Report for the Hearing delivered in Case 136/86

1. Facts and written procedure

The plaintiff in the main proceedings, the Bureau national interprofessionnel du cognac (hereinafter referred to as BNIC), is an inter-trade body concerned with the market in Cognac wines and spirits and was established by 1941 legislation which has been amended on several occasions. According to the provisions applicable at the material time (order of the Minister for Agriculture of 10 May 1975), the BNIC is composed of:

According to the order of 14 November 1960, the proceedings of the BNIC are presided over by a senior official of the Ministry of Agriculture, appointed by the Minister for Agriculture, who also appoints a government commissioner and, if necessary, a deputy government commissioner. The commissioner attends all meetings of the BNIC and its standing committee. He may either give his assent to the decisions adopted or submit them to the Minister for approval (Article 4).

On 15 June 1978, the general assembly of the BNIC adopted rules of procedure laying down its working procedures, as provided for in Article 5 of the said order. The rules of procedure, approved by an order of the Minister for Agriculture of 2 August 1978, determine the conditions under which ordinary and extraordinary general assemblies are called and how they are conducted, the powers of such assemblies, and the powers and working procedures of the standing committee and the technical committees. Sanctions are also laid down for infringements of the inter-trade agreements made generally binding under the law of 10 July 1975.

Article 2 of that law, supplemented and amended by Law No 80-502 of 4 July 1980, provides as follows:

Article 3 of the law of 10 July 1975 also provides that:

On 29 October 1979, the government commissioner to BNIC, following the deliberations of that body on 18 October, adopted a decision regulating certain matters in regard to the 1979/80 marketing year. Under Article 3 of that decision, the production quota provided for in Article 2 of the decision of 2 July 1976 supplementing the organization of the market in the Cognac region was to be composed as follows:

Article 9 establishes a trade levy for the financing of measures for the organization of the market in Cognac wines and spirits and in particular for the study and identification of outlets (other than cognac and Pineau de Charentes) for musts and wines from the specialized white vineyards of the defined region of Cognac. That levy was payable as follows:

The funds raised by the implementation of that provision were to be used in the following manner: FF 300 per hectolitre of pure alcohol was to be paid to winegrowers who had been unable to sell their marketing quotas in whole or in part and who agreed not to produce cognac from it: the remainder, after deduction of operating costs, was to be paid into a fund intended to finance the measures referred to above (Article 10).

The part of that decision dealing with the levy was reproduced in an inter-trade agreement concluded within BNIC on 29 October 1979. In addition, Article 4 of that agreement provides as follows:

The agreement was made generally binding by a ministerial order of 2 January 1980 adopted under Law No 75-600 of 10 lulv 1975.

BNIC has brought proceedings before the tribunal d'instance, Saintes, against a winegrower from the region concerned for payment of the amount of FF 7916.02, the levy owed by that winegrower for exceeding the marketing quota fixed at the maximum of 8 hectolitres of pure alcohol per hectare (Article 9 (A) of the decision of the government commissioner and Article 2 of the inter-trade agreement).

The tribunal d'instance raises the question whether

It also notes that those quotas are fixed by decision of the government commissioner and not, as in the case of the fixing of a minimum purchase price for cognac, by a mere inter-trade agreement made generally binding by an inter-ministerial decree. It further observes that it was the aim of the levy that was specified by the inter-trade agreement of 23 November 1979, which was made generally binding, as stated above, by a ministerial order.

Consequently, the tribunal d'instance, after pointing out that having regard to the aim of the levy at issue, the inter-trade agreement is contrary to Article 85 (1) of the EEC Treaty (judgment of the Court of 30 January 1985 in Case 123/83 BNIC v Clair [1985] ECR 391), and part of that aim is to fix a price for cognac different from that provided for in the Community rules (since part of the levy was intended to be used to pay a price supplement to certain producers), stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling:

The order for reference was received at the Court Registry on 4 June 1986.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted on 22 August 1986 by the Commission of the European Communities, represented by Giuliano Marenco, acting as agent, and on 25 August 1986 by the plaintiff in the main proceedings, represented by Philippe Calmeis, Avocat.

Upon hearing the report of the Judge-Rapporteur and the view of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, it asked the plaintiff in the main proceedings to reply in writing to a certain number of questions and to furnish the Court with certain documents. The plaintiff complied within the prescribed time-limit.

2. Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities

BNIC submits the following observations :

2.1.1. By way of introduction, BNIC describes the economic situation on the market in white wines and musts and in that of cognac, as the latter is organized under national law. It draws attention to the increase in production until quotas were introduced for the 1975/76 marketing year, the stagnation and sometimes even the drop in sales between 1972 and 1973 (as a consequence of the oil crisis) and the increase in stocks. It was necessary to take action to diversify and improve production, particularly in regard to the quality of the finished product, cognac, and to develop a programme of study and identification of new outlets for agricultural products, wines and musts in order to ensure the economic stability of the region, in which 63000 winegrowers and about 9000 persons employed by wine dealers earn their living from viticulture. It emphasized that it was also necessary to take account of satellite industries situated in the region and of the importance of the latter in regard to foreign trade. Cognac alone represents one-third of the Poitou-Charente Region's exports, one-quarter of French exports of wines and spirits and 12% of French exports of agricultural and food products.

2.1.2. After describing its own functioning, BNIC expresses the view, on the basis of the judgment in the abovementioned case in which it was a party, that Article 85 (1) of the Treaty is not applicable in this case for the following reasons.

2.1.3. Furthermore, the production quotas do not hinder trade between the Member States. Neither winegrowers nor dealers in the defined region of Cognac can be in a position of inferiority vis-â-vis other French or even foreign winegrowers or dealers producing or marketing competing spirits inasmuch as they hold considerable stocks for production and commercial activities, abundant raw materials which increase in value with the passage of time. It is not in the areas of production, marketing or storage that winegrowers and dealers in the defined region can compete with each other or with their French or foreign counterparts but by improving the quality of wines for distillation and spirits from Cognac.

2.1.4. The sole purpose of the quota is to provide a point of reference on the basis of which the levy may be charged, and that levy has absolutely no practical effect with regard to commercial and economic relations between producers, winegrowers and dealers at national level and at the level of imports and exports. It is therefore perfectly compatible with Community law. The establishment of the special levy for a single year cannot distort competition. It is intended merely to finance a study and research programme designed to promote technical and economic progress in winegrowing and to improve the quality of wines, and the results of such a programme are uncertain.

2.1.5. BNIC concludes that:

First approach

The Commission of the European Communities submits the following observations.

2.2.1. The Commission begins by analysing the compatibility of the cognac production quotas with the common organization of the market in wine and the prohibition of measures equivalent in effect to a quantitative restriction on exports. It suggests a reply in the negative to those questions. First of all, spirits, and therefore cognac, are not subject to the common organization of the market in wine and are not even an agricultural product within the meaning of the Treaty, since they do not appear in Annex II. Secondly, the production quota, by definition, makes no distinction between goods intended for the internal market and those intended for export.

2.2.2. With regard to the compatibility of the measures at issue with Article 85, the Commission points out that they were adopted by the government commissioner after discussion in the general assembly of BNIC. The question is therefore whether the State measure may interfere with the effectiveness of the competition rules applicable to undertakings.

First approach

It cannot be said that the conclusion of agreements contrary to Article 85 was favoured by the provisions at issue. Nor do those provisions reinforce the effects of an agreement. The present case, unlike BNIC v Clair (judgment of 30 January 1985 in Case 123/83 [1985] ECR 391, 402), does not concern an agreement made generally binding on third parties by a ministerial order. The decision of the government commissioner was not preceded by an agreement but, as the last citation in the preamble indicates, by resolutions of the general assembly of BNIC. Those resolutions may not be analysed as agreements within the meaning of Article 85 (1) inasmuch as they were not intended to determine the behaviour on the market of the undertakings represented in BNIC.

Second approach

The Commission goes on to raise the question whether it could not also be considered that, in this case, the State measure interferes with the effectiveness of Article 85. The government commissioner's decision merely incorporates the results of the discussion within BNIC (according to Article 4 of the inter-ministerial order of 14 November 1960, it would appear that only the Minister for Agriculture may adopt measures different from those agreed between the undertakings concerned). He did not, therefore, merely hear the groups concerned before reaching his decision.

It is true that persons represented at the general assembly of BNIC are not bound in regard to their behaviour on the market by the resolutions of that assembly; it is the State intervention which gives those resolutions binding force. However, that intervention renders nugatory conduct of the same kind on the part of undertakings, prohibited by Article 85 (1) of the Treaty.

The fixing of production quotas constitutes a restriction of competition capable of affecting intra-Community trade when a large part of the production at issue is exported within the common market, as is the case here. It therefore comes within the scope of Article 85 (1).

3. Replies to questions put by the Court

BNIC replied to questions put by the Court asking it to state the date on which the inter-trade agreement made generally binding by the ministerial order of 2 January 1980 was concluded and the reason why an inter-trade agreement was concluded after the decision of the government commissioner of 29 October 1979, an agreement which reproduced the part of the decision concerning the levy for exceeding marketing quotas.

The inter-trade agreement was drafted and signed on 23 November 1979.

With regard to the need to adopt that agreement, since the objectives were those fixed in the government commissioner's decision on the organization of the marketing year 1979/80, namely the identification of new markets and the principle of the establishment of a levy, the most important thing was to finance those objectives by creating new resources in the form of levies, since the use of parafiscal charges was not legally possible.

Therefore, since it was necessary to create a levy by inter-trade agreement, that agreement being governed by the law of 10 July 1975 by virtue of the procedure provided for, in particular, in the BNIC rules of procedure, it was essential for the draft inter-trade agreement to be submitted to the extraordinary general assembly after discussion by assemblies of each of the two interest groups (dealers and winegrowers) dealing exclusively with the implementation and detailed rules for the levy.

However, leaving aside the permanent and dirigiste intervention of the government commissioner in the drawing up of the inter-trade agreement, it is necessary to point out that that levy is only the consequence or at least the essential means of attaining the objectives defined in the government commissioner's decision organizing the marketing year, without forgetting the need for the procedure making the inter-trade agreement generally binding, in accordance with Article 2 of the Law of 10 July 1975.

1 Language of the Case: French.