61975C0040
OPINION OF MR ADVOCATE-GENERAL REISCHL
DELIVERED ON 9 DECEMBER 1975 (
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Mr President,
Members of the Court,
To counteract rising prices on the domestic market the Italian Government on 24 July 1973 issued Decree-law No 427 which on 4 August 1973 became Law No 496. As a result the prices of producers, wholesalers and retailers of certain important foods, including pasta products from durum wheat, were temporarily frozen at the level at which they were on 16 July 1973 and increases were allowed only in December 1973 and September 1974. On the other hand the said Law provided that the Italian State intervention agency for agricultural products, the AIMA, could with ministerial consent intervene to control the Italian cereal market by purchases, storing and sale, the conditions for the sale on the domestic market being determined by an interministerial committee.
In application of these provisions the AIMA purchased on the world market as from September 1973 considerable quantities of durum wheat at an average price of 18500 lire per 50 kg. The greater part of this durum wheat was sold with the consent of the Interministerial Committee in various stages between September 1973 and April 1975 to Italian manufacturers of semolina and pasta. The prices lay between Lit. 11000, 13000 and 13600 per 50 kg, whereas the price on the Italian market at the period in question lay between Lit. 11500, 18500 or even 20000 per 50 kg.
These facts gave rise to criticism from competitors of the Italian manufacturers of pasta in other Member States. Thus the French association of pasta manufacturers, which took the view that the Italian action to keep prices down was to be regarded as an unlawful aid under the EEC Treaty, sent a telegram to this effect in September 1973 to the departments of the Commission. This protest was repeated in a telegram in October 1973.
Although the Italian measures were not notified in accordance with Article 93 of the Treaty, the Commission nevertheless, as it said in the proceedings, had already initiated a review in September 1973. In this connexion there were discussions between departments of the Commission and a delegation of the semolina manufacturers; the Management Committee for Cereals was involved as well as the Working Party on Questions of Competition in Agriculture; there were explanations by the Italian Government and repeated talks between the officials of the Commission and the officials of the Italian Government.
The Commission came to the view that there was no distortion of competition and no prejudice to trade between Member States, that the contested measure could not be regarded as incompatible with Article 92 and that therefore there was no cause to start proceedings under Article 93 of the EEC Treaty, because the nature of the Italian rules was such that only pasta which was intended for domestic consumption was affected by the action to keep prices down.
The undertaking Bertrand, a French manufacturer of pasta with its registered office in Grigny (Rhone), considers this view to be wrong. In its opinion the Italian measures to keep the price of durum wheat down benefited exported products also and there was therefore an aid incompatible with Article 92 of the EEC Treaty since trade between the States was affected and there was distortion of competition to the prejudice of producers in other countries. The plaintiff argues that the Italian exports of pasta to France had increased during the period in question while French consumption had remained the same. In particular it was shown that in January 1974 Italian manufacturers of pasta had effected sales in France at prices which were below the French selling prices. In this way Bertrand had lost a share of the marked of some 670 metric tons and had been compelled to approximate its prices to the Italian prices and thus suffer loss of profit. Up to 1 August 1974 there had been in total damage which could be set at FF 250000.
The applicant brought an action before the Court on 22 April 1974 on the grounds that the Commission ought to have intervened against the Italian measures and required their abolition, failure to do so being a breach of official duty and claimed that the Commission should pay the sum of FF 250000 together with interest at the discount rate of the Bank of France from the bringing of the action as compensation for the alleged damage. Alternatively it is claimed that the Commission should pay FF 1 as provisional damages and that an expert should be appointed to establish the amount of the damage suffered by the applicant. My opinion on these claims, which the Commission asks you to reject, is as follows:
1.
Because the defendant has expressed doubts, having regard in particular to Article 38 (1) of the Rules of Procedure, that is, to the necessity of stating the grounds of the claim for damages, it is necessary first to consider whether there are objections to the admissibility of the application.
There are good grounds for such objections.
It is to be observed first of all that the applicant has mentioned only a sum by way of damages. It is true it explains that having regard to the fact that its narrow profit margins did not allow greater price reductions, it has suffered market losses of some 670 metric tons and that it had to reduce its profit margin in the cause of adjusting to the Italian selling prices. There are, however, no particulars in the application of how the sum is calculated and it is not explained to what extent and for what periods reductions in the normal selling prices had to be made.
Further the allegation is made in the application that the said losses were due to Italian competition. On the other hand nothing is said as to why other influences, such as those arising from the domestic market, should not come into consideration and on what grounds, such as those based on long-standing business relations, it should be accepted that the applicant's expectations with regard to the maintenance of the extent of its business were justified.
Finally, particulars are also missing in relation to the claim that the Italian import prices are due to the fact that as a result of the Italian action to reduce prices the costs of the manufacture of exported pasta products were reduced. On this point it would surely have been appropriate to show that other factors (more rational production methods used by the Italian manufacturers, use of common wheat and such like) could not provide the explanation. It would also have been appropriate for the purpose of giving sound reasons on this subject to make a comparison of prices. This would have had to refer to the price level of pasta products on the Italian domestic market and how they compared with export prices. It ought, moreover, to have covered the movement of prices in the past, that is, it would have had to be shown that, on the assumption that the market prices for durum wheat and manufacturing costs were unchanged, the Italian prices dropped during the relevant period or it should have been shown that, on the assumption of rising market prices for durum wheat in the 1973/74 marketing year, the Italian prices had not risen to the extent that would have been expected if artificially low-priced durum wheat had not been used. There is nothing of this nature in the application.
In my opinion it is accordingly not surprising that the Commission has raised the question in its defence whether the application can be regarded as admissible. If the relevant provisions were strictly applied one could well conclude that it is not.
If I do not propose that the Court should so decide, it is only because I do not wish to lay myself open to the criticism of exaggerated regard to formalities in the interpretation of Article 38 (1) of the Rules of Procedure. Therefore I shall still deal with the substance of the case.
2.
So far as the grounds of the claim are concerned, the applicant has argued that it has suffered damage by reason of a wrongful omission on the part of the Commission. The contested Italian measures aimed at reducing the prices of durum wheat (sale at prices below the market level, and partly at a loss) must be regarded as an unlawful aid under Article 92 of the EEC Treaty. The Commission was therefore obliged to procure their abolition. If the Commission had in good time discharged this obligation, the object of which was to protect economic undertakings, which were in competition with those favoured, it would have seen to it that the Italian manufacturing costs for pasta were based on the market prices and therefore the low-priced offers in France would not have been possible and the applicant would not have suffered a decrease in sales and a narrowing of its profit margins.
Proceeding from these grounds several questions arise in relation to the Community law on liability for wrongful acts or omission as frequently encountered in the case-law:
(a)
It must be ascertained whether the Commission indeed had cause to initiate the procedure under Article 93, that is, whether the Italian action to reduce prices violated the principles of Article 92.
(b)
It must be ascertained whether the alleged damage was caused by the fact that the Italian export prices for pasta products were influenced by the price reduction of durum wheat.
(c)
Finally the question arises whether the Commission can be held liable for a wrongful act or omission and in what way the damage is to be defined.
In this examination I shall first deal with the second question since it appears to me to give rise to the least problems. Moreover, it may possibly make it unnecessary to deal with the whole substance of the case.
(a)
So far as the Italian export prices for pasta products are concerned it is undisputed that in January 1974 an Italian manufacturer effected sales in France at prices between FF 2.385 and 2.505 per kg (these prices related to 500 g packets in lorry-loads of five metric tons). It is also undisputed that the French pasta manufacturers were at the time demanding prices between FF 3.08 and 3.20 per kg.
This comparison of prices could give rise to the suspicion that the Italian prices were due to a distortion in competition. Since at the time cheap durum wheat was sold by the Italian intervention agency AIMA to the Italian pasta manufacturers it might be assumed that there was a connexion between this action, which influenced the manufacturing costs, and the level of the Italian export prices.
This, however, is not sufficient in the present case. Even if it may be possible to see this as constituting some evidence, proof of cause and effect, that is, that the Italian pasta products exported benefited from the price reducing action of the AIMA, has certainly not been furnished.
In this respect, significance and weight must be attached to submissions, which included official statistics, advanced by the Commission in order to undermine the applicant's argument.
From this the following picture arises of the quantitative development of the pasta exports from Italy to France: In 1971 16700 metric tons, in 1972 21900 tons, in 1973 22200 tons and in 1974 22900 tons. A continued increase in exports was thus to be observed from 1971 onwards, that is, long before the contested action to reduce prices began and here it is fitting to observe that the French consumption and the French manufacture of pasta products has declined since 1970, as the Commission has stated without being contradicted. The statistics show in particular that during the relevant period (the 1973/74 marketing year) exports had increased only marginally. The applicant's argument that the prices of exported pasta products were influenced by the sales of cereals by the AIMA would be justified only by the finding that the exports had substantially increased and that a clear upward turn in the statistics could be seen. This may be said in particular with regard to the fact that at the period in question there was a prohibition on the export of pasta products to third countries, for this must naturally have led to the Italian producers' trying to make good this loss (according to the figures given by the Commission it was some 22700 metric tons between 1972 and 1974) by increased exports to Member States of the Community. The fact that clearly there was no such development certainly destroys the applicant's view that there was a causal link between the reduction in the manufacturing costs of the Italian pasta products and the prices for exports to France.
The price trends are also significant. The Commission was not challenged when it stated that the free-at-frontier import prices of Italian products in France — I would like next to turn my attention to these — in the period before the introduction of the Italian measures were FF 1.50 per kg (first quarter of 1973), FF 1.42 per kg (second quarter of 1973) and FF 1.69 per kg (third quarter of 1973). In the last quarter of 1973, that is, after the Italian support action began, the price climbed to FF 2.03 per kg; there was a further increase in the first quarter of 1974 (FF 2.40 per kg) and in the second quarter of 1974 (FF 2.52 per kg). There was a slight reduction in the third quarter of 1974 to FF 2.48 per kg, while in the fourth quarter of 1974 the price was FF 2.61 per kg. These average prices, moreover, agree with the applicant's particulars regarding the offer prices of an Italian pasta manufacturer applicable in France in January 1974. The price trends shown here do not fit the applicant's argument that the action of the AIMA in reducing prices had an effect upon the exported pasta products. If this had been so then there should have been a reduction in the Italian export prices or at least there should have been no increase.
A comparison with the movement of the French prices of pasta products ex-factory is, moreover, instructive. Even before the beginning of the period taken for comparison these were clearly higher than the Italian export prices. In the first two quarters of 1973 they were FF 2.17 per kg and in the third quarter of 1973 FF 2.22 per kg. There was thus a difference of between FF 0.53 and 0.75 in relation to the Italian export prices. It increased in the last quarter of 1973 to FF 1 and then continued at FF 0.63, 0.51, 0.78 and 0.88 during the following quarter. It may thus be concluded that on the whole the Italian and French prices kept in step without a break. It is striking, and this contradicts the. applicant's argument, that during the relevant period a sharp increase in Italian export prices in comparison with the internal French prices was to be observed and that the difference between the prices narrowed after the introduction of the Italian measures. It is also striking that the more pronounced rise in the Italian price index obviously corresponds with the rise in the price index for durum wheat on the Italian market.
In my opinion all this leads to the conclusion that, contrary to the applicant's view, there were causes for the difference between the French and Italian prices other than the reduction in the durum wheat prices in Italy, perhaps more rational manufacturing methods used by the Italian producers, the use of common wheat for exported goods, narrower profit margins of the importers, the weakness of the Italian currency or other production factors. At least on these facts the applicant cannot rely solely on the prima facie evidence mentioned above. It ought to have adduced genuine proof of the correctness of its argument that the price advantage of the Italian imported goods was due to the measures of the AIMA in reducing the prices of durum wheat on the Italian market.
For this purpose it would for example have been necessary to consider a comparison with internal Italian prices and their trends or it would have to have been shown, by reference to the trends in the market price for durum wheat, that on using durum wheat for which the normal market price had to be paid the Italian export prices would have had to increase even more sharply than they did as shown by the abovementioned statistics. Nothing like this is to be found in the applicant's argument. Even after the detailed objections of the defendant the applicant both in the reply and in the oral procedure simply limited itself to maintaining that the Italian price advantage could not be explained otherwise than by the use of the cheaper durum wheat.
Accordingly there can only be a finding that an essential factor in a claim based on liability for a wrongful act or omission, the causal connexion between the Italian measures which were not objected to by the Commission and the alleged damage to the applicant, has not been proved. The application must accordingly be dismissed for this reason alone.
(b)
It is not necessary to add any further observations. Nevertheless I would like to make a few observations on the further question whether the conduct of the Commission could be regarded as unlawful and wrong within the meaning of the law on liability for breach of official duty.
Since the only criteria mentioned by the applicant in this connexion is that of Article 92 of the EEC Treaty - provisions on the organization of the market ought scarcely to come into consideration as protective measures in the present case —, it must above all be considered whether the Commission was under a duty to intervene on the basis of Article 92 et seq., that is, whether the Italian measures to reduce the price of durum wheat must be regarded as unlawful aids.
Under Article 92 any aid granted by a Member State or through State resources which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States, is incompatible with the common market. If the Italian measures with which the present case is concerned are to be considered against this then it must briefly be shown how they have functioned.
According to what we heard from the Commission in the proceedings the starting point was the level of the maximum prices for pasta products laid down by the State. This was the basis of the price of durum wheat which with a normal profit margin was necessary to maintain the selling prices of pasta products laid down by the State. Further information was provided as to the quantities of pasta sold on the Italian market during a particular period by the various manufacturers, the criterion for which was the value-added tax which was due only in respect of domestic sales and the average prices at which manufacturers bought durum wheat on the market during the particular period were calculated. By means of the difference between the actual purchase price of durum wheat and the purchase price necessary to maintain the selling prices under the regulations, the financial losses could be determined which the individual manufacturers suffered during a reference period. On this basis the quantities of durum wheat and the selling prices allowed by the AIMA and necessary to compensate for the loss were determined. So far as the supply of durum wheat is concerned, the manufacturers were thus retroactively put in a position which seemed necessary to keep within the maximum prices for pasta.
In my opinion in view of such a system the question may be raised whether in fact we are concerned with favouring, that is, with a genuine aid within the meaning of Article 92, or whether it may be said to be only a balancing, compatible with the Treaty, of burdens imposed by the State — observance of maximum prices in the sale of pasta.
Of more significance surely is what may be learned from considering two other criteria of Article 92, the distortion or threat of distortion of competition, and the affecting of trade between Member States.
The strong impression in fact is given that the Italian system for reducing the price of durum wheat, because it was based on the value-added tax, which is due only in respect of domestic sales, and because administrative tax controls were provided, it was so designed that there was a guarantee that only pasta which was intended for domestic consumption benefited from the sales of durum wheat at reduced prices and that this carefully-directed action would therefore not affect the export of pasta to other Member States. On the other hand it is also established that imports into Italy of pasta made of durum wheat from other Member States were insignificant inter alia because common wheat is also processed, which is not permissible in Italy and also because, this applies particularly to the French manufacturers, of the higher prices of foreign products compared with the Italian production, and that they did not decrease but even increased between the years 1972 to 1974. Thus the effects of the Italian measures on the inter-State trade in durum wheat and semolina from durum wheat, which trade was almost non-existent owing to the scarcity of the Community production, seems to have been completely insignificant. It may therefore be assumed that the Italian action in reducing the price of durum wheat did not give rise to the accompanying characteristics essential for Article 92, namely distortion of competition and the affecting of trade between Member States, and that therefore, in the absence of an infringement of the provisions on aid, there was no cause for the Commission to intervene under Article 93.
If, however, this assessment is regarded as not being fully valid, it remains finally to inquire whether a complaint can lie against the Commission on the ground of its failure to act.
In this connexion I do not base my argument on the assumption that the Italian system may perhaps not have functioned quite reliably and that there was therefore the possibility that reduced-price durum wheat was used in the manufacture of exported pasta, for there are no compelling reasons for such an assumption. I have in mind rather a fact, which is apparent from Case 60/75 (Russo v AIMA), that the Italian action to reduce prices had effects solely on the Italian durum wheat market and the prices on that market. The prices were below the level that would have been reached without the intervention measures, that is, they were below the level in the Community. Every manufacturer of pasta could benefit from these effects, even in so far as sales were effected on the markets of other Member States. In view of this the question may be raised whether action ought not to have been taken under Article 92 since effects were associated with the support action which distorted competition and could affect trade between Member States.
The answer to this question in my view turns essentially on the extent of the said effects and whether they affected the market generally or only particular cases. It is important in addition to know whether the Commission should have taken account of such effects and had regard to them in its evaluation.
It seems to me — let me anticipate my conclusion — that from both points of view it is scarcely possible to justify any complaint against the Commission. In my view it may be said that the Commission, in judging a system which was basically designed to compensate Italian manufacturers of pasta for losses involved in domestic sales, and in view of a shortage in the durum wheat market in the Community, could not be expected to anticipate the said effects. In addition the effects, if there were any, on inter-State trade, as an analysis of the statistics show, were so minimal that they could be disregarded in the context of Article 92.
In view of my main observations on the question of the proof of causality I can limit myself now to these brief adumbrations which are naturally based only upon a cursory examination. In view of this — other factors in the claim for damages need not be gone into — I think it may be conclusively held that in any event there are no sufficient grounds for finding that the claim based on liability for a wrongful act or omission is justified.
3.
To summarize I propose that the Court should not accede to the applicant's request for a report by an expert which would only be limited to a consideration of its books, that is, to assessing the fall in sales and profit, and that it should dismiss the application, if not as inadmissible under Article 38 (1) of the Rules of Procedure, then as unfounded, in view of the absence of any indication of further evidence. The costs of the proceedings in this event must be borne by the applicant.
(
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