COMMISSION RECOMMENDATION of 22 December 1969 to the Italian Republic on the adjustment of the State monopoly of a commercial character in matches (Only the Italian text is authentic) (70/119/EEC)

I

1. The Italian Government, by letter of 24 March 1959, informed the Commission of the European Economic Community that matches are 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. Royal Decree No 560 of 11 March 1923, and the convention annexed to it, abolished the State monopoly in the sale of matches which had been in existence since 1916 and introduced instead a tax on manufacture. At the same time a consortium was set up, known as the Consorzio industrie fiammiferi (CIF), to which all Italian undertakings which produced matches were required to belong ; the State concluded the abovementioned convention with the consortium, granted it the monopoly in the manufacture and sale of matches in Italy and entrusted it with the task of ensuring that the tax on the manufacture of matches was paid to the State.

The right to import is reserved to the State, which may grant import permits to individuals.

The State undertook for the duration of the convention not to authorize the setting up of new factories for the manufacture of matches or substitutes therefor. On the occasion of one of the renewals of the convention, it was decided that that obligation should also apply to the opening of factories whose production would be exclusively for export (Article 12 of the implementing provisions of Legislative Decree No 525 of 17 April 1948 on the renewal of the convention between the State and the CIF).

The convention, due to expire on 31 May 1932, was several times renewed. The latest renewal of it, by Ministerial Decree of 29 April 1965, provides for its expiry on 31 December 1974.

As regards manufacture, the CIF is empowered to allocate the volume of production needed for the domestic market among the different undertakings which are members of the consortium. Matches are then sold by producers to the CIF, which distributes them through the network of the Amministrazione autonoma dei monopoli di Stato (AAMS) (since Royal Decree No 396 of 5 April 1925 matches have in fact been assimilated to other monopoly products).

The selling prices of matches are fixed by a Decree of the Ministry of Finance on a proposal from a committee on which the CIF is represented (Article 6 of the Decree of 11 March 1923). These are maximum prices and the CIF has the right to sell at lower prices (Article 6 of the Convention).

3. For several years the needs of the Italian market have been almost entirely covered by domestic production (in 1965, 1 metric ton was imported from Member States, total imports from all countries amounting to 3 metric tons) ; in 1966 there were no imports (total imports : 1 metric ton) ; in 1967, 4 metric tons were imported (total imports : 4 metric tons), and in 1968, 3 metric tons (total imports : 4 metric tons).

The Commission considered that this situation gave rise to discrimination against suppliers in other Member States in respect of marketing conditions and, on 11 April 1962, recommended the Italian Republic, in pursuance of Article 37 (6): - to allow the importation and marketing of matches from other Member States, either by permitting suppliers of these products to supply the distribution network of the AAMS or by adopting any other suitable means to that end, within the limit, for the year 1962, of 5 % of the domestic production for 1960, and to increase that amount by at least 15 % each year;

- to fix selling prices to consumers so that, apart from customs duty, the same margin between the delivery price and the selling price is applied to goods imported from other Member States as to domestic goods with the same delivery price: to permit advertising of matches from other Member States under the same conditions as those permitted in respect of domestic products.

The Italian Government has not taken any measures to comply with that recommendation. By letter of 13 May 1963 the Italian Government expressed its readiness to consider solutions such as those recommended by the Commission on condition, however, that the question of import restrictions in existence in France and Germany were resolved at the same time.

As it has already had occasion to point out to the Italian Government in answer to the letter of 13 May 1963, the Commission, while aware of the importance of the problems raised by the Italian Government, considers that the difficulties which are liable to arise with regard to the establishment of the common market can only be solved in a balanced manner if all Member States apply the provisions of the Treaty. As has been mentioned above. Article 37 requires the Italian Republic to ensure that from 1 January 1970 no discrimination regarding conditions under which goods are procured and marketed exists between nationals of Member States : the same obligation applies to the French Republic to which the Commission is addressing, at the same time as to the Italian Republic, a recommendation concerning the adjustment of its match monopoly. As to the Federal Republic of Germany, it may invoke Article 37 (5), where by the obligations on Member States are binding only in so far as they are consistent with existing international agreement. The Commission is prepared, if the failure to adjust the German monopoly gives rise to difficulties for Italy, to discuss the problem with the Italian authorities on a practical basis. The Commission points out in this connection that under the second subparagraph of Article 37 (3) it may, where a product is subject to a State monopoly of a commercial character in only one or some Member States, authorize the other Member States to apply protective measures until the adjustment provided for in paragraph 1 of that Article has been effected : the conditions and details of such measures would be determined by the Commission.

In the light of the foregoing the obligation to effect the adjustment laid down in Article 37 cannot be made conditional on the solution of the questions referred to by the Italian Government.

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 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 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 matches 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.

4. As explained in paragraph 3, the restriction of the Italian market to domestic products constitutes discrimination against suppliers from other Member States. It should be stressed in this connection that the introduction on to the Italian market of a given quantity of matches from other Member States and the gradual in crease of that quantity will not be sufficient to attain the objective of Article 37 so long as the State is able, by refusing import permits, to decide to what extent and in respect of which qualities the needs of the Italian market may be met by suppliers in other Member States and so long as the CIF, being the sole agent authorized to sell matches on the Italian Market, is able to prevent those suppliers from entering that market.

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 it will be effective, is to abolish the State's exclusive right to import as well as the CIF's exclusive right to market matches, in so far as those rights concern trade between Member States.

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

The tax to which matches are subject in Italy is a tax on manufacture ; the CIF cannot therefore be regarded as a revenue-producing monopoly. It is true that the CIF performs a revenue function : as a distributor of revenue stamps and on account of the fact that it makes advance payment of taxes to the State, it simplifies the collection of tax revenue. However, there is no necessary and direct link between the tax and the exclusive right of the CIF to market matches.

Moreover, in view of the small number of match manufacturers, the Commission feels that the performance of the CIF's revenue collecting role would not be jeopardized by the introduction of a straightforward tax on manufacture, such as indeed exists both in Italy and in other countries for products which are, from the point of view of tax revenue, much more important than matches and yet in respect of which no monopoly has been set up.

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 allow matches to be imported from Member States without any restriction. To that end, all formalities necessary for the introduction of these products on to the Italian market must be such as can be carried out directly by the buyers or persons appointed by them, so that those concerned may immediately dispose of the products.

2. To allow all operations necessary for the marketing of matches 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 other Member States to be established on the basis of agreement between buyers and sellers 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.

Done at Brussels, 22 December 1969.

For the Commission

The President

Jean REY