JUDGMENT OF 29. 6. 1978 — CASE 154/77 PROCUREUR DU ROI v DECHMANN

In Case 154/77, REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal de Première Instance (Chambre Correctionnelle) (Court of First Instance (Criminal Chamber), Neufchâteau, for a preliminary ruling in the proceedings pending before that court between

THE COURT composed of: H. Kutscher, M. Sørensen and G. Bosco (Presidents of Chambers), A. M. Donner, J. Mertens de Wilmars, P. Pescatore and A. O'Keeffe, Judges, Advocate General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and procedure

II — Written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

III — Oral procedure

Decision

Costs

I —. Facts and procedure

1. Pursuant to the provisions of Article 2 (1) and (2) of the Belgian Law on economic regulation and prices, as stated in the Law of 30 July 1971 (Moniteur Belge of 31 August 1971) amending the Arrêté-Loi of 22 January 1945, the minister responsible for economic affairs may fix maximum prices for products, materials, foodstuffs, goods or animals, as well as the limit of the profit to be made by any vendor or intermediary.

2. Pierre Dechmann, a retail butcher and pork-butcher in Bouillon, is being prosecuted before the Chambre Correctionnel (Criminal Chamber) of the Tribunal de Première Instance (Court of First Instance), Neufchâteau, for having contravened the aforesaid legislation on 25 July and 18 September 1975. The charge contains two counts:

3. A copy of the judgment making the reference was received at the Court on 19 December 1977. The Belgian Government, by its Counsel Roger Lallemand, Advocate of Brussels, the British Government, represented by the Treasury Solicitor's Office, and the Commission of the European Communities, represented by its Legal Adviser, Jean Amphoux, submitted written observations pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

II —. Written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

A —. The Belgian Government points out that the common organization of the market in pigmeat, as it results from Regulation No 121/67 of the Council of 13 June 1967, fixes the price for pigmeat at the production or wholesale stage. According to the case-law of the Court, in particular Case 31/74 [1975] 1 ECR 47 which was decided by a judgment of 23 January 1975, and also in the opinion of the Commission, the existence of such a common organization does not prevent the introduction of national rules at a later stage — the retail stage — provided that such rules do not jeopardize the aims and functioning of the common organization of the market.

B —. The British Government refers to its observations submitted in Case 65/75 [1976] ECR 291, and observes that inflation remains a formidable enemy throughout the Community against which Member States should be able to take unilateral action which does not conflict with their Community obligations.

C —. The Commission of the European Communities states first that as the Court of Justice does not have jurisdiction to give rulings on the validity of provisions of national law or on their compatibility with Community law, the question submitted should be read as asking whether and to what extent Regulation No 121/67 on the common organization of the market in pigmeat and its implementing regulations allow the continued existence of a power on the part of Member States to regulate the selling price of that product to consumers. In the present case, the answer to that question is to be sought essentially in Community provisions on the price system, by examining whether the national measures on prices are compatible with those provisions, a problem moreover which the Court has already examined in a certain number of judgments.

III —. Oral procedure

1. By a judgment of 17 November 1977, which was received at the Court on 19 December 1977, the Tribunal de Premiere Instance, Neufchâteau, submitted a question to the Court of Justice under Article 177 of the EEC Treaty on the interpretation of Regulation No 121/67/EEC of the Council of 13 June 1967 on the common organization of the market in pigmeat (Official Journal, English Special Edition 1967, p. 46), in order in particular to define its scope in relation to national measures affecting prices.

2. The question was raised in the course of criminal proceedings against a retail butcher and pork-butcher, who is charged with failing to observe the selling prices to the consumer of pigmeat as they result from the Belgian Arrêté Ministériel of 27 March 1975 (Moniteur Belge of 29 March 1975), fixing the selling price to the consumer of beef and veal and pigmeat.

3. Article 2 of the said Arrêté, which was adopted pursuant to the Belgian Law of 30 July 1971 on economic regulation and prices (Moniteur Belge of 31 August 1971), provides that the selling prices of pigmeat to the consumer charged by retail butchers may not exceed the sum of the weighted average purchase price and a maximum profit margin of Bfr 22.

4. To that end, Article 3 (2) of the Arrêté defines the profit margin as being the weighted average of the differences established by type of purchase between the weighted average selling price and the weighted average purchase price.

5. Article 3 (4) provides that the weighted average purchase price shall be calculated by dividing the total of the invoices by type of purchase, not inclusive of value-added tax, for the four preceding weeks, by the corresponding number of kilograms less 2.5 %.

6. The accused in the main action pleaded that the aforesaid provisions are incompatible with the Community regulations which introduced the common organization of the market in beef and veal and in pigmeat, and therefore cannot be applied to him.

7. The national court trying the case decided to stay the proceedings and ask the Court of Justice whether the Arrêté Ministériel of 27 March 1975 fixing the selling price to the consumer of pigmeat involved an infringement of Regulation No 121/67/EEC of the Council on the common organization of the market in pigmeat, and in particular of Articles 3, 4 and 5 thereof, and of the regulations which established the basic price for pigmeat.

8. Within the framework of proceedings brought under Article 177 of the Treaty, it is not for the Court to give a ruling on the compatibility of rules of internal law with provisions of Community law.

9. On the other hand, the Court is competent to supply the national court with any criteria coming within Community law enabling that court to determine whether such rules are compatible with the Community rule evoked.

10. Therefore the question submitted must be taken as asking whether and to what extent Regulation No 121/67/EEC of the Council of 13 June 1967 on the common organization of the market in pigmeat allows a power to continue to exist on the part of Member States to regulate by means of internal rules selling prices to the consumer in this sector.

11. Regulation No 121/67 on pigmeat, adopted within the framework of the common agricultural policy and last amended, at the time of the facts material to the main action, by Regulation No 1861/74 of the Council of 15 July 1974 (Official Journal 1974, L 197, p. 3), is intended to establish a common organization of the market within the meaning of Article 40 of the EEC Treaty.

12. This common organization of the market is intended, as is emphasized repeatedly in the preamble to the regulation, to create for the Community a single market in pigmeat subject to common administration.

13. In order to bring about this single market, the regulation established a system comprising a set of material rules and of powers, including a framework of organization calculated to meet all foreseeable situations.

14. A central place in this system is held by the price system provided for by Articles 4 and 5 of the regulation and applicable, under Article 4 (1) and (2), at the slaughtering stage, that is the production and wholesale stage.

15. So as to ensure the freedom of internal trade Regulation No 121/67 also comprises a set of rules intended to eliminate, as laid down in Article 19, all the obstacles to free movement of goods and all distortions in intra-Community trade due to market intervention by Member States.

16. As the Court held in its judgment of 23 January 1975 (Case 31/74 Galli [1975] 1 ECR 47) and in its judgments of 26 February 1976 (Case 65/75 Tasca and Joined Cases 88 to 90/75 Sadam [1976] ECR 291 and 323), in sectors covered by a common organization of the market, and a fortiori when this organization is based on a common price system, Member States can no longer take action, through national provisions adopted unilaterally, affecting the machinery of price formation as established under the common organization.

17. It was held in the same judgments that provisions of a Community agricultural regulation which comprise a price system applicable at the production and wholesale stages leave Member States free — without prejudice to other provisions of the Treaty — to take the appropriate measures relating to price formation at the retail and consumption stages, on condition that they do not jeopardize the aims or functioning of the common organization of the market in question.

18. In principle the fixing of a maximum profit margin for retailers to charge when selling to the ultimate consumer is not apt to jeopardize the aims or functioning of such an organization, so long as the profit margin is calculated essentially on purchase prices as charged at the production and wholesale stages.

19. This is especially true where the profit margin takes sufficient account of the marketing and importing costs which the retailer must bear both at the supply stage and at the stage of sale to consumers, and where it is fixed at a level suitable to ensure that the retailer obtains fair remuneration for his activity.

20. On the other hand a profit margin which does not fulfil these conditions could freeze maximum retail selling prices, and this would be apt to affect at prior stages of marketing the price mechanism resulting from the common organization of the market, or to affect intra-Community trade by an appreciable reduction in imports.

21. A Member State cannot base the justification for fixing such a margin on the need to deal with an undesirable tendency observed in price trends on the market, such as a rise in prices to the consumer, by way of the provisions of Article 103 of the Treaty relating to conjunctural policy.

22. 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 agricultural markets.

23. For these reasons, the answer to the national court should be that Regulation No 121/67 must be interpreted as not preventing the unilateral fixing by a Member State of a maximum profit margin for retail sale of pigmeat, calculated essentially on purchase prices as charged at prior stages of marketing and varying according to the trend of such prices, provided that the margin is fixed at a level which does not impede intra-Community trade.

24. The costs incurred by the Government of the Kingdom of Belgium, the Government of the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.

25. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT in answer to the question submitted to it by the Tribunal de Premiere Instance, Neufchâteau, pursuant to the judgment of that court of 17 November 1977, hereby rules: