COMMISSION RECOMMENDATION of 22 December 1969 to the Italian Republic on the adjustment of the State monopoly of a commercial character in salt (Only the Italian text is authentic) (70/124/EEC)

I

1. The Italian Government, by letter of 24 March 1959, informed the Commission of the European Economic Community that sodium chloride (sea salt, rock salt and salt from salt springs) is in Italy subject to a State monopoly of a commercial character within the meaning of Article 37 of the EEC Treaty.

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.

2. Law No 907 of 17 July 1942 (as amended by Law No 1641 of 11 July 1952) reserved to the State all forms of production and sale in Italian territory as well as the importation of any kind of salt. However, such regulations do not cover Sicily and Sardinia, the neighbouring small islands and the communes of Livigno and Campione. The Amministrazione autonoma dei monopoli di Stato (AMMS) may derogate from the prohibition on production by individuals. Sales are made through the distribution network of the AAMS.

As regards taxation, it should be noted that there is a consumer tax on edible salt, while industrial salt is tax free.

3. Since 1958 the Italian Government has taken certain measures with a view to the adjustment of that monopoly: (a) By Law No 1085 of 19 December 1958, and later by Law No 825 of 13 July 1965 the principle of specifying retail price components was adopted for edible salt as for other products subject to a revenue-producing monopoly ; for each price charged by the supplier of such products, the amount of the consumer tax and the amounts allowed to the AAMS for distribution costs and to retailers by way of rebate are fixed by law and published ; the total is the sale price to the public. Suppliers, by asking a particular delivery price, can thus determine the end-price at which their products will be sold.

(b) Presidential Decree No 390 of 9 March 1961, by way of derogation from the Law of 1942, allowed the importation of salt into Italy within an annual quota equal to 5 % of domestic production. Law No 519 of 5 July 1966 concerning industrial supplies of salt made other derogations with regard to imports of industrial salt. The rules resulting from such provisions in respect of the various kinds of salt are as follows: - edible salt from Member States of the EEC may be imported for personal use within the limit of the quota. Prior approval of the AAMS is necessary for quantities exceeding 5 kilogrammes. No derogation from the AAMS sale monopoly of edible salt is however permitted since the Decree of 9 March 1961 lays down (Article 5) that sales in the Italian territory over which the monopoly extends may be made only through the monopoly's selling organization. The importation of edible salt for the purpose of sale of sale is there fore conditional on the product being delivered to the AAMS for sale on a consignment basis;

- as regards industrial salt, direct importation by users is allowed without quantitative restriction, subject, however, to prior AAMS approval and to a permit from the Ministry for Foreign Trade or to the latter only, depending on the type of salt, According to the explanations given by the Italian authorities the sole purpose of that permit is to avoid any use of such salt for human consumption. Products thus imported may be freely marketed on the Italian market.

4. The first quota (for the year 1961) was fixed at 1 050 000 metric quintals by a Ministerial Decree of 16 June 1961 and has been increased each year ; in 1966 it reached an amount of 2 111 930 quintals. However, such quotas have remained almost entirely unused : only negligible quantities of industrial salt were imported. On 29 July 1966, the Commission recommended the Italian Republic to abolish such quotas. The Italian Government gave its agreement to the measure recommended by the Commission and, on 11 September 1967, forwarded to the Commission a draft law to that effect, which the competent Department had just submitted for the approval of the Italian Council of Ministers. The legislative process in respect of that draft is not yet completed.

5. The Commission is of the opinion that the measures so far taken by the Italian Government, though constituting, in the sector under consideration, an important step towards the elimination of discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed, are not yet sufficient to achieve the objective of Article 37.

Since the end of the transitional period is approaching, 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 a like system) the same result as that achieved for other products by the application of Articles 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 for 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 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 Italy to adjust the monopoly in salt 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.

In this particular case the Commission considers that the objective of Article 37 will not be achieved so long as quantitative restrictions remain and the sale of edible salt on the Italian market is reserved to the AAMS. As regards industrial salt, import permits, in so far as they are in fact necessary in order to prevent tax evasion, should be granted automatically and without delay.

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, lies in the abolition of the abovementioned quantitative restrictions and the exclusive right of the AAMS to sell edible salt and in granting automatically and without delay any import permits in respect of industrial salt.

6. The monopoly in edible salt has the character of a revenue-producing monopoly. Pursuant to Article 90 (2) of the EEC Treaty undertakings having the character of a revenue-producing monopoly are subject to the rules contained in the Treaty, in particular the rules of competition, in so far as the application of such rules does not obstruct the performance of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.

The Commission is of the opinion that the revenue function of this monopoly does not justify the maintenance of quantitative import restrictions or of marketing restrictions. Through the adoption in 1958 of a system of specifying retail price components, thereby establishing a direct and constant relationship between each selling price and each delivery price, the Italian Government has already taken away much of the significance of the monopoly's revenue function : since the amount of tax corresponding to a particular selling price is fixed in advance, the ability of the tax authorities do derive the maximum tax revenue from the sale of each product - which, as has been shown, is the main taxation objective - has been correspondingly reduced. In the circumstances it seems that the revenue function of the monopoly could be fulfilled simply by means of a consumer tax.

II

On these grounds the Commission of the European Communities recommends the Italian Republic to take the following measures, in accordance with Article 37 of the EEC Treaty: 1. To abolish all quantitative restrictions on imports of salt.

2. To allow all operations necessary for the marketing of edible salt from other Member States to be freely carried out on the Italian market. To that end, in particular: - to allow suppliers from other Member States to set up their own wholesale trade network in Italy and to hold stocks there;

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

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

- to take all measures necessary to ensure that retailers are commercially independent of the public authorities.

3. To ensure that import permits in respect of industrial salt, in so far as they are in fact necessary in order to prevent tax evasion, are granted automatically and without delay.

Done at Brussels, 22 December 1969.

For the Commission

The President

Jean REY