COMMISSION RECOMMENDATION of 22 December 1969 to the French Republic on the adjustment of the State monopoly of a commercial character in basic slag (Only the French text is authentic) (70/121/EEC)

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1. The Comité d'Organisation de la Sidérurgie (Organizing Committee for Iron and Steel) set up in France, by Decision of 5 February 1941 (la Société nationale pour la vente des scories Thomas) (SNST), a société anonyme with variable capital to which all French basic slag producers belong. The Decision of 5 February 1941 was incorporated, with amendments, in the Decree of the Minister for Industrial Production of 28 June 1947. In accordance with Annex III to that Decree the SNST is responsible for: (a) ensuring that orders and deliveries of basic slag comply with the decisions issued by public authorities and bodies empowered to determine programmes, allocations and suballocations in accordance with the Law of 26 April 1946;

(b) allocating orders to factories in accordance with the production programmes for Bessemer steel and for raw slag grinding adopted by the Chambre syndicale de la sidérurgie;

(c) effecting all sales of slag both on the domestic market and for export;

(d) invoicing customers for deliveries made by factories and collecting the proceeds of such sales;

(e) withholding (or collecting) all necessary amounts in order to cover its own expenditure as well as equalization measures, compensations, grants or refunds provided for in laws, decrees or ordinances.

The SNST carries out these tasks under the supervision of the Director for the Iron and Steel Industry.

2. It follows from the foregoing that the SNST enjoys the exclusive rights of exportation and of sale on the domestic market. It also follows that there exists in effect an import monopoly in that, since the SNST is the only body authorized to sell basic slag on the French market, an importer can directly purchase slag manufactured abroad only in order to make direct use of it and not to sell it on the French market.

Until 31 December 1968 a system for the allocation of basic slag was in force. Under that system the tonnage of basic slag for direct agricultural use or for use in the form of compound fertilizers was fixed by periodic decisions of the public authorities. The tonnage for direct agricultural use was made available to the Ministry of Agriculture, which allocated it in accordance with the relevant regulations. The rest was directly allocated to the user industries by the allocating authority. Producers and their selling agency, the SNST, were required to ensure that the basic slag was delivered in accordance with that allocation.

Pursuant to a Decision of 30 January 1968 by the Director for the Iron and Steel Industries this system ceased to apply from 1 January 1969. However, since the Decree of 28 June 1947 has not been revoked, Article 37 of the EEC Treaty continues to apply to the SNST. Under that provision Member States are required progressively to adjust State monopolies of a commercial character so as to ensure that, when the transitional period has ended, no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States.

3. Imports into France of basic slag from other Member States and exports to those States have both followed a somewhat irregular course. Imports increased from 435 000 metric tons in 1960 to 890 000 metric tons in 1963 and decreased to 680 000 metric tons in 1966 ; in 1968 they reached 840 000 metric tons. Exports which amounted to 820 metric tons in 1960 went down to nil in 1964, and have remained stable at a little over 30 000 metric tons from 1966 to 1968. (It should be noted that Italy is at present the only country in the EEC importing French basic slag.)

Production has for several years averaged about 2 300 000 metric tons.

4. The Commission notes that until now no measures have been taken with a view to the adjustment of the monopoly in basic slag.

Since the end of the transitional period is approching, measures should now be adopted to bring to an end all discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed.

Article 37, which comes under the Title relating to the free movement of goods and, more particularly, under the Chapter concerning the elimination of quantitative restrictions between Member States, aims at achieving by the end of the transitional period in respect of products subject to a State monopoly of a commercial character (or an equivalent system) the same result as that achieved for other products by the application of Article 30 to 34, that is to say the free movement of goods.

However, a different procedure was provided in order to achieve that result in the sectors covered by State monopolies. Their progressive adjustment was provided for partly in order to take account of the fact that in the view of the Member States concerned the products subject to a monopoly presented special problems and partly so that the elimination of quantitative restrictions and of measures having an equivalent effect in those sectors should not be without practical result. There were indeed grounds for fearing that the liberalization of trade in respect of the products subject to a monopoly would not take place if the monopolies, by virtue of their exclusive right to import, export and market certain products, were to remain free to decide to what extent and under what conditions products from other Member States could be allowed on the domestic market (or, conversely, to what extent domestic products could be exported to other Member States).

It is for that reason that Article 37 contains the provision designed "to ensure that when the transitional period has ended no discrimination regarding the conditions under which goods are procured and marketed exists between the nationals of Member States".

It should be stressed that the ending of discrimination resulting directly from the provisions applicable to products subject to a monopoly is not the only requirement laid down in Article 37 : that objective could be attained. in the absence of an Article governing State monopolies, by means of other provisions of the Treaty, in particular those prohibiting charges having an equivalent effect to customs duties and measures having an equivalent effect to quantitative restrictions. It follows from what has been said above in relation to the special characteristics of State monopolies and of the restrictions to which they can give rise that the objective of the "adjustment", i.e. of ensuring that "no discrimination exists", is to eliminate the possibility that the particular powers vested in the monopolies in respect of the importing and domestic marketing, or the exporting, of certain products might at the end of the transitional period still give rise to discrimination.

Since these are the objectives laid down in Article 37, it is incumbent upon France to adjust the monopoly in basic slag before the end of the transitional period in order that the objectives may be attained. On the other hand, it is for the Commission, in addition to its general duty to see that the Treaty is implemented, to make recommendations in accordance with Article 37 (6) as to the manner in which the adjustment provided for in that Article shall be carried out.

5. With regard to imports, the Commission is of the opinion that the SNST's exclusive right to sell slag on the domestic market is a discouragement to any potential buyer wishing to obtain slag produced abroad with a view to marketing it, since any quantity imported by him without the intervention of the SNST has to be sold to that body.

In these circumstances the SNST is in a position to decide on what terms the basic slag requirements of the domestic market will be covered by domestic production. This situation may give rise to discrimination in respect of the terms of sale against producers in other Member States who may consequently be prevented from exerting any competitive pressure on the French market.

With regard to exports, strict limitations are in force in order that domestic production may be reserved as a first priority for supplying the French market. French producers cannot, therefore, take advantage of the more favourable conditions they might find for their products in other Member States ; this gives rise at the same time to discrimination against consumers in those States in respect of the terms of supply.

For these reasons it seems to the Commission that the best solution for attaining the objective laid down in Article 37, because there is no doubt that it will be effective. is to abolish the exclusive domestic and export sales right of the SNST, in so far as those rights concern trade between Member States.

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On these grounds the Commission of the European Communities recommend the French Republic to take the following measures, in accordance with Article 37 of the EEC Treaty: 1. To allow all operations necessary for the marketing of basic slag from other Member States to be freely carried out on the French market. To that end, in particular: - to allow suppliers from other Member States to set up their own wholesale and retail trade network in France and to hold stocks there:

- to allow suppliers from other Member States to advertise their products freely:

- to allow prices for products from the other Member States to be freely agreed between sellers and buyers at the different stages of marketing.

2. To allow, without restriction, exports to the other Member States of the EEC without the intervention of the SNST.

Done at Brussels, 22 December 1969.

For the Commission

The President

Jean REY