OPINION OF MR ADVOCATE GENERAL WARNER

DELIVERED ON 19 SEPTEMBER 1979

My Lords,

Introductory

This case arises from a prosecution brought under French price control legislation. It comes to the Court by way of a reference for a preliminary ruling by the Cour d'Appel of Rouen.

The appellant in the proceedings before that Court is the Procureur General at that Court. The Respondents are three gentlemen responsible for the management of Denkavit France SARL, together with that company itself which is said to be ‘civilement responsable’. The three are Dr H. Buys (who states that his name is erroneously spelt ‘Buijs’ in the Order for Reference and who is a Dutchman), Dr H. Pesch (also a Dutchman) and Mr Yves Dullieux (who appears to be French).

The respondent company (which I shall call ‘Denkavit’ for short) belongs to a group of companies manufacturing animal feeding-stuffs and, in particular, milk-feed products used for rearing calves and other young animals. This Court has been made familiar with the products of that group by a number of previous cases including Case 251/78 Denkavit Futtermittel GmbH v Minister für Ernährung, Landwirtschaft und Forsten des Landes Nordrhein-Westfalen in which I delivered my Opinion yesterday.

The respondents were prosecuted before the Tribunal correctionnel of Rouen for alleged infringements of a French Arrété Ministériel, No 76-86/P, of 22 September 1976 (Bulletin Officiel des Services des Prix (‘BOSP’) of 23 September 1976, p. 364).

Article 1 of that Arrêté provided that until 31 December 1976 the prices, inclusive of all taxes charged for products of all kinds were not to exceed, either at the production stage or at the various stages of distribution, the prices lawfully being charged for those products on 13 September 1976 or, failing the latter, on the nearest previous date.

Article 2 of the Arrêté exempted from the provisions of Article 1 the prices of what were described as ‘produits frais de l'agriculture et de la pêche’.

Guidance as to the intended scope of the Arrêté was provided by a Notice published on the same date (and on the same page of the BOSP). The Notice stated among other things that Article 1 of the Arrêté did not apply to the prices at the production stage —

‘Des produits régis par le traité ayant instauré la Communauté européenne du charbon et de l'acier;

Des produits frais provenant de l'agriculture et de la peche (cf. art. 2 de l'arrêté) et des autres produits agricoles dont le prix à la production est régi par des décisions prises dans le cadre de la politique agricole de la Communauté européenne.’

The Notice went on:

‘Ne doivent être considérés comme produits agricoles et de la pêche que ceux qui n'ont pas été transformés. Si ces produits ne gardent pas leur individualité d'origine ou font l'objet d'une transformation sortant des usages normaux ou habituels de l'agriculture ou intervenant a un stade quelconque de l'industrie et du commerce, ils perdent de ce fait leur caractère initial. Ne peuvent, par exemple, être considérés commes produits agricoles les cuirs verts, les pulpes de betteraves ou les produits surgelés.

En ce qui concerne plus particulièrement les produits laitiers, on admettra cependant par tolérance que les beurres, la crème et les fromages dont les prix à la production pouvaient être librement déterminés à la date d'entrée en vigueur de l'arrêté, conservent leur caractère de produits agricoles, même après transformation ou affinage. Au contraire, des produits tels que les poudres le lait, les laits concentres, les crêmes glacées présentent un caractère industriel ainsi que les fabrications telles que les yaourts, fromages frais, fromages fondus.’

A further explanatory Notice was published on 1 October 1976 (see the BOSP of that date p. 380).

It was recalled in that Notice that, as the earlier Notice had indicated, the freeze did not apply at all to prices at the production stage of fresh agricultural products or of other agricultural products the prices of which were governed by decisions adopted within the framework of the agricultural policy of the EEC. However, as regards the effect of the freeze on prices at the distribution stage, a distinction had to be drawn between the two categories of agricultural products. In the case of fresh agricultural products, distributors (defined as comprising importers, wholesalers and retailers) were required to keep to their profit margins, in strict money terms, applying at the date when the freeze took effect. This meant that they could, on the one hand, increase their prices in order to take account of subsequent increases in producer prices. or in the c.i.f. free-at-frontier prices of imported goods, but must, on the other hand, pass on to their customers the benefit of any fall in such prices. In the case of other agricultural products subject to Community regulation of the market, the application of the Arrêté was said to be excluded, ‘in accordance with Community Regulations’, as regards prices at both the production and the wholesale stages. At other stages of distribution, however, sale prices were not to be higher than those lawfully applied on the date when the freeze took effect. Lists of the products falling within the two categories were set out in an annex. The list of ‘fresh agricultural products’ included raw milk, butter, fresh cream and certain cheeses; the list of other agricultural products included milk powder in bulk.

Nowhere in either Notice was there any express mention of animal feeding-stuffs.

The respondents assert, and the point is not contested, that Denkavit supplies the feeding-stuffs that it manufactures exclusively to wholesalers, who resell them to farmers.

On 20 September 1976 Denkavit raised the prices of its milk feed products in order, the respondents say, again without contradiction, to take account of the higher prices it was having to pay for primary agricultural products. Those price increases were maintained on sales effected during September and October 1976, after the price freeze had come into effect.

The offence with which the respondents were actually charged was that they had, between 24 September and 31 October 1976, sold at unlawful prices six specified milk-feed products for calves, namely ‘Denkavit Starter’, ‘Denkavit Finition’, ‘Denkavit C. R.’, ‘Denkavit K. B.’, ‘Denkavit Elevage’ and ‘Denkavit Milk’.

By a Judgment of 18 May 1978 the Tribunal correctionnel of Rouen dismissed the charges. It did so on grounds that it summarized by saying (in the last paragraph of that Judgment) that those products were all within Community regulations relating to the European agricultural markets, that they could not therefore be subject to national regulations, and that consequently the Arrêté of 22 September 1976 did not apply to them. In reaching that decision the Tribunal referred to a number of authorities, including the Judgments of this Court in Case 31/74 Galli [1975] 1 ECR 47, Case 65/75 Tasca [1976] 1 ECR 291 and Cases 88 to 90/75 SADAM v CIP, ibid. p. 323.

It is from that Judgment of the Tribunal that the Procureur General now appeals to the Cour d'Appel, on three closely linked grounds which are recorded in the Order for Reference as follows:

‘(1) That milk feed products for calves have never been regarded as being among those agricultural products whose price is governed by Community provisions;

(2) That national legislation about prices is lawful in so far as it does not disturb the formation of prices of the raw materials used in the products concerned;

(3) That milk products for calves must be regarded as products of second-stage processing.’

The composition of each of the six products in question is unfortunately not entirely clear. There is no express finding about it in the Judgment of the Tribunal correctionel. In the Order for Reference the Cour d'Appel recites that, according to the respondents whose statement on the point was not disputed, their composition was 60 % milk powder, 20 % whey, 19.7 % vegetable fats and 0.3 % vitamin-enriched minerals. In their written observations to this Court the respondents say that that does not fully and accurately reflect their statement and that in fact those products, according to the particular type, are composed as follows:

— 60 to 65 % skimmed-milk powder;

— 12 to 20 % powdered whey;

— 4 to 7 % maize starch;

— 15 to 20 % fats; and

— 0.3 % additives.

The respondents add that the fats are not mainly of vegetable origin but of animal origin (lard and/or beef fat) only a small proportion being of vegetable origin (i.e. coconut oil). The French Government, in its written observations to this Court, sets out what appears to be at first sight a different composition of two of the products, namely:

‘Denkavit Finition’:

— 60 % skimmed-milk powder;

— 12.5 % whey;

— 20.39 % mixed fats; and

— 7.1 % various additives.

‘Denkavit Elevage’:

— 45 % skimmed-milk powder;

— 15 % buttermilk powder;

— 18.33 % whey;

— 16.4 % mixed fats; and

— 5.2 % various additives.

At the hearing we were told, however, on behalf of the respondents that that did not really differ from what had been set out in their written observations, bearing in mind that buttermilk powder was, for the purposes of the relevant Community legislation, to be assimilated to skimmed-milk powder (which seems to be correct) and that the French Government had treated the maize starch as an additive.

It is not of course for this Court, on a reference under Article 177 of the EEC Treaty, to seek to make definitive findings on matters of that kind. For the purposes of the reference the Court must do the best it can with what is stated in the Order for Reference. The respondents underlined the fact that, of the ingredients of the ‘Denkavit’ products in question as they stated them to be, all except the 0.3 % ‘additives’, were subject to common organizations of agricultural markets: the skimmed-milk powder and powdered whey by virtue of Council Regulation (EEC) No 804/68 (milk and milk products), the maize starch by virtue of Council Regulation (EEC) No 2727/75 (cereals), and the fats, according to their origin, by virtue of Council Regulation (EEC) No 136/66/EEC (oils and fats). Council Regulation (EEC) No 805/68 (beef and veal) or Council Regulation (EEC) No 2759/75 (pigmeat). That too seems to be correct.

The Cour d'Appel has referred to this Court six questions, which I think it convenient to deal with seriatim.

The first question

The first question is this:

‘Should milk feed products for calves of the nature and composition indicated above be included, as regards the determination of prices at the production or wholesale stages, among the products subject to the rules of the common organization of agricultural markets? In particular, are they within the definition of milk products (Article 1 of Regulation No 804/68 of 27 June 1968) or within that of animal feeding stuffs (Article 4 of Regulation No 990/72 as amended by Regulation No 804/76 of 7 April 1976) or within any other category of agricultural products subject to Community legislation under Article 38 of the Treaty of Rome?’

There can be no doubt that the feeding stuffs in question, whatever their precise composition, are ‘agricultural products’ within the meaning of Article 38 of the Treaty, because they are among the products listed in Annex II to the Treaty. Annex II includes the whole of Chapter 23 of what was, when the Treaty was made, called ‘the Brussels Nomenclature’, and that Chapter includes ‘prepared animal-fodder’.

Those feeding-stuffs are, again whatever their precise composition, within Heading No 23.07 B of the Common Customs Tariff which comprises ‘Sweetened forage’ and ‘other preparations of a kind used in animal feeding … containing … milk products’. It is unnecessary for present purposes to consider what subdivision of that Heading they are within; that depends on, among other things, whether they contain any and if so how much starch. (Your Lordships remember that the statement of their composition contained in the Order for Reference does not mention starch).

Article I of Regulation No 804/68 defines the products covered by the common organization of the market in milk and milk products. By virtue of paragraph (g) of that Article those products include ex Heading No 23.07 B of the CCT:

‘Preparations and feeding-stuffs containing products to which this Regulation applies … except preparations and feeding-stuffs to which Regulation No 120/67/EEC applies.’

The feeding-stuffs here in question undoubtedly contain products to which Regulation No 804/68 applies (if only because they contain milk powder) nor does Regulation No 120/67/EEC (now replaced by Regulation No 2727/75) apply to them, because they contain 50 % or more of milk products (see Article 1 of and Annex A to that Regulation). It follows that those feeding stuffs are covered by the common organization of the market in milk and milk products.

Nor did I understand anyone to contend to the contrary before this Court. Your Lordships will remember the way in which the Procureur General's grounds of appeal were formulated before the Cour d'Appel and in particular his reference to the feeding-stuffs in question being ‘products of second-stage processing’. This, understandably enough in view of the definition of ‘agricultural products’ in Article 38 (I) of the Treaty as meaning ‘the products of the soil, of stockfarming and of fisheries and products of first-stage processing directly related to these products’, seems to have led the respondents and the Commission to wonder whether the Procureur General contended that the ‘Denkavit’ milk-feed products were not agricultural products within the meaning of the Treaty at all. Before this Court, however, it was made clear on behalf of the French Government that it accepted that those products were within Regulation No 804/68. The assertion that they were products ‘of secondstage processing’ was repeated as part of a subtler argument that, although within the Regulation, they were not products of which the prices were thereby regulated. To that argument I shall come when I deal with the Cour d'Appel's third question.

Regulation No 990/72, which is also mentioned in the Cour d'Appel's first question, is a Commission Regulation laying down detailed rules for granting aid for skimmed milk and skimmed-milk powder used as feed or processed into compound feeding-stuffs. Its genesis lies in Article 10 of Regulation No 804/68, paragraph I of which provides in general terms for aid to be granted for skimmed milk and skimmed-milk powder produced in the Community and used as feeding-stuffs. Paragraph 2 of Article 10 provides for the Council to adopt general rules governing such aid. Such rules were adopted by the Council by Regulation (EEC) No 986/68. Paragraph 3 of Article 10 provides for detailed rules for the application of that Article to be adopted by the Management Committee procedure. It was under this that Regulation No 990/72 was adopted, in replacement of an earlier Commission Regulation, No 1106/68, which had been much amended.

Article 4 of Regulation No 990/72, as amended by Commission Regulation (EEC) No 804/76 (which entered into force on 15 April 1976), defines the compound feeding-stuffs in respect of which the aid may be granted. It defines them, so far as here relevant, as being those ‘containing not less than 60 % and not more than 70 % of skimmed-milk powder to which is added not less than … 5 % of non-butyric fats and not less than 2 % of starch’.

Your Lordships see that, on the mere basis of the statement of the composition of the Denkavit products contained in the Order for Reference, it is doubtful whether that definition covers them, since that sment does not mention any starch. O the basis, on the other hand, of the statement of the composition of the products contained in the respondents' written observations, it is clear that the definition does cover them.

I am accordingly of the opinion that, in answer to the first question referred to the Court by the Cour d'Appel, Your Lordships should rule as follows:

(1) Milk-feed products for calves of the nature and composition indicated in the question are agricultural products within the meaning of Article 38 of the EEC Treaty and are within the definition of milk products in Article 1 of Regulation No 804/68;

(2) Whether such milk-feed products are also within the definition of compound feeding-stuffs in Article 4 of Regulation No 990/72 as amended by Regulation No 804/76 depends upon whether they contain at least 2 % starch.

The second question

The Cour d'Appel's second question is whether feeding-stuffs of the kind to which the proceedings relate ‘are subject to the monetary compensatory amounts provided for by Regulation No 974/71 of 12 May 1971 and, if so, whether that in itself means that, by virtue of Article 1 (I) of that Regulation, they are covered by the common organization of agricultural markets’.

The answer to the first pan of that question admits of no doubt. Monetary compensatory amounts (‘MCAs’) have at all material times applied to feeding-stuffs of the kind in question. Your Lordships will remember that, by virtue of Article I (2) of Council Regulation No 974/71, MCAs may be applied:

‘(a) to products covered by intervention arrangements under the common organization of agricultural markets;

(b) to products whose price depends on the price of the products referred to under fa) and which are governed by the common organization of markets or are the subject of a specific arrangement under Article 235 of the Treaty.’

Feeding-stuffs are not as such covered by intervention arrangements nor are they the subject of any specific arrangement under Article 235 of the Treaty. It is as products whose price depends on the price of products covered by intervention arrangements and which are themselves governed by the common organization of markets that they have been subjected to MCAs. The Regulations of the Commission under which that was done for the period September-October 1976 are set out in careful detail both in the written observations of the respondents and in those of the Commission. I need not. I think, go through them.

The second part of the question, as the Commission pointed out, suggests that the cart might be put before the horse MCAs may only be applied to a product if it is within Article I (2) of Regulation No 974/71, which means that, unless it is the subject of a specific arrangement under Article 235 of the Treaty, they may not be applied to it unless it is covered by the common organization of an agricultural market. It follows that one cannot draw from the circumstance that MCAs have been applied to a product the conclusion that that product is covered by the common organization of agricultural markets. If MCAs were applied to a product that was neither the subject of a specific arrangement under Article 235 nor covered by a common market organization, their application to that product would be invalid. However, if my answer to the Cour d'Appel's first question is right, this part of its second question is irrelevant.

I am accordingly of the opinion that, in answer to the Cour d'Appel's second question. Your Lordships should rule, without more, that feeding-stuffs of the kind indicated in the question have at all relevant times been subject to the monetary compensatory amounts provided for by Regulation No 974/71.

The Cour d'Appel's subsequent questions are. expressly, asked only on the tooting that the answers to the first and second questions are to the effect that the ‘Denkavit’ products are subject to Community legislation. Since, in my opinion, they are, I must deal with those questions.

With the third question one comes, I think, to the heart of the case.

The third question

That question is as follows:

‘Does the common organization of the market in milk and milk products provided for by Regulation No 804/68 of 27 June 1968, either alone or in conjunction with the common organization of the market in beef and veal provided for by Regulation No 805/68, preclude the application by a Member State of national legislation imposing a price freeze to the milk-feed products for calves defined above?’

In considering the arguments presented to us on that question it must, I think, be borne in mind that the written observations of those who submitted any (the French Government, the respondents and the Commission) were all lodged before Mr Advocate General Capotorti delivered his Opinion in Case 223/78 (the Grosoli case), and that the oral observations of those who attended the hearing (the respondents and the Commission) were made before the Court delivered Judgment in that case (which it did on 12 July last). It should also be borne in mind that the Counsel who represented the respondents here were the same as those who represented Mr Grosoli, so that, naturally, many of the arguments that were put forward on behalf of the respondents were the same as those Mr Advocate General Capotorti and the Court had to consider in the Grosoli case.

Inevitably the argument in the present case centred, as it did in the Grosoli case, on the decisions of the Court in the Galli, Tasca and SADAM cases and in Case 154/77 Procureur du Roi v Dechmann [1978] ECR 1573, the first three of which were, as I have already said, referred to by the Tribunal correctionnel in its Judgment. Mention was also made at the hearing of Case 10/79 the Toffoli case, which was then due to be heard on the following day and in which Mr Advocate General Reischl is to deliver his Opinion tomorrow.

I need not go again over the ground already amply covered by the Opinion of Mr Advocate General Capotorti and the Judgment of the Court in the Grosoli case. The former contains a review of the earlier cases and a detailed analysis of the resultant law. The latter contains an authoritative summary of that law.

It is of course true that in the present case we are concerned with prices as between producer and wholesaler, whereas in the Grosoli case the Court was concerned with prices as between retailer and consumer. It was suggested on behalf of the respondents that that gave rise to a distinction of principle between the two cases. But the authorities clearly in my opinion that it does not. The difference is one of degree. As the Court has pointed out ‘national rules for the same marketing stages as the system of Community prices will normally run a greater risk of conflicting with the said system than rules applying exclusively to other stages’ (see paragraph 6 of the Judgment in the Tasca case and paragraph 7 of that in the SADAM case). But the test throughout is whether or not the national rules that are in question are such as to jeopardize the aims or functioning of the common organization of the market. That is a matter which, at the end of the day, has, in a case like this, to be determined by the responsible national courts.

By the same token I would reject the submission of the French Government that a distinction should in principle be drawn between the introduction of national legislation governing prices for products that are the subject of Community arrangements (such as intervention arrangements) guaranteeing their prices and the introduction of such legislation governing prices for products processed from them (described by the French Government as ‘products of second-stage processing’ or ‘industrial products’). The authorities show clearly that the reason why national control of retail prices may conflict with Community rules is that such control may have repercussions on prices at earlier marketing stages. It seems to me obvious that, similarly, national control of prices for processed products may have repercussions on prices for the products from which they are processed. Here again the only test can be whether the national legislation in question is or is not such as to jeopardize the aims or functioning of the common organization of the market.

The French Government sought to demonstrate that the price freeze imposed by the Arrêté of 22 September 1976 had not interfered with the aims or with the functioning of the common organization of the market in milk and milk products by reference to four factors:

(1) The relationship between the cost of the raw materials entering into two of the ‘Denkavit’ products (‘Denkavit Elévage’ and ‘Denkavit Finition’) and the selling prices of those products at 31 January 1977;

(2) The fact that the price of skimmedmilk powder in France rose by 7 % over the whole of the year 1976;

(3) The fact that denaturing of skimmed-milk powder (for animal feed) did not diminish during the period of the freeze; and

(4) A reply given by the Commission to a question put down in the European Parliament by Mr Cointat, in which the Commission said that, on the information then in its possession, it did not think that the Arrêté had had any effect on the common organization of the market in milk and milk products.

With all respect to the French Government, I think that in relying on the first three of those factors it adopted the wrong approach, because one does not know what other factors may, in the relevant period, have affected the costs of French producers of milk-feed products or the market for their products. Nor would it be realistic to require the ordinary criminal courts of a Member State, in a case such as this, to take evidence and pass judgment on the complex economic issues involved in such an approach. One would not convict a cat on the basis of the scanty-data put before this Court by the French Government. The correct approach in my opinion is to examine the price determining machinery of the common organization of the market and to consider whether the freeze was, having regard to the composition of the products in question, inherently-likely to interfere with the functioning of that machinery.

As to the Commission's reply to Mr Cointat, I think it enough to recall that, before this Court, the Commission emphasized that it had given that reply-on the basis of the information then available to it. The Commission's submissions in this Court left no doubt that it would have given a different reply-now.

The principal features of the price determining machinery of the common organization of the market in milk and milk products are these:

(i) The fixing for each year of a target price for milk itself; this is the price ‘which it is aimed to obtain for the aggregate of producers’ milk sales, on the Community market and on external markets' (Article 3 of Regulation No 804/68).

(ii) The fixing of intervention prices for butter, skimmed-milk powder and certain Italian cheeses; these are fixed at levels designed to enable milk to achieve its target price (Article 5 of the Regulation).

(iii) Intervention buying and aids to private storage of those ‘intervention products’ (Articles 6, 7 and 8).

(iv) The aid (under Article 10) for skimmed milk and skimmed-milk powder used as feed or in feedingstuffs.

(v) A system of import levies and export refunds which extends not only to the intervention products but also to other milk products, including feeding-stuffs, and is designed to insulate Community prices from world market prices (Articles 14 and 17).

In addition, as Your Lordships know, the system of MCAs is applicable to milk products, including feeding-stuffs.

It is difficult to see how national legislation freezing or controlling prices for milk-based feeding-stuffs could fail to interfere with the functioning of that machinery. Indeed the respondents annexed to their written observations (as Annex 5) a diagram which, to my mind, vividly illustrates how it must inevitably do so. The Commission too thought that it must do so. It was particularly anxious about the effect of such legislation on sales of skimmed-milk powder from intervention stocks.

The French Government suggested that the effect of the price freeze must have been negligible because it was so shortlived. On that point the respondents cited Case 82/77 Openbaar Ministerie of the Netherlands v Van Tiggele [1978] ECR 25, where it was held that the temporary nature of a measure having an effect equivalent to a quantitative restriction on de between Member States could not render that measure compatible with Article 30 of the Treaty. I agree with the respondents that similar considerations apply here. The prohibition on Member States introducing measures that conflict with the common organization of agricultural markets cannot be escaped by means of an appeal to the ‘de minimis’ principle, at all events where it is sought to enforce such measures by criminal proceedings.

There could be circumstances because of which, despite the apparent incompatibility between the common organization of the market and the national price freeze, there was in fact no such incompatibility. Such might be the case, for instance, if it were shown that, owing perhaps to lack of competition between manufacturers of milk-based feeding-stuffs, their profit margins were so high as to enable them readily to absorb the effects of the freeze — though what we were told on behalf of the respondents suggests that the contrary was the case. It is of course for the competent French Courts to consider such possibilities if they are canvassed before them on the basis of adequate evidence.

In the result I am of the opinion that Your Lordships should answer the third question put by the Cour d'Appel by ruling as follows:

(1) Member States are precluded from applying national price control legislation to milk-feed products of the kind referred to in the question if the application of such legislation to them would jeopardize the aims or functioning of the common organization of the market in milk and milk products established by Regulation No 804/68 or the aims or functioning of any other common market organization established by Community law;

(2) Where the validity or applicability of any such national legislation is questioned before a court or tribunal of a Member State it is for that court or tribunal to decide whether that legislation is or is not compatible with Community law; in so doing that court or tribunal should have regard to the actual features of any relevant common market organization and in particular to its price determining machinery.

The fourth question

The Cour d'Appel's fourth question is:

‘Do the rules on the free movement of goods laid down in Articles 30 to 34 of the Treaty of Rome, and more particularly Article 22 of Regulation No 804/68 as regards milk products, preclude the application to the said products of national legislation imposing a price freeze which prevents increases in the purchase price of raw materials or finished products from being passed on in selling prices?’

As I mentioned yesterday in my Opinion in Case 251/78, now that the transitional period is over, Article 22 of Regulation No 804/68 adds nothing to what is in the Treaty itself and it should be regarded as spent.

For the rest the answer to the question is substantially to be found in the Judgments of the Court in the Tasca and SADAM cases (paragraphs 13 and 15 respectively). I suggest that, following and adapting what the Court there said, Your Lordships should, in answer to the fourth question, rule as follows:

Articles 30 to 34 of the Treaty prohibit in trade between Member States all measures having an effect equivalent to quantitative restrictions. For the purpose of that prohibition it is enough that the measures in question should be likely to hinder, directly or indirectly, actually or potentially, trade between Member States. Although national price control legislation applicable without distinction to domestic and imported products does not necessarily constitute a measure having an effect equivalent to a quantitative restriction, it may do so if it results in the sale of imported products becoming either impossible or more difficult than that of domestic products. In particular national legislation imposing a price freeze may not be applied in circumstances in which, having regard to the prices of imported products compared to those of domestic products, traders wishing to import either raw materials or finished products into the Member State concerned from other Member States cannot do so without incurring losses.

The fifth question

The Cour d'Appel's fifth question is:

‘Does the common organization of the market in milk products (Regulation No 804/68) preclude a Member State from applying national legislation imposing a price freeze which does not contain special provisions for agricultural products governed by EEC decisions?’

It was submitted on behalf of the respondents that that question was ill-formulated and called for an answer only if the answers to the third and fourth questions should be in the negative. The Commission, for its part, said that it had difficulty in understanding the relevance of the question.

I do not think that those criticisms are justified.

I imagine that, in putting the question, the Cour d'Appel had in mind the endeavours of the authors of the Notices published in the BOSP on 23 September and 1 October 1976 to exclude from the scope of the Arrêté products the prices of which were governed by Community regulations, and that it wondered whether those endeavours had gone far enough.

As I said recently in my Opinion in Case 159/78 Commission v Italy (citing Case 167/73 Commission v French Republic [1974] 1 ECR 359) I think that a Member State infringes the Treaty if it has in force legislation that is incompatible with Community law, at all events where people may thereby be misled as to what the law really is. If that is right, it must I think follow that a Member State infringes the Treaty if it introduces price control legislation without making it clear (in one way or another) that that legislation is inapplicable to products covered by a common market organization in so far as its application to those products would be incompatible with the provisions of that organization.

I am therefore of the opinion that, in answer to the fifth question, Your Lordships should rule that national legislation imposing a price freeze is incompatible with Community law if and in so far as, on the face of it, it applies to products covered by a common market organization in a manner incompatible with the provisions of that organization.

The sixth question

The Cour d'Appel's sixth and last question is:

‘Is the combined effect of Articles 5 and 85 of the Treaty of Rome to preclude a Member State from applying national legislation freezing the prices of products subject to Community legislation?’

On that question there was submitted to us on behalf of the respondents an elaborate and very learned argument of which the gist was that the imposition of price controls had the same adverse effect on competition between undertakings as a price fixing agreement between. Such an agreement being prohibited by Article 85, it must, so the argument went, be a breach of Article 5 for a Member State to cause the same effect by means of legislation.

The flaw in that argument is in my opinion that it overlooks that what is prohibited by Article 85 is ‘agreements between undertakings, decisions byassociations of undertakings and concerted practices’ having certain specified characteristics. No doubt a Member State would be in breach of Article 5 if it enacted legislation calculated to bring about or to encourage such agreements, decisions or practices. But I do not think that, in relation to Article 85, Article 5 can be interpreted as going further than that. To hold that it did would be to render Article 90 virtually nugatory. It would also mean that the Treaty had taken away from Member States all power to control prices, which the Judgments of the Court in the Galli, Tasca, SADAM, Van Tiggele, Dechmann and Grosoli cases clearly show that it has not.

I am therefore of the opinion that, in answer to the sixth question, Your Lordships should rule that Article 85 of the Treaty is not, either alone or in conjunction with Article 5, concerned with national price control legislation.