61975C0045
OPINION OF MR ADVOCATE-GENERAL REISCHL
DELIVERED ON 20 NOVEMBER 1975 (
1
)
Mr President,
Members of the Court,
The case for a preliminary ruling, with which we have to deal today, is concerned with certain rules relating to the brandy monopoly in the Federal Republic of Germany. I therefore consider it appropriate first of all to make some observations on the basic provisions of the monopoly contained in a Law of 8 April 1922 as most recently amended by a Law of 2 March 1974.
The rule is that domestically-made brandy must be delivered to the Federal Monopoly Administration. The distiller receives from the Monopoly an acceptance price. This is computed on the basis of the basic price for brandy which is fixed by the Federal Monopoly Administration in such a way ‘that it covers the average manufacturing costs for one hl of wine-spirit in wellrun agricultural potato distilleries of average size’, that is, with an average production of 500 hl wine-spirit. Moreover there are deductions and additions, mostly scaled according to the quantities of the produce. The brandy is sold by the Monopoly at a price which is likewise determined by the Monopoly Administration. The normal selling price, there are other selling prices determined according to the use for which the brandy is intended, but which do not concern us here, includes the brandy duty and the so-called price margin, that is the acceptance price and the amount intended to cover the costs of the Monopoly.
Where there is exemption from the duty to deliver, for example, brandy distilled from fruit, a brandy surcharge is imposed. This is made up of the difference between the normal brandy selling price and the basic price for brandy less the average costs which the Federal Monopoly Administration saves by not accepting the brandy; this average amount was fixed at DM 21 for the period which is relevant to the main action. Provision is made, however, for additions and reductions according to the nature and quantity of the brandy produced; it is relevant whether the brandy was distilled in accordance with the distillation right laid down by the Monopoly Administration.
On the importation of brandy and products containing winespirit a monopoly equalization levy is payable. Products containing wine-spirit include wines and aromatic drinks similar to wine whose content of wine-spirit is above a certain percentage. The normal monopoly equalization for brandy for drinking and for drinks containing wine-spirit is determined by the difference between the normal selling price and the basic price for brandy. It thus contains the brandy duty and the so-called ‘Monopolausgleichspitze’ (monopoly equalization margin), which covers the cost of one hl of wine-spirit which the Federal Monopoly incurs by acceptance and sale of domestic brandy in respect of which there is a duty to deliver and which is capable of delivery.
The national proceedings, from which the present reference for a preliminary ruling has arisen, are concerned in particular with the lawfulness of this Monopolausgleichspitze.
In October 1970 Rewe-Zentrale, the plaintiff in the main action, had vermouths imported from Italy cleared through customs at its open customs warehouse and in January 1971 put certain quantities into free circulation. Thereupon monopoly equalization was demanded in application of the said provisions. In so far as it relates to the said margin Rewe considers the levy unlawful having regard to Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty. It claims that similar domestic products did not have to bear such a charge. Further it takes the view that because. the costs of the monopoly are not fixed internal taxation laid down by law but charges of an amount which varies according to price factors, they are not capable of compensation. There is also discrimination in so far as imported products are compared with domestic products which have to bear the brandy surcharge. In this respect it is significant that there is a reduction of the brandy surcharge according to the average amount of costs saved by the monopoly and that certain increases and reductions are provided for. It would be more correct to relate the comparison of charges to the lowest charge on domestic products.
On these grounds, Rewe brought an action before the Finanzgericht Rheinland-Pfalz. The latter stayed the proceedings by order of 10 April 1975 and referred the following questions for a preliminary ruling under Article 177 of the EEC Treaty:
1.
Are Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty to be interpreted as giving citizens of Member States from the end of the transitional period direct individual rights which national courts must protect?
2.
Does the levying of the part of the monopoly equalization called the Monopolausgleichspitze (monopoly equalization margin) on the import of Italian Vermouth violate the principles of the first paragraph of Article 95 of the EEC Treaty — and, in the event of Question 1 being answered in the affirmative, also those of Article 37 (1) because it is not intended to compensate for the burdening of the comparable domestic products with a tax but rather with the costs of the administration of the state monopoly?
3.
In the event of Question 2 being answered in the negative: In applying Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty are only the Monopolausgleichspitze on the one hand and the monopoly costs on the other to be compared with one another or does it depend on whether the imported product is not as regards its total price placed in a worse position by the levying of the Monopolausgleichspitze than the comparable domestic product?
4.
In the event of the first alternative of Question 3 being answered in the affirmative:
Is imported Italian Vermouth discriminated against within the meaning of Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty in that the Brandy Monopoly Law provides, for the wine spirit of imported products for consumption, a Monopolausgleichspitze of a uniform amount whereas for comparable domestic products the charges are the costs of the administration of the national monopoly scaled according to the quantity of the products?
It seems to me appropriate to preface the examination of these questions with two observations. The one relates to the concept of the organization of the market and the other to the criterion of comparison in the present case dependent on the nature of imported products.
(a)
Both the Federal Government and the Commission have stressed that the German system relating to the brandy monopoly, in so far as alcohol obtained from agricultural products is concerned, may be described as a national organization of the market for agricultural products. In my view convincing reasons were given for this and should not be lost sight of in dealing with the case.
Reference may be made on the one hand to the concept of the organization of the market and the characteristics applicable to it in Community law as laid down in the judgment in Case 48/74 Charmasson v Minister for Economic Affairs and Finance, Paris [1974] ECR 1383. According to that judgment there is an organization of the market where a regulation of the market by the national authority exists with the objective of stabilizing the market, ensuring a fair standard of living for the relevant agricultural community by means of guaranteeing sales outlets and assuring the availability of supplies to consumers.
It is on the other hand clear that raw alcohol obtained from agricultural products has been incorporated in Annex II to the EEC Treaty by Regulation No 7 of the Council of 18 December 1959 and has thus been recognized as an agricultural product within the meaning of Articles 38 to 46 of the Treaty.
It is likewise known that the organization of the brandy monopoly is intended to ensure a market equilibrium — production and demand should balance as far as possible — and that by means of guaranteeing the best return for agricultural basic products and the disposal of alcohol through a price guarantee its objective is to guarantee incomes and thus the different sizes of undertakings and the costs of production are taken into account in computing the acceptance-prices or, in respect of alcohol not subject to an obligation to deliver, the brandy surcharge. This objective of agricultural policy is clearly expressed in a series of provisions of the brandy monopoly. I refer to Article 25 of the Brantweinmonopolgesetze (Brandy Monopoly Law) according to which agricultural distilleries must be linked with an agricultural undertaking; only potatoes and cereals may be processed in the distillery and the residues of the distillery must be fed to the livestock of the holding connected with the distillery. I refer further to the fact that under Article 32 of this Law there must be an agricultural need for the establishment of new agricultural distilleries, that under Article 33 the right to distil is determined having regard to the area used for agricultural purposes and that under Article 33 (a) it is important in determining the right to distil whether the distillery holdings depend on the growing of potatoes and their processing into brandy. Moreover it should not be forgotten that under Article 37 distilleries belonging to fruit associations produce brandy exclusively from fruit which the members of the association in question have produced themselves and that, I will now limit myself to this but the list is not exhaustive, under Article 65 the basic price for brandy is based on the average manufacturing costs of one hl of wine-spirit in wellrun agricultural potato distilleries of average size.
In my opinion these facts are so significant that they cannot be sufficiently clearly stressed at the beginning of this inquiry. I shall later deal with the consequences which may be inferred therefrom for the present case.
(b)
The same applies to the second preliminary observation which is intended to set necessary limits to the scope of the inquiry.
The central questions in these proceedings is whether imported alcohol is discriminated against vis-à-vis domestic products. In judging it, it is important what domestic product is taken as a criterion of comparison. The main action is concerned with the import of Italian vermouth. Apparently alcohol from wine is used in its production. A comparable domestic product must likewise be alcohol obtained from wine. However, as far as this domestic product is concerned it has become clear in the proceedings that it is not subject under the brandy monopoly law to the obligation to make deliveries and, as appears from Article 76, it cannot be accepted by the monopoly. If this is right, and the national court must ultimately decide whether it is, so that if such alcohol cannot be bought and sold by the monopoly, then charges relating to the monopoly cannot constitute the difference between the acceptance-price and the sale price. The comparable domestic charge of the brandy surcharge is more relevant to such a product, that is, a charge which, because the selling prices laid down by the monopoly apply to such alcohol under Article 106 of the Brantweinmonopolgesetz, represents the difference between the selling price and the basic price having regard to the average costs saved (DM 21) and, where appropriate, certain surcharges and reductions.
In my opinion it is fitting to mention now that this fact too should not be lost sight of in the further consideration of the case.
First question
In the context of the first question, to which I shall now turn after these necessary preliminary observations, it must first be decided whether Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty gives rise from the end of the transitional period to direct individual rights which national courts must protect.
No difficulties arise in answering the question if one adheres strictly to its wording. All the parties who have made observations thereon have unanimously recommended an answer in the affirmative and indeed there are good reasons for this.
First it must be stressed that there is a clear obligation: this not only applies to the first paragraph of Article 95 but also to Article 37 (1) according to which, when the transitional period has ended, no discrimination by state trading monopolies regarding the conditions under which goods are procured and marketed must exist between nationals of Member States. It is also relevant that the Court has in Case 6/64 Costa v ENEL [1964] ECR 585 p. 597 already recognized the direct applicability of Article 37 (2) according to which the introduction of new cases of discrimination is prohibited. It may rightly be inferred from this that the concept of discrimination as such, which has the same meaning in Article 37 (1) and (2), is no obstacle to direct application (cf. Opinion in Case 82/71, Publico Ministero Italiano v SAIL Rec. 1972, p. 154).
It seems to me, however, open to question whether these observations suffice or whether, as in a number of other cases, after the facts have been ascertained, there is not cause to go beyond the questions and to indicate important aspects of Community law which are of importance for the decision in the case. I am referring to the observations of the Federal Government in which reference is made to Article 37 (4) and the argument is put forward that this leads in certain circumstances to the prohibition on discrimination in Article 37 (1) being relative. The inquiry ought at least to extend to this viewpoint.
Article 37 (4) provides:
‘If a State monopoly of a commercial character has rules which are designed to make it easier to dispose of agricultural products or obtain for them the best return, steps should be taken in applying the rules contained in this Article to ensure equivalent safeguards for the employment and standard of living of the producers concerned_…’
In my opinion the wording makes it clear that the objective of this provision is that there should be interdependence in respect of the said products, and probably not only for those in Annex II: the application of the prohibition on discrimination applies only in so far as equivalent safeguards for the employment and standard of living of the producers concerned can be ensured by certain positive measures. This is in no way to be understood as a so-called discretionary provision with little legal significance. The history of the origin of the provision and the fact that the delegations of various Member States attached great importance to the adoption of the said wording permit only the conclusion that the provision is of a mandatory nature.
Equivalent safeguards, as was rightly said in the proceedings, may be provided by means of national measures. Community-law measures, however, within the framework of the introduction of the common organization of the market, would be more appropriate. This certainly applies in a sphere such as the present where it is sought to achieve a common organization of the market (cf. the proposal of the Commission of 6 March 1972 for a regulation on the common organization of the market in ethyl alcohol of agricultural origin and supplemental provisions for ethyl alcohol of non-agricultural origin and certain products containing alcohol OJ C 43 1972, p. 3).
The attitude of the Commission accords with this as expressed in a recommendation of 22 December 1969 addressed to the Federal Republic of Germany relating to the restructuring of the State trading monopoly. It is stated therein that the national organization of the market in ethyl alcohol of agricultural origin should be replaced by one under Community law. Until the common organization of the market entered into force special measures were to be declared necessary under Article 37 (4). Thus imported brandy for drinking should basically be treated, so far as import charges are concerned, as if it were produced in a distillery with an annual production of 10000 hl of wine-spirit; further, the levying of a countervailing charge on the import of alcoholic drinks is declared to be lawful. The use of ethyl alcohol of non-agricultural origin, on which a special charge is likewise imposed, may also be limited.
It can therefore certainly be said that there are good grounds for the claim that Article 37 (1) applies to products mentioned in Article 37 (4) provided that equivalent safeguards for the employment and standard of living of the producers of alcohol of agricultural origin have not been created without reservation at Community level, as it is sought to achieve.
Having regard to the observations, made at the beginning, of the existence of a national German organization of the market in alcohol and the fact that in such a case the special rules of Articles 39 to 46 of the EEC Treaty apply, one may well go further and raise the question whether the general provisions of Article 37 (1) and the first paragraph of Article 95, which are mentioned in all the questions from the national court, cannot yet apply without reservation after the expiration of the transitional period because the national organization of the market has not yet been replaced by a common organization of the market.
When I raise this question I am conscious that the Court has already made relevant observations in Case 48/74. I refer to the statement that national organizations of the market could be retained until the establishment of a common organization of the market but not beyond the end of the transitional period. After the expiration of the transitional period national organizations of the market, which were in existence when the Treaty entered into force, no longer justify an infringement of the provision in Article 33 on the non-application of quantitative restrictions, even though an appropriate common policy has not yet been determined. In my opinion it is important that the decisive statement of the Court related to quantitative import restrictions on bananas into France and that in this respect it was stated that to continue permanently a simple quota system cannot respond to the conditions for the existence of a national organization of the market. The observations on the continued application of the national organizations of the market are accordingly a simple obiter dictum in the said decision and it must therefore be permitted to return to them in a case in which the question of the organization of the market actually arises and in which the effects of an argument to the disadvantage of national organizations of the market becomes clearly apparent.
Let me say at once that in dealing with the question whether national organizations of the market can exist after the expiry of the transitional period-there are good reasons for not stressing unduly the principle laid down in Article 8:
“the expiry of the transitional period shall constitute the latest date by which all the rules laid down must enter into force and all the measures required for establishing the common market must be implemented.”
and the principle contained in Article 40:
“Member States shall bring the common agricultural policy into force by the end of the transitional period at the latest.”
Otherwise, in my opinion, other principles enshrined with equal clarity in the Treaty, would not be sufficiently respected. Thus it should not be overlooked that in Article 38 (4), the opening provision of the title on agriculture, it is stressed that the operation and development of the common market for agricultural products must be accompanied. by the establishment of a common agricultural policy among the Member States. This provision thus lays down that without a common agricultural policy there can be no development of the common market for agricultural products. Further, it should not be forgotten that in Article 43 (2) there is reference to the replacement(Ablösung) of the national organizations by one of the forms of common organizations provided for in Article 40 (2) and that Article 43 (3) provides that there shall be a replacement (Ersetzung) of the national market organizations by the common organization provided for in Article 40 (2) provided that the common organization offers equivalent safeguards for the employment and standard of living of the producers concerned. This means that gaps are to be avoided and that the rule applies that there should be continuous development subject to the necessary adjustments. Accordingly this alone is enough to make it difficult to defend the argument that when the transitional period has ended, then, without regard to the stage of realization of a common policy, it is no longer possible to rely on national organizations of the market which exclude or limit the application of the general provisions of the Treaty.
With hindsight it is moreover apparent that the realization of the common agricultural policy, due to diverse conflicting interests, was complicated and time-consuming. An additional difficulty was caused by the well-known Luxembourg Accords of January 1966 which introduced the principle of unanimity whereas Article 43 of the Treaty provides for Council decisions by a qualified majority. It is perhaps especially due to the well-known difficult package negotiations that not all agricultural spheres could be completely dealt with before 31 December 1969. In these circumstances, which were partly foreseeable already when the provisions of the Treaty were laid down, it seems to me that there is no ground whatever for assuming that it was the intention of the authors of the Treaty that, when the transitional period had ended and independently of the stage of realization of a common agricultural policy, the general provisions of the Treaty should be applied even if this would lead to interests, which were protected by national organizations of the market, being seriously prejudiced. It is easy to imagine situations in which only one or a few Member States had an interest in the replacement of a national organization of the market by a common organization of the market. If the argument that when the transitional period had ended it would no longer be possible to rely on national organizations of the market were right, then it would have been considerably more difficult for such Member States to achieve their objective whereas other Member States, which were interested only in the application of the general provisions of the Treaty, could have achieved their objective simply by obstruction and lapse of time. Precisely because it cannot be assumed that any Member State would have accepted such a result, which would have meant the rash surrender of its own essential interests, one must necessarily incline to the view that the end of the transitional period does not represent a rigid time-limit in relation to the application of the general provisions of the Treaty but that special rules of national organizations of the market continue to apply so long as a common organization of the market has not been created.
Furthermore there are two other considerations which support this conclusion and which, for the sake of completeness, I would not wish to omit. It was not to be ruled out that common organizations of the market would be established only shortly before the end of the transitional period. Until they entered into force a period of transition and adaptation was necessary with special rules for the individual Member States. This would not have been permissible if, when the transitional period had ended, only the general provisions of the Treaty or the rules of the common organizations of the market would have had to be applied.
Further, I would like to refer to Article 44 (6) according to which at the end of the transitional period, a table of minimum prices still in force shall be drawn up and the. Council shall determine “the system to be applied within the framework of the common agricultural policy”. The Council Decision of 20 December 1969 was taken on this basis and its validity was repeatedly extended. Because it was not possible to create a common organization of the market before the end of the transitional period for all products which were subject to minimum prices, the decision expressly provided for exceptional rules for individual Member States (the levying of countervailing charges, the continuance in force of minimum prices). This too is hardly compatible with the argument that, in the absence of a common organization of the market, when the transitional period ended the general provisions of the Treaty became applicable.
If, in spite of everything this interpretation of Articles 39 to 46 and the view that the rules of national organizations of the market could continue to exist beyond the end of the transitional period are not accepted, then in my view there is at least one consideration which cannot be circumvented.
The principle is adhered to in various places in Title II on Agriculture that the necessary adjustments are to be effected progressively. I refer for example to Article 39 (2) or Article 43. A similar rule is to be found in Article 37 (4). This represents a basic principle of the Common Agricultural Policy: abrupt transitions from one order to another should be avoided as far as possible. I am of the opinion that this principle should apply in the present case in circumstances in which recourse is had to the basic principles contained in Articles 171 and 174 of the EEC Treaty. This would lead to the following result: the recognition of the application of the general provisions of the Treaty from the end of the transitional period onwards could not, because it is only recently to be found in the case-law whereas previously the general view was quite different, become effective immediately, but only after the expiry of a certain period of forbearance which the Court may determine, to that extent creating law. Only in this way can, in my opinion, unjust hardship be avoided and the transition and the necessary adjustments take place without lacunae.
Thus, however the position is looked at, whether with reference to the continuance of national organizations of the market or having regard to the proviso in Article 37 (4) or having regard to the last point of view I have mentioned, it is indispensable in the context of the first question to hold that Article 37 (1) and the first paragraph of Article 95 cannot be applied without reservation at the end of the transitional period in a case such as the present. Rather does their application come into question only in so far as they neither jeopardize the existence of the national monopoly of a commercial character or the national organization of the market, nor adversely affect important aspects of the way the matter is regulated nationally.
Question Two
In the second place we must examine whether the Monopolausgleichspitze (monopoly equalization margin) levied on the import of Italian vermouth is incompatible with the first paragraph of Article 95 and Article 37 (1) because it is intended to compensate for the burdening of the comparable domestic products with the costs of the administration of the monopoly.
This questions has its origin in the argument of the plaintiff in the main action that in making the necessary comparison of charges under the Treaty only fixed internal charges laid down by legislation may be considered; on the other hand items involving price and cost factors (manufacturing and marketing costs), which are of a fixed nature and do not uniformly apply to domestic products, must be left out of account.
In this connexion I would like to recall first of all that the comparable domestic product with which the main action is concerned is alcohol which is exempt from the obligation to make deliveries. It does not attract the charges demanded from the plaintiff because it does not pass through the monopoly and is therefore not handled, transported or sold by the monopoly. It is subject to a surcharge of a variable amount which is levied with the purpose of putting it on an equal footing domestically with products of the monopoly in order to prevent alcohol exempt from the obligation to make deliveries from obtaining a competitive advantage; only to this extent can there be said to be a monopoly pressure in respect of this product.
If, mindful of this fact, we now turn to the interpretation of Article 95, it is important to note above all that, as the Commission rightly stressed, it is a provision drafted in wide terms. It covers ‘taxation of any kind’ and is thus in no way limited to purely fiscal taxation. Since under this article the objective of the taxation is clearly irrelevant and since the brandy surcharge may certainly be called a charge imposed by the national authority because the factors determining it (selling price and basic price) are laid down by the national authority, quite apart from its express description in the legislation as an excise tax, it is accordingly quite proper to infer that it, too, is relevant in its entirety, and not only as regards its tax component, for the purpose of Article 95.
In any event it is not appropriate in this connexion to refer to the judgment in Joined Cases 2 and 3/62 Commission of the EEC v Grand Duchy of Luxembourg ECR [1962] 425 and to attempt to rely on its findings to justify a different conclusion. As we know, it is stressed in this judgment that Article 95 does not allow any kind of compensation for economic burdens in order to approximate prices to each other. Monopoly equalization is not compensation for a previous charging of a basic product used in the manufacture of alcohol but compensation for the direct charging of the final product with the brandy surcharge. On the other hand there cannot be said to be an approximating of prices to each other because in spite of the levying of the monopoly equalization amount foreign production costs which differ from the domestic costs are of course in no way affected.
It may, however, be left open how Article 95 and the concept of taxation contained in it are to be interpreted. In my opinion Article 37 is the sole criterion, for judging monopoly charges and monopoly equalization, since Article 37 is the lex specialis in relation to Article 95. As authority for this view I refer to the judgment in Case 13/70 Francesco Cinzano & Cia GmbH v Hauptzollamt Saarbrücken ECR [1970]. That case was concerned with the import charges on goods which domestically were subject to a monopoly; a decision was given solely on the basis of Article 37 and the prohibition contained in it against discrimination. It is expressly stated in the said judgment that there is no discrimination when the imported product is subjected to the same conditions as the domestic products subject to the monopoly. Duties levied on imports linked to the existence of a State monopoly did not amount to an infringement of Article 37 as long as the charge imposed was only to the same extent as on domestic products affected by the monopoly.
If one follows this reasoning then the sole criterion is that there are no differences in the marketing conditions. For the purposes of Article 37 the objective of a charge is irrelevant and therefore there is nothing in Article 37 against having regard to the costs of the administration of the monopoly.
Nor, on the other hand, is there any ground for objecting that taking account of the administrative costs of the monopoly in the equalization charge leads to discrimination against imported goods because in any case they already had to bear the processing and marketing costs in the exporting country. This argument could at most succeed with regard to compensation for the charging of products which pass through the monopoly and only in so far as it relates to finishing and marketing costs. On the other hand the argument does not apply to the brandy surcharge, which alone concerns us in the present proceedings, for the relevant domestic alcohol does not pass through the monopoly and thus does not enjoy the services of the monopoly in manufacturing and marketing and has to bear an equalization charge just as imported products.
In this connexion, moreover, it is necessary to acknowledge the pertinence of the argument raised by the Federal Government that the elimination of the cost factor which is contained in the surcharge margin from the equalization charge would lead to a completely unacceptable result for the monopoly.
The consequence would be either that imported products, which in any case are burdened with less production costs, would enjoy a considerable advantage in competition. The marketing possibilities for the products of the monopoly would thus be very much reduced, which would seriously prejudice if not jeopardize the existence of the monopoly in spite of the fact that Article 37 requires no abolition of the national monopoly of a commercial character.
Or it would be necessary to exempt domestic products, too, from this part of the monopoly charge, that is to say, to finance the administrative costs of the monopoly from the general budget. No-one, however, could regard this, that is, the subsidizing of the monopoly by the public at large, as justified. It is surely more appropriate to place the costs of the monopoly on those who require the products of the monopoly. The self-financing of the monopoly is thus, as the Federal Government rightly stresses, an essential part of the monopoly system; therefore regard must be had to the effects associated with it within the terms of the equalization allowed under Article 37.
This concludes all that is necessary to be said in answer to the second question. An additional observation is, however, appropriate with regard to the question, raised by the Commission in its written observations whether, because of the purpose of the Monopolausgleichspitze, should it be used to finance the monopoly and thus to finance an activity which benefits only domestic products, there must not be said to be a charge having an effect equivalent to customs duties which is unlawful under the Treaty. In this connexion the Commission referred to the judgments in Case 77/72 Carmine Capolongo v Azienda Agricola Maya [1973] ECR 611 and Case 94/74 Industria Gomma Articoli Vari, IGAV v Ente Nazionale per la Cellulosa e Per la Carta ENCC [1975] ECR 699. A duty is defined in them as having equivalent effect to customs duties when it applies to domestic and imported products to a like extent but is intended to finance and support the activity of a public authority which benefits the domestic products in a specific way with the result that the charge on domestic products is to be regarded as consideration for benefits received.
After what we have heard in the proceedings it should, however, have become clear that this case-law does not fit the present case. The decisive factor, which apparently the Commission too now sees, is simply that the Monopolausgleichspitze does not serve to finance the monopoly. The Monopolausgleichspitze goes into the federal budget without any particular purpose being prescribed. Since on the other hand the monopoly is in no way subsidized out of the federal budget there is accordingly no ground in the present case for referring to the said case-law and bringing into play the concept of a charge having equivalent effects to customs duties.
Third question
As a result of the third question it should then be considered whether in applying Article 37 (1) and the first paragraph of Article 95 only the Monopolausgleichspitze and the monopoly costs are to be compared or whether decisive importance is to be attached to the fact that imported products, even when charged with the Monopolausgleichspitze, are not, as regards the total price, placed in a worse position than the comparable domestic product
Obviously this question is directed to the fact that foreign, products often have smaller production costs and therefore, in spite of being subject to the monopoly equalization, can be put on the domestic market without difficulty and even have a price advantage over domestic products.
With regard to this question all parties to the proceedings have expressed the view that for the purposes of the said article of the Treaty the amount of the total price is irrelevant. Obviously this is the only correct view.
Article 37 speaks of the avoidance of any discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed. This is to be understood as meaning that only the charges determined by the monopoly are at issue. Imports may be burdened only to this extent. On the other hand Article 37 is obviously not concerned with price comparison, that is, the approximating of prices to each other as practised in some organizations of the agricultural market. In this connexion reference may, moreover, appropriately be made to the judgment in Case 2 and 3/62 Commission of the EEC v Grand Duchy of Luxembourg and Kingdom of Belgium [1962] ECR 425 and the views developed there according to which in the sphere which concerns us here not all equalization, such as for economic burdens on domestic goods, is possible.
Fourth question
Finally the fourth question calls for consideration whether imported Italian vermouth is discriminated against in that it is subject to Monopolausgleichspitze of a uniform amount whereas for comparable domestic products the charges are the costs of the administration of the monopoly scaled according to the quantity of the products.
It has in fact been shown in the proceedings that the monopoly equalization is made up of the amount of the brandy tax and the costs of the administration of the monopoly. It amounted at the time of the imports in question to DM 1266. With regard to comparable domestic brandy not subject to the obligation to make deliveries, the brandy surcharge was scaled according to the additions and deductions to the basic price for brandy which is also the binding criterion here. There were accordingly brandy surcharges ranging from DM 929.80 to DM 1463 or more precisely up to DM 1266 because, according to Article 79 of the Branntweinmonopolgesetz, the amount of the monopoly equalization obviously represents the upper limit. It might therefore seem to be indicated that there is discrimination if a prohibition on discrimination is understood as meaning that imported products may in no event be subject to greater burdens than any comparable domestic products.
It seems, however, doubtful to me whether such a view is appropriate. We heard in the proceedings also that, starting from a certain level of production (332 hl wine-spirit per annum) domestic products bear the brandy surcharge to the same extent as imported products is subject to monopoly equalization. This is so because apparently the right to distil, which is relevant in this connexion, is regularly exceeded in respect of 97 % of the relevant production. Only a quite limited amount of domestically produced brandy enjoys the advantage of a reduced charge. In my view account should be taken of this fact. In other words I consider it reasonable to take the charge on domestic products adopted as a rule as a basis and to measure the lawful charge on imported products against it. The fact that in certain circumstances in the domestic sphere the charge is reduced must be regarded as due to the existence of an aid based on considerations of policy in regard to agriculture and to the middle classes. If this course is followed, that is, if one brings the few cases of smaller charges under the provisions on aids, this would have the result that they could not be objected to since obviously they were in existence when the Treaty entered into force and there has been no decision by the Commission under Article 92 et seq, if indeed there can be any criticism at all in these circumstances on the basis of Article 92 et seq. since the rules on aids do not apply to agriculture. In my opinion the view can in no way be supported that all import transactions must likewise bear only a correspondingly reduced charge.
If this view is not accepted then there are still the considerations mentioned at the beginning based on Article 37 (4) and on the existence of a national organization of the market and the necessity to continue to allow even now, so far as is necessary, certain departures from the general provisions of the Treaty so that the guarantees with regard to disposal of products and income, with their differentiations according to the quantities produced, may produce their effects which are essential for the functioning of the national organization of the market. In this case, since a correspondingly differentiated application to imported products is not possible in the absence of reliable information and checking of the conditions in the place of origin, it must therefore be considered how the establishment of absolute equality of treatment, that is, the abolition of the said advantages, would work out
In my view the consequences are clear, although the decision on the point is naturally, should it arise, a matter for the court making the reference.
If the Monopolausgleichspitze were not required when the importation occurs, as the plaintiff in the main action in one place claims, or if, as the plaintiff argues, in another place, the lowest domestic charge, that is, the lowest brandy surcharge applicable, were levied on imported products, then, not least of all because of the lower price levels applying in a number of Member States, there would be such an advantage in competition for imported goods that the disposal of the domestic alcohol of the monopoly would be seriously jeopardized. In other words there would be the risk of serious prejudice to the national organization of the market and the national monopoly and, in the end result, even of the abolition of the monopoly.
If, however, as in the other conceivable possibility of avoiding any discrimination, the normal charge were introduced for smaller domestic producers, which would mean that there would be lower acceptance or selling prices, then the higher production costs of such undertakings would no longer be covered. They would thus be forced to give up production and this would effect the return on agricultural products and the income of the producers concerned. In my opinion the Federal government has supplied impressive figures in this respect. They show that some 1300 agricultural distilleries, 27000Abfindungsbrennereien (distilleries having a special arrangement with the authorities), which process their own fruit and 200000 Stoffbesitzer (producers of the raw material) with an annual production of 85000 hl would be affected. It is to be feared that some 4000 agricultural undertakings would be affected in respect to livestock, for the distillers' wash arising from the production of the alcohol is used as fodder, and this would happen particularly in areas which are plainly among the economically weak ones such as the region adjoining East Germany and in which in recent years a large number of new undertakings have been created with considerable indebtedness. The observations made in the recommendation of the Commission of 22 December 1969, which I have already mentioned, show that this picture is true. I shall quote only one sentence: ‘The unlimited opening of the German market to products of the other Member States before the common organization of the market enters into force (for ethyl alcohol of agricultural origin) could jeopardize … the disposal of German ethyl alcohol of agricultural origin and the competitive capacity of the German brandy for drinking and thereby the employment and standard of living of the producers of the agricultural raw material in question.’
It may thus be stated that a strict application of the principles of Article 37 (1) and the first paragraph of Article 95 in the circumstances of the main action would have far-reaching effects on the national organization of the market and the national monopoly of a commercial character and would thus rob the national rules of an essential characteristic, the orientation around the interests of the small and medium-sized undertakings. This justifies the finding that the differentiation described, which is an important part of the national rules, is at present indispensable and if it is considered that it does in fact have a discriminatory character then, at least having regard to the necessary relativeness of the prohibition on discrimination under Article 37 (4) and the special provisions on agriculture, there is nothing objectionable in it.
This in my opinion concludes all that needs to be said on the fourth question in terms of a reference for a preliminary ruling — the further arguments relating to Article 90 (2) (revenue-producing monopolies) do not need to be discussed.
5.
In view of the foregoing I propose that the questions raised by the Finanzgericht Rheinland-Pfalz should be answered as follows:
(a)
As from the end of the transitional period Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty give rise to rights in favour of the individual which may be asserted before the national courts. The said provisions, however, do not have unrestricted application in so far as Article 37 (4) applies or a national organization of the market exists and equivalent safeguards for the employment and standard of living of the producers concerned are not ensured by a common organization of the market.
(b)
Article 37 (1) and the first paragraph of Article 95 do not rule out that, on comparing the charges which on the one hand products imported from other Member States and on the other hand comparable domestic products have to bear, the costs of the administration of a national monopoly may be taken into account.
(c)
All that is involved in applying Article 37 (1) and the first paragraph of Article 95 is the comparison of the charges imposed by the national authority which imported products and domestic products directly have to bear and not on the other hand the question whether the total price of imported products, taking into account the import charges, is higher than the price level for comparable domestic products.
(d)
There is no discrimination within the meaning of Article 37 (1) and the first paragraph of Article 95 in cases in which the monopoly equalization to which imported products are subject is uniformly laid down whereas the charges on comparable domestic products are scaled according to the quantitiy produced by the manufacturer. This applies in any event if the import charge corresponds to the normal domestic charge or if the differentiation of domestic charges is indispensible having regard to the requirements of a national organization of theöö market.
(
1
)	Translated from the German.