared to other milk producers in the United Kingdom and similar agricultural co-operatives in other Member States, contrary to Articles 12 and 34 EC. Because it is barred from vertically integrating its operations and sending its milk to be processed by contractors, Milk Marque is prevented from pursuing an activity that is open to other producers in the United Kingdom and co-operatives in other Member States. The national measures apply to members of Milk Marque only and not to all milk producers in the United Kingdom, were not adopted on the basis of objective criteria and, because they restrict the operation of the common organisation of the market for milk and milk products, are not objectively justified.

92. The Commission, on the other hand, views this case as at most concerning disparities in treatment or distortions, within the meaning of the Walt Wilhelm judgment, (37) which result from divergences between the laws of the various Member States that apply in accordance with objective criteria and without regard to nationality.

93. The United Kingdom Government and the Dairy Industry Federation also consider that there was no discrimination, or in so far as there may have been discrimination, that it was justified on objective grounds.

(b) Opinion

94. By its fourth question the national court in essentially asking whether the contested measures place the applicant in the main proceedings at an unjustified disadvantage.

95. As regards Article 12 EC, there is nothing in the order for reference to suggest that Milk Marque suffered discrimination on grounds of nationality. The Commission rightly refers to the judgment in Walt Wilhelm, which states that Article 12 EC is not concerned with any disparities in treatment or the distortions which may result, for the persons and undertakings subject to the jurisdiction of the Community, from divergences existing between the laws of the various Member States, so long as the latter affect all persons subject to them, in accordance with objective criteria and without regard to their nationality. (38)

96. Milk Marque and the NFU also argue that the contested measures constitute discrimination between producers or consumers within the Community, contrary to Article 34(2) EC.

97. Whether treating producers in the same Member State differently is also caught by Article 34(2) is uncertain. The matter can be left open here, as there is in any event no comparison of situations. The reason for treating Milk Marque differently from other producers and consumers both at home and abroad is that it occupied a dominant position, which it abused. Regardless of any divergences between laws, as mentioned above, (39) the prohibition on abusing a dominant position obviously applies to all undertakings operating on the market in the United Kingdom. There can therefore be no finding of unequal treatment.

V ─ Conclusion

98. In the light of the foregoing I propose that the Court answer the questions referred by the national court as follows:

(1) Articles 32 EC to 38 EC, Council Regulation No 26 and Council Regulation (EEC) No 804/68, as amended, are to be interpreted as in principle not precluding a Member State from applying national laws to combat abuses by a cooperative of milk producers found to enjoy market power, provided that the national competition authorities balance the various objectives set out in Article 33 EC. It is for the national court to examine whether the national authorities have carried out that balancing operation. The objective in Article 33(1)(b) EC of increasing producers' earnings cannot be relied on to justify an abuse of a dominant position.

(2) The function of the target price under Article 3 of Regulation (EEC) No 804/68 does not preclude that price being used by a Member State for the purposes of investigating the pricing policy of such a co-operative and any market power it may enjoy.

(3) Articles 28 EC to 30 EC do not preclude a Member State from applying national laws of the kind here at issue in such a way as to prohibit a milk producers' co-operative which has been found to enjoy market power from sending milk produced by its members to be processed by contractors on its behalf, including in other Member States, where application of such laws is intended to prevent abuse of a dominant position.

(4) Neither the general prohibition on discrimination, nor Articles 12 EC or 34(2) EC in which that prohibition finds expression, in principle preclude the application of national laws of the kind in point here that prohibit a producers' co-operative found to enjoy market power from acquiring or setting up additional milk processing plants, or from sending milk to be processed on its behalf to contractors either in the Member State in question or in other Member States, where such measures are adopted in order to prevent abuse of a dominant position.

1 –: Original language: German.

2 –: Whether the undertaking enjoys market power is a question of national law in this case. It should be assumed for the purposes of this Opinion, following the questions referred for a preliminary ruling, that Milk Marque occupies a dominant position on the market.

3 –: On the common organisation of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176).

4 –: fixing the target price for milk and the intervention prices for butter and skimmed-milk powder for the 1997/1998 milk marketing year (OJ 1997 L 170, p. 6).

5 –: applying certain rules of competition to production of and trade in agricultural products (OJ, English Special Edition 1959-1962, p. 129).

6 –: See, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraphs 59 to 61; Case C-60/98 Butterfly Music [1999] ECR I-3939, paragraph 13; and Case C-97/98 Jägerskold [1999] ECR I-7319, paragraph 21.

7 –: of 20 June 1978 amending Regulation (EEC) No 804/68 on the common organisation of the market in milk and milk products(OJ 1978 L 171, p. 12).

8 –: See Winkler in Immenga/Mestmäcker, EG-Wettberwerbsrecht, Vol. II, VO no. 26, paragraph 87 et seq. for further detail.

9 –: Case 23/84 Commission v United Kingdom [1986] ECR 3851; Case 347/85 Commission v United Kingdom [1988] ECR 1749; Case 372/88 Cricket St Thomas [1990] ECR I-1345; and Case C-40/92 Commission v United Kingdom [1994] ECR I-989.

10 –: Case 10/79 Toffoli [1979] ECR 3301.

11 –: Milk Marque refers in that connection to the Opinion of Advocate General Tesauro in Case C-70/93 BMW v ALD [1995] ECR I-3439, points 36 to 40.

12 –: It cites Joined Cases 40/73 to 48/73 Suiker [1975] ECR 1663, and Case 27/76 United Brands [1978] ECR 207.

13 –: Case 14/68 Walt Wilhelm [1969] ECR 1, paragraph 4.

14 –: See however Schwarze-Hix, EU Kommentar, Art. 36 EC Treaty, paragraph 1.

15 –: Winkler, for instance, in Immenga/Mestmäcker, EG-Wettberwerbsrecht, Vol. II, VO no. 26, paragraph 12 sees the scheme and purpose of the exception in Article 2(1) of Regulation No 26 as follows: It is by allowing farmers to enter into agreements that would be unlawful under cartel law that the legislature enables them to compete at all.

16 –: Article 33(1)(b) EC.

17 –: Maillander in Gemeinschaftskommentar, Müller-Henneberg/Schwartz, Gesetz gegen Wettbewerbsbeschrankungen und Europaisches Kartellrecht, EWGB, BER, Ausn, para. 29. Winkler agrees: Immenga/Mestmäcker cited above, Landwirtschaft, first sentence of Art. 42(1), EC, para. 2.

18 –: Case 83/78 Redmond [1978] ECR 2347, paragraph 57; Case 177/78 Pigs and Bacon Commission [1979] ECR 2162, paragraph 15. See also Grabitz-Gildorf/Sack, Kommentar zum EWG-Vertrag, Article 42(2) and Winkler in Immenga/Mestmäcker cited above, Landwirtschaft, first sentence of Art. 42(1), EC, para. 2.

19 –: Winkler in Immenga/Mestmäcker cited above, Landwirtschaft, first sentence of Art. 42(1), EC, para. 2.

20 –: See on this Case 10/79 Toffoli [1979] ECR 3301, paragraph 11 and Case 166/82 Commission v Italy [1984] ECR 459, paragraph 23. There is no need to decide whether Article 37(2) EC invests the Community with competing or exclusive jurisdiction since the Community has exercised its jurisdiction in the milk market, so it has exclusive jurisdiction for measures within the common agricultural policy in any event (see generally Case C-438/92 Rustica Semences [1994] ECR I-3519, paragraph 16).

21 –: Case 111/76 Officier van Justitie v Van Den Hazel [1977] ECR 901, and Redmond, cited in footnote 18, paragraphs 56 et seq.

22 –: Case 48/74 Charmasson v Minister for Economic Affairs and Finance [1974] ECR 1383, paragraph 26.

23 –: Case 31/74 Galli [1975] ECR 47 and Case 51/74 Van der Hulst's v Prodshap voor Siergewassen [1975] ECR 79; Case 65/75 Tasca [1976] ECR 291; Joined Cases 88/75 to 90/75 SADAM [1976] ECR 323; Case 154/77 Dechmann [1978] ECR 1573.

24 –: In that connection the United Kingdom cites Case 68/88 Commission v Greece [1989] ECR 2965, paragraphs 23 et seq.

25 –: Cited in footnote 13.

26 –: See Gavalda/Parleani, Droit des affaires de l'union Europeene, 3rd Edition, para. 410 and following.

27 –: See points 41 et seq. above.

28 –: On the supremacy of agricultural policy over the Treaty objectives in the field of competition, see Case 139/79 Maizena v Council [1980] ECR 3393, paragraph 23 and Case C-280/93 Germany v Council [1994] ECR I-4973, paragraph 61.

29 –: Case 27/85 Vandemoortele v Commission [1987] ECR 1129, paragraph 20.

30 –: Case 59/83 SA Biovilac v European Economic Community [1984] ECR 4057, paragraph 16.

31 –: See Case 75/63 Unger v Bedrijfsvereniging voor Detailhandel en Ambachten [1964] ECR 177 and Case C-309/96 Annibaldi [1997] ECR I-7493, paragraph 13.

32 –: Case 18/84 Commission v France [1985] ECR 1339.

33 –: Case 18/84 cited in footnote 32, point 12.

34 –: Case 15/79 Groenvald [1979] ECR 3409, paragraph 7; Case 155/80 Oebel [1981] ECR 1993, paragraph 15; Case C-47/90 Delhaize et le Lion [1992] ECR I-3669, paragraph 12; Case C-203/96 Dusseldorp and Others [1998] ECR I-4075, paragraph 40; and Case C-388/95 Belgium v Spain [2000] ECR I-3123, paragraph 41.

35 –: Case 229/83 Leclerc v Au blé vert [1985] ECR 1.

36 –: Ibid., paragraph 27.

37 –: Cited in footnote 13, point 13.

38 –: Cited above, point 13.

39 –: See point 95.

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