JUDGMENT OF 12. 7. 1979 — CASE 223/78 GROSOLI

In Case 223/78 REFERENCE to the Court under Article 177 of the EEC Treaty by the Pretore, Padua, for a preliminary ruling in the criminal proceedings pending before that court against

THE COURT composed of: J. Mertens de Wilmars, President of the First Chamber, Acting as President, Lord Mackenzie Stuart (President of the Second Chamber), P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges, Advocate General: F. Capotorti Registrar: J. A. Pompe, Deputy Registrar

gives the following

JUDGMENT

Facts and Issues

I — Facts and procedure

II — Observations lodged by the parties under Article 20 of the Statute of the Court

A — Observations of Mr Grosoli

B — Observations of the Italian Government

C — Observations of the Commission

III — Oral procedure

Decision

Costs

I —. Facts and procedure

1. In order to stabilize consumer prices in Italy the Council by Regulation No 2453/76 of 5 October 1976 on the transfer to the Italian intervention agency of frozen beef and veal held by the intervention agencies of other Member States (Official Journal L 279, p. 3) made available to the Italian intervention agency 40000 tonnes of edible frozen meat for the purpose of its sale on the national market before 1 April 1977. This time-limit was ultimately extended by Council Regulation No 1440/78 of 20 June 1978 amending Regulation No 2453/76 (Official Journal L 173, p. 6) until 31 December 1978.

2. On 26 July 1977 the Comitato Interministeriale dei Prezzi [Interde- partmental Committee on Prices], hereinafter referred to as the Price Committee, which is the Italian institution having power to fix the prices of goods and services, decided by Order (Provvedemento) No 35/1977 (Gazzetta Ufficiale della Repubblica Italiana No 207 of 29 September 1977) that as from 29 July 1977 the maximum consumer prices of frozen meat from adult bovine animals should over all the national territory be those set out in paragraphs 1 and 2 of the operative part of the order. Although Regulation No 2453/76 is cited in the preamble, the order of the Price Committee is interpreted to the effect that the maximum consumer prices apply not only to the 40000 tonnes of meat made available by the Community but to all frozen meat marketed in Italy.

3. In the course of a health inspection at the premises of a butcher it was found that the prices he charged for certain parts of frozen meat were higher than the prices laid down by the above-mentioned order of the Price Committee. The butcher stated that he had bought the parts wholesale from S.p.A. Grosoli at prices which were already themselves higher or in certain cases very close to those laid down by the Price Committee for retail sale.

4. By order dated 15 July 1978 the Pretore requested the Court to give a ruling under Article 177 of the EEC Treaty:

5. The Pretore recalls that the Court, in its judgment of 26 February 1976 in Case 65/75 relating to criminal proceedings against Riccardo Tasca ([1976] ECR 291), held that in eveny case it is for the national court to decide whether the maximum prices which it is called upon to consider produce such effects as to make them incompatible with the Community provisions on sugar. This criterion cannot however, in the Pretore's opinion, be accepted in criminal proceedings, since by formally permitting a binding system of prices laid down by the authorities to continue to exist it ultimately leaves doubt as to its actual application since it thus gives rise to serious inequality between producers or traders who decide to abide by that system — possibly selling the product at a loss — and those who consider that they are not subject to it and consequently charge prices higher than those laid down by the authorities.

6. The order making the reference was lodged at the Court Registry on 5 October 1978.

II —. Observations lodged by the parties under Article 20 of the Statute of the Court

A —. Observations of Mr Grosoli

B —. Observations of the Italian Government

C —. Observations of the Commission

III —. Oral procedure

1. By order dated 15 July 1978, received at the Court on 5 October 1978, the Pretore, Padua, requested the Court under Article 177 of the EEC Treaty to give a ruling as to the compatibility with the Community rules of a binding system of prices laid down by the authorities and limited to the retail sector alone, taking into account the fact that in such a case the question of the constitutionality of the legislative measures on prices adopted by the Italian State is said to be justified in relation to Article 3 of the Constitution of the Italian Republic.

2. This question concerns on the one hand Order No 35/1977 adopted by the Italian Comitato Interministeriale dei Prezzi [Interdepartmental Committee on Prices], hereinafter referred to as the Price Committee, on 26 July 1977 in relation to the maximum consumer prices for frozen beef and veal (Gazzetta Ufficiale della Repubblica Italiana No 207 of 29 September 1977) and on the other hand the Community rules on the common organization of the market in beef and veal. The question arose in criminal proceedings against the legal representative of a commercial meat undertaking for infringing the aforesaid order.

3. 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 the provisions of Community law. On the other hand, the Court has jurisdiction to supply the national court with all the criteria for interpretation coming within Community law so as to enable that court to determine whether such rules are compatible with Community rules.

4. The third reference in the preamble to Order No 35/1977 of the Price Committee refers to Council Regulation (EEC) No 2453/76 of 5 October 1976 on the transfer to the Italian intervention agency of frozen beef and veal held by the intervention agencies of other Member States (Official Journal L 279, p. 3). According to the second recital to that regulation the reason for the transfer measure was the economic situation in Italy at the time, in particular the very high rate of inflation and the transfer was intended to help to stabilize consumer prices. The sale of the meat transferred to the Italian intervention agency was made at flat rate prices fixed in advance by the Commission and only retailers or their authorized agents were allowed to make applications to purchase (Articles 3 and 8 of Commission Regulation No 2793/76 of 18 November 1976 on the detailed arrangements for implementing Regulation No 2453/76 (Official Journal L 319, p. 24)).

5. Although the consumer price of this meat was not laid down by the Community rules, the latter must nevertheless, in view of their anti-inflationary objective, be interpreted as authorizing the Italian Government to fix the prices by means of national provisions, provided that the profit margin allowed to retailers should not be so low as to hinder the disposal of the products in question.

6. Assuming that Price Committee Order No 35/1977 must be interpreted as applicable not only to the meat transferred to Italy under Regulation No 2453/76 but to all frozen meat at the retail stage, the question put by the Pretore, Padua, raises the more general problem of the powers of Member States in relation to prices applicable to agricultural products covered by a common organization of the market.

7. As the Court has held in a consistent series of judgments — that of January 1975 (Case 31/74 Galli [1975] 1 ECR 47) and those of 26 February 1976 (Case 65/75 Tasca and Joined Cases 88 to 90/75 SADAM [1976] 1 ECR 291 and 323) as well as in the judgment of 29 June 1978 (Case 154/77 Dechmann [1978] ECR 1573), 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. 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.

8. The Court stated in the same judgments that in every case it is for the national court to decide whether the maximum prices which it is called upon to consider produce such effects as to make them incompatible with the Community provisions in the matter. In this respect it is necessary to take account of the specific nature of the organization of the market in question.

9. As regards the characteristics of the common organization in beef and veal it should be remembered that it includes a price system and a system of trade. The price system is based on a guide price fixed annually by the Council for adult cattle. Intervention measures are provided in the event of the market prices' falling a certain extent below the guide price. The fresh or chilled meat purchased as a result of intervention measures is frozen and stored by the intervention agencies. The sale of the meat so stored must be decided at the Community level and must be made at prices established by tender or fixed at a flat rate in advance by the Commission. The system of trade with non-member countries involves in particular levies and refunds. The basic levy is determined each month separately for adult cattle and for frozen meat. Flat-rate coefficients applicable to the levies on adult cattle are used to calculate the levy on fresh or chilled meat. As a result of various international agreements certain derogations have been made from the system.

10. It is apparent from the observations and figures given during the proceedings before the Court that frozen meat on the one hand and fresh or chilled meat on the other do not fully compete with one another on the Community markets. Consumer preference may to a certain extent prevent a rigid automatic connexion between the prices of the two classes of meat. The differences in prices of the different cuts, with or without bone, may be another source of uncertainty. These are details of the common organization of the markets in beef and veal which the national court is free to take into account, along with other factors in the organization, to decide whether a national measure jeopardizes its objectives or functioning.

11. In the order for reference the Pretore, Padua, expresses misgivings in following the judgment of the Court in so far as it leaves the national court the task of deciding in every case whether the maximum prices laid down by the national authorities produce such effects as to make them incompatible with the Community provisions. In the Pretore's view this criterion is not acceptable in criminal proceedings since by formally permitting the maintenance of the price system it leaves its application in doubt and thus creates inequality between traders who decide to comply and those who consider they are not subject to it.

12. This objection however cannot be regarded as decisive. The task of the national court in the division of jurisdiction between the Court of Justice of the European Communities and the national courts in not basically different from the assessment of the economic factors which the national court has often to undertake in applying its municipal law. Further there can be no inequality between traders as alleged since the national legal system offers individuals the necessary recourse to ensure uniformity in the application of the legal rules.

13. It follows from the foregoing that the question should be answered to the effect that outside the scope of Regulation No 2453/76 the unilateral fixing by a Member State of maximum prices for frozen beef and veal at the retail stage is incompatible with the common organization of the market in beef and veal only to the extent to which it endangers the objectives or the operation of that organization.

14. The costs incurred by the Government of the Italian Republic and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable and as these proceedings are, in so far as the party charged in the main prosecution is concerned, in the nature of a step in the proceedings 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 Pretore, Padua, by order of 15 July 1978, hereby rules:

(1) Council Regulation No 2453/76 of 5 October 1976 on the transfer to the Italian intervention agency of frozen beef and veal held by the intervention agencies in other Member States, in conjunction with the regulations implementing it, must be interpreted as meaning that the Italian Government is authorized to fix by national measures retail prices for such meat on condition that the retailers' margin of profit is not so small as to hinder the marketing of the products in question.

(2) Outside the scope of that regulation the unilateral fixing by a Member State of maximum prices for frozen beef and veal at the retail stage is incompatible with the common organization of the market in beef and veal only to the extent to which it endangers the objectives or the operation of that organization.