1.

The applicant objects mainly to the definition of the class of persons qualified to participate in the special import system linked with the purchase of meat held by the intervention agencies. Owing to the fact that the class has not been restricted to processors, for whom the special import system was intended, and because it has not been laid down that the meat to be bought from the intervention agencies must be processed, the processors, who were in principle the intended beneficiaries, have been discriminated against. This extension of the category of participants has also led to each tenderer's only being awarded very limited quantities. In the applicant's view it would be more appropriate to restrict the class to processors or at least to give them preferential treatment and then apportion the meat according to the processing capacities and patterns of trade existing hitherto. The applicant is also of the opinion, which too is to be viewed against the background of the criticism concerning the class of participants, that the Commission was wrong to be guided mainly by tenders from traders who, to some extent, only participated in the invitations to tender for speculative reasons, and that as a result it fixed minimum prices which were too high. In this way it has disregarded the aim of the special import system which is to supply processors with meat from non-member countries on favourable terms. It is necessary to proceed on the basis that the advantage of being exempted from the levy is as good as offset by minimum prices which were far too high; at least the aim of giving preferential treatment to processors has been neglected to an inadmissible extent in favour of endeavours to relieve the intervention agencies of stocks, and thus burdens have been imposed on processors which strictly speaking should have been borne by the general public. Finally the Commission must also be blamed for having fixed differing minimum prices for the different Member States and by so doing offending against the concept that Community law must be applied uniformly. (a) As far as concerns these objections it must first of all be noted that the applicant has not called in question the principle upon which the relevant rules and regulations in this case are based, namely the linking of imports from non-member countries on favourable terms with the sale of meat held by the intervention agencies. Any other attitude would indeed be difficult to understand in view of the surplus of beef and veal in the Community, which early in 1978, as we were told, culminated in stocks of 450000 tonnes. But anyone who accepts this principle ipso facto acquiesces in restrictions of the imports given preferential treatment and also recognizes in connexion therewith that granting preferential treatment on importation must be made conditional upon certain reciprocal concessions which are in the public interest. In this connexion it is quite clear that the Community institutions are entitled to exercise a wider discretion when they assess these two factors. When they do so the possibility is not ruled out a priori all the circumstances which are to be taken into consideration and especially the market situation may lead to a considerable reduction of the privileges attaching to importation. If such reductions eventuate then every time the question whether the interests of the processing industry were given adequate consideration has to be determined account must also be taken of the fact that the system viewed as a whole provides this industry with other substantial benefits. In this connexion for example imports exempted from the levy in the context of GATT tariff quotas or of import quotas applied to ACP products are material. Aids for private warehousing are also to be regarded as such a benefit. Furthermore special sales of meat held by intervention agencies at reduced prices to the processing industry itself, such as took place for example in November 1977 and in August 1978, whereby 4 COO and 3000 tonnes respectively were handed over at the quite favourable price of 950 units of account per tonne, must not be forgotten. (b) As far as concerns the question of the definition of the class of persons allowed to participate in the special procedure in question the Commission, as your Lordships are aware, attached importance to the principle, laid down in Article 7 of Regulation No 805/68 for the disposal of products bought in by the intervention agencies, according to which ‘equal access to goods and equal treatment of purchasers’ is to be ensured. The applicant on the other hand takes the view that attention should have been focused mainly on the fact that the processors received preferential treatment. This would have meant that, if discrimination to their detriment was to be avoided, participation in the special procedure would have to be restricted to them. In fact such an attitude is also not inconsistent with the principle quoted by the Commission. On this point Regulation No 98/69 (as amended by Regulation No 429/77 — Official Journal 1977 L 61 of 5 March 1977, p. 18) gives an official interpretation. According to that regulation differentiation based on objective criteria is definitely permitted; in particular there can be exceptions and this must also apply to the ‘linking’ system, if the goods to be disposed of are intended for specific purposes. Furthermore it is also relevant that, in the context of a similar special import system (imports of young male bovine animals intended for fattening in accordance with Article 13 of Regulation No 805/68), Regulation No 2902/77, unlike Regulation No 2900/77, which gives the trade priority, clearly accords priority to agricultural producers. As far as concerns this controversial point it must first of all be stressed that the last-mentioned reference undoubtedly has no value as an argument, because the special import arrangements for young bovine animals is restricted to a total or partial suspension of the levy (Article 13 of Regulation No 805/68 as amended by Regulation No 425/77: Official Journal L 61 of 5 March 1977, p. 1), which means that that article does not provide for the import system to be linked to the sale of meat held by the intervention agencies, as does Article 14 of Regulation No 805/68. The fact that the relevant rules could not be restricted to the class of processors because the said rules deal with the importation of meat and many processors, in Italy at least the smaller undertakings, do not import direct but avail themselves of the trade seems to me also to be convincing. If the rules advocated by the applicant were adopted, such interested parties would not have a chance, and that would undoubtedly amount to discrimination, because under Article 11 of Regulation No 585/79 as amended by Regulation No 1384/77 licences cannot be issued to them and then assigned by them to importers. Furthermore it must be borne in mind that ‘linking’ under Article 14 of Regulation No 805/68 is in general permissible, because there is no clear limitation on it; therefore imports exempted from the levy cannot only be linked to the sale of meat held by the intervention agencies, which is only suitable for processing, but also to the sale of any meat held by intervention agencies, that is of intervention agency meat intended for general consumption. In the present case it is clear that in fact the second of the two alternative combinations was chosen. This can be inferred from a statement of the applicant that meat held by the intervention agencies and intended for the processing industry was not involved. This is confirmed by the Council Estimate of 13 December 1977, which has already been mentioned, and on which the invitation to tender of January 1978 was based. It compared the requirements of the processing industry with the supplies available within the Community made up inter alia of quantities in public and private storage, tariff quotas and imports from ACP countries. If accordingly the conclusion was drawn that there remained a deficit of 50000 tonnes in the processing industry's requirements of meat, to be made good by special imports, this can only mean that it was not considered necessary to reserve as well for the processing industry the meat held by the intervention agencies and linked to these imports. If however there is a linking of this kind, it naturally precludes any obligation to process the intervention agency meat in question which is what the applicant demands should be done. It must also be regarded as equally pointless to reserve the sale of such intervention agency meat to processors because in this way they would be forced to act as dealers which is not one of their functions. In such a case laying the emphasis on the principle laid down in Article 7 of Regulation No 805/68 and, as the Commission has done, giving the parties interested equal access to the ‘linking’ system, must on the contrary be the obvious course. To that must also be added, and this makes it abundantly clear that the Commission cannot be blamed for misusing its discretion, that all the parties interested cannot in fact be said to have received absolutely equal treatment, that on the contrary the privileged position of processors positively stood out. Care was in fact taken in an appropriate manner that other interested parties, who were entitled to effect the privileged imports, used the imported meat for the purpose specified, that is to say, for processing. In this connexion I draw attention to Article 9 of Regulation No 585/77, as amended by Regulation No 1384/77, under which in the licence the factory in which the meat is to be processed into preserved food is to be designated. Furthermore under Article 11 of this regulation the applicant for a licence has to undertake to carry out himself or have carried out under his responsibility the processing and also to prove that the person responsible for the factory indicated in the application for a licence has agreed to the manufacture in those premises of the preserved food in question. Moreover reference should be made to the corresponding wording of Article 11a which by means of Commission Regulation No 2901/77 has been added to Regulation No 585/77. Accordingly it cannot in fact be said that the rules could only be regarded as lawful if they had been framed in accordance with the applicant's ideas. Just because they take account of the principle of equal access to meat held by the intervention agencies and also of the principle of giving the processing industry preferential treatment it must on the contrary be recorded that they are compatible with the rules of the common organization of the market in beef and veal and in no way inconsistent with the prohibition of discrimination. (c) The question to be looked into following on this is whether valid objections can be raised against the principle of taking into account the prices tendered against the minimum prices fixed on the strength of them and also on the ground that the same minimum quantity applied to each participant in the invitation to tender. In the applicant's view an apportionment of the quantities according to the processing capacities would have been more appropriate. It is also of the opinion that the system requires prices to be at about the same level as world market prices. But this is clearly unattainable if every possible price tendered is taken into consideration, that is to say prices tendered by processors whose costs are lower because of diversification or because they manufactured certain products themselves and also prices tendered by other interested parties who dispose of meat held by the intervention agencies to the retail trade upon terms which are favourable to them and sell imported meat to processors at a big profit. As far as concerns this category of questions the view that the quantities available should be apportioned according to processing capacities is evidently based on the notion that only processors should participate in the special import system, a notion however, as has already been shown, which must be rejected. On this point the Commission has convincingly shown that, if the invitations to tender are restricted to processors, the determination of their processing capacities would create very great difficulties. Furthermore, since larger meat processors are to be found in other Member States, this would straightaway lead to the smaller Italian undertakings being placed at a disadvantage and thus prevent this maintenance of a balance between regions. With regard to the methods adopted to fix the price it is clearly wrong to say that there is in general a need to approximate it to world market prices. Although it is true that a requirement of this kind applies to imported meat and may well in the main be satisfied by the interposition of traders and the inclusion of a corresponding profit margin, the obligation to process nevertheless places the processor in a strong position and thereby ensures that the importer's charges cannot be excessive. On the other hand this does not apply to meat held by intervention agencies, because it is not necessarily intended for processing. As far as that is concerned one can legitimately make sure that the price reaches a certain level. On the one hand that is justified, because it is in the interest of the intervention agencies and under the system of ‘linking’ that interest is intended to come into its own. On the other hand it must be borne in mind that it is only by taking into consideration the highest prices tendered that a dissipation of the available quantities can be prevented which is unfortunately what happened in 1977 when another system was applied. In this connexion it must moreover be noted that it is not entirely clear why only dealers can obtain higher prices for meat held by the intervention agencies, which from the outset is not intended for processing. In fact there is presumably no reason why processors, who participate in the invitation to tender should not also act accordingly and by so doing avoid losses by purchasing meat held by intervention agencies. Finally, having regard to the foregoing, restricting the quantities to each tenderer can also hardly be described as unjustified. If in fact there was no such limitation, most of the available meat would go to the financially strongest undertakings, which are able to submit higher tenders. Therefore the restriction of quantities must undoubtedly be regarded, in the interest of a balanced apportionment, as being appropriate and justified. (d) There now only remains the question whether the minimum prices in this case were fixed too high so that the advantage accruing to processors was in practice cancelled out or disproportionately reduced. Furthermore the objection that the Commission has wrongly fixed differing minimum prices for the different Member States has to be examined. As far as concerns the price fixing the applicant, in substantiation of its view, points out that prices on the world market at that time had been about 900 units of account per tonne, that the normal selling price of beef and veal held by the intervention agencies was approximately 1300 units of account per tonne but that the minimum price fixed by the Commission amounted to 1600 units of account per tonne. However it overlooks in this connexion, on the one hand, that processing the meat from the intervention agencies was not obligatory, and that, what is more, the meat could be sold on the market at a profit by processors as well as by dealers. There are therefore no grounds at all for establishing an average cost price for meat for processing on the basis of the price for meat held by the intervention agencies as determined by the invitation to tender, and of the price of imported meat. On the other hand, even if it is assumed that the beef and veal to be acquired from the intervention agencies is processed, it must be borne in mind that the relevant quantity which as your Lordships are aware, amounted at the most to 100 tonnes, as a rule — I call attention to the applicant's statement that before 1974 it imported each year about 10000 tonnes from non-member countries — is to be compared to a much larger quantity of imported meat, which, since it has to be processed, may be bought in addition by other participants in the invitation to tender who are not themselves processors. If however the cost prices are calculated on that basis then, in view of the savings in the levy of more than 1000 units of account, even if a profit margin for the dealer is taken into consideration — and no evidence has been adduced to us that this is usually about 20 % — and even if a smaller quantity of meat is acquired from the intervention agencies at a price which is about 300 units of account per tonne more than the normal selling price of meat held by intervention agencies an advantage must still accrue to the processors and such an advantage rules out the finding that the objective of giving them the benefit of a special import system has been neglected to an inadmissible extent. On the question of the fixing of differing minimum prices for the different Member States it must first of all be stressed that, since the lowest level was chosen for Italy, it led to Italian undertakings receiving preferential treatment. Furthermore the Commission has shown that there are objective reasons for proceeding in this way and that consequently there cannot be presumed to be any discrimination. Thus the intervention prices vary anyway from one Member State to another; differences in quality must be taken into account and it is necessary to have regard to the different market conditions and conditions of competition and this of course also accounts for the normal selling prices for meat held by the intervention agencies not being uniform in all the Member States. If that fact had not been taken into consideration and if at the time of the invitation to tender care had not been taken to see that the minimum price in the various Member States represented about the same difference in relation to the selling price of meat held by the intervention agencies — in Italy the difference was even smaller than in the other Member States — there would have been regional imbalance and the Italian purchasers would have been the ones placed at a disadvantage as regards quantity compared with interested parties from the other Member States. However during the proceedings no conclusive evidence was adduced to show that there was any reason for fixing the minimum prices for Italy at a still lower level. This would in fact undoubtedly have upset the regional balance to the detriment of other Member States and since under those circumstances' only smaller quantities would have been available for the other Member States, would in particular have made it necessary to fix the minimum prices for the latter at an even higher level than had already been reached. (e) To sum up it must be recorded that the applicant's objection that the system is discriminatory and disregards the principle of proportionality is no more well founded than the similar objection made concerning the decision which has been directly challenged.