OPINION OF MR ADVOCATE-GENERAL MAYRAS

DELIVERED ON 16 AND 17 JUNE 1975 ( 1 )

Contents

General introduction . I — The nature of the sugar market II — The common organization of the market in the sugar sector III — The concerted action between European producers IV — Applicability of the rules of competition to agriculture V — Formal submissions of a general nature VI — Protection of the Italian market — The problem of sugar imports VII — Protection of the Netherlands market VIII — Protection of the market in the Federal Republic of Germany IX — Concerted action relating to the invitations to tender for refunds on exports of Community sugar to third countries X — The pecuniary sanctions which have been imposed Conclusions

Mr President,

Members of the Court,

General introduction

It was at the end of the first marketing year following the entry into force of the basic Regulation of the Council, No 1009/67, on the common organization of the market in sugar that the Commission of the European Communities was informed that there were obstacles to free Community trade in sugar.

Quite apart from refusals to sell, which caused certain sugar consumers to complain, a combination of the following facts also attracted its attention:

— the grouping, from 1 July 1968, of German producers in marketing organizations with strictly demarcated areas, and the intervention of the Bundeskartellamt (The Federal Cartel Office) in Berlin in the affairs of one of these organizations, the Südzucker-Verkauf, for the purpose of requiring production of certain information in connexion with contracts which this organization had entered into with its commercial representatives and also in connexion with loyalty rebates which it granted;

— an agreement made between French sugar manufacturers under the aegis of l'Association de défense des intérêts économiques et sucriers (Association for defending the economic interests of sugar manufacturers) for the marketing year 1968/1969, notified to the Commission on 31 October 1968, on which however it has not defined its position;

— the fact also that Netherlands producers had entered into agreements for mutual cooperation, the evaluation of which in the light of Article 85 of the Treaty culminated in the Commission initiating a procedure (under Article 3 (1) of Regulation No 17/62 of the Council) which has not yet been completed;

— finally the outbreak in the Netherlands in March 1969 of a sugar ‘price war’.

As these facts raise the presumption that they are practices which restrict competition on the common market, the Commission, as far back as 1969, in accordance with Regulation No 17/62 of the Council, undertook the necessary investigations and obtained information from many producers, dealers and consumers of sugar.

When these investigations had been completed it introduced, on 31 May 1972, upon its own initiative, the procedure specified in Article 3 (1) of this Regulation against twenty-two producers and sales organizations and their members representing about 90 % of Community production.

The objections raised against these undertakings were notified to them between 24 July and the following 29 July, a time-limit of two months being given to them within which to deliver their defences in writing.

After these undertakings had acceded to this invitation their representatives, as Article 19 (1) of Regulation No 17 provides, were heard by the officials of the Directorate-General for Competition and Agriculture, in the presence of officials of the Member States concerned.

Finally, after having received on 5 December 1972 the opinion of the Advisory Committee on Restrictive Practices and Monopolies, the Commission adopted on 2 January 1973 its Decision entitled ‘European Sugar Industry’ based on Articles 85 and 86 of the Treaty which was notified to the twenty-two undertakings. It calls upon them, on the one hand, to put an end immediately to the infringements which it had found to exist; on the other hand it imposes on sixteen of the undertakings fines totalling 9 million units of account.

It is only the latter undertakings which have challenged in your Court the decision which they claim should be annulled and, in the alternative, rectified so far as the amounts of the fines which have been imposed are concerned.

Apart from the recent Frubo case it appears to me that this is the first time that you have had to deal in such a direct way with the problem of the application of the rules of competition in the Treaty to the production of and trade in an agricultural product (Article 42 of the Treaty) which is covered by a common organization of the market (Article 40).

On this problem another has been grafted: are the instruments and mechanisms provided by a regulation relating to the common organizations of markets and by Community implementing regulations, on the one hand, and the systems maintained or created by national authorities in the same sector, on the other hand, such as to guarantee or permit, provided that there is neither a cartel nor an abuse of a dominant position, the free movement of the product under consideration and free competition between producers?

The anti-trust bodies of the Member States are familiar with this problem with which the Community authorities may well be confronted more and more frequently. It is namely the problem of cartels which, according to Article 59 of the French regulation of 30 June 1945‘result from the application of texts of laws, regulations and other legislative documents’; it is also the problem of ‘cartels between farmers or farmers’ associations' expressly mentioned by German law on competition (Article 100 (1) GWB).

In a Community context the impact of competition law on existing common organizations of the market in agricultural products calls for the consideration of Regulation No 26/62 of the Council. Article 2 of this regulation states that Article 85 (1) of the Treaty shall not apply to such of the agreements, decisions and concerted practices as form an integral part of a national market organization or which are necessary for attainment of the objectives set out in Article 39 of the Treaty.

These considerations show why it appeared to me to be advisable, before embarking on the examination of the applications, to describe the main features of the sugar market and to give particulars of the regulations in the light of which the conduct of the applicants must be evaluated.

I — The nature of the sugar market

For a long time sugar and its raw materials — cane sugar or beet sugar — has been affected, on a national level, by intervention measures adopted by public authorities and by agreements between economic operators.

At the present time there is still no country where the sugar sector of the economy is completely exposed to market forces.

The respective development of the cultivation of beet and cane sugar and competition between sugar based on these two plants have been decisively influenced by the subsidies granted to sugar beet producers.

Without going back to the decrees enacted, at the time of the continental blockade, by Napoleon I to promote sugar production, such interventions started to play a leading role in Europe from the beginning of the second half of the 19th Century. They took the form of multiple measures for aid and support granted to beet producers and sugar manufacturers by national governments. Whatever methods were adopted by these measures, the financing of them was in the end charged to the consumer or the taxpayer, so much so that Lamartine, who, although a poet, was also a politician, could declaim in a speech before the National Assembly:

‘Je vous défends d'appeler la sucrerie une industrie nationale. Elle n'a de national que les charges qu'elle fait peser sur le pays’.

‘I forbid you to call the sugar industry a national industry. It is only the heavy burden of the duties which it imposes on the country which is national’.)

These policies led to large scale dumping which brought about a fall in prices on the world market and were therefore detrimental to the development of sugar producing countries.

By way of reaction these interventions by public authorities or private agreements caused endeavours to be made to organize production and sales internationally on a more or less free market basis and at the same time to make certain that the market was reasonably stable and, without creating too much disturbance, to bring the volume of production into line with the volume of consumption. Let me mention on this point the convention signed at Brussels on 5 March 1902 and the later ‘International Sugar Agreement’, under which export quotas were fixed for countries which are net exporters.

The world sugar market is strictly speaking a very narrow residual market (‘marche résiduel’) which hardly represents more than 15 % of world production. As early as 1960 two-thirds of the sugar traded internationally was sold at special prices, guaranteed and fixed under agreements; the world price, as defined by the International Sugar Agreement, only applied to about one third of the international trade in this product.

This disproportion has increased: 55 million metric tons out of the 80 million metric tons produced in the world in 1974 were consumed in the producing countries. The remainder, 25 million metric tons, that is to say hardly more than one third of world production, was traded internationally. But 13 million metric tons were sold pursuant to bilateral agreements such as the American ‘Sugar Act’, the ‘Commonwealth Agreement’ or the agreement made between Cuba and the Soviet Union. These agreements are concerned with preferential markets. Thus the volume of sugar actually put on the world market is estimated to be only 12 million metric tons. Having regard to this situation the sugar market, which is very sensitive to political or economic crises, is also used for speculative operations. It is for this reason that there is a close connexion between the movement of stocks and prices, in spite of modern methods of marketing and transport which in the normal course of events ought not to justify the building up of very large stocks.

Although sugar stocks are to some extent necessary because the sugar marketing year properly so-called is so short and because the gap between marketing years has to be bridged, building up such stocks is a highly speculative operation. It only needs an actual shortage of some hundreds of thousands of tons to make the price rocket above the highest production costs or, on the contrary, a known or potential surplus of two million metric tons to make it drop to such an extent that it falls below the cost price.

These price variations are made even larger by speculation on the futures markets in New York, London and Paris. There are reasons for supposing that the periods of scarcity are only temporary break-downs in the development of production which continually increases and which is a long way from being caught up by consumption. In fact in the developed industrial countries consumption in practice only goes up in proportion to the population increase, the rate of which is very low; on the other hand in the developing countries, which have a large population increase, consumption is curbed by the low standard of living.

So far as the Community market is concerned its chief characteristic, just like the world market at that time, was a definite tendency to over-produce.

During the four marketing years 1968/69 to 1971/72 with which the present cases are concerned the total production of white sugar in the Community went up from 6800000 metric tons to approximately 8100000 metric tons.

During the same period consumption only increased from 5900000 metric tons to 6500000 metric tons, that is to say from 120000 to 150000 metric tons per year.

Production therefore exceeded Community consumption by 11 % to 24 %.

If these figures are broken down between the five Member States — Belgium and Luxembourg together being treated as one State — they show that two States, France and Belgium, have continually produced a sugar surplus, while in the other States production and consumption are in balance or there is a deficit. Owing to its economic structure Italy has a deficit.

During this period the pattern of Community trade was not enlarged to any appreciable extent except in the case of imports into Italy.

With regard to Community exports of white sugar to the world market they went up from 1100000 metric tons in 1968/69 to 1600000 metric tons in 1971/72.

II — The common organization of the market in the sugar sector

It is this very special sector of sugar production which Regulation No 1009/67 untertook to organize by trying to reconcile such contradictory objectives as: the maintenance of the standards of living of sugar beet farmers and sugar manufacturers, the stabilization of the markets, the availability of supplies, the increase of productivity in accordance with rational criteria and, finally, a reasonable level of consumer prices.

Strictly speaking only the agricultural aspect of sugar production, that is to say primarily beet growing, should have come within the agricultural provisions of the Treaty, as the sugar industry like the other industries in the Community is bound to be subject to the general system, in particular to the rules of competition. And it could appear to be calculating backwards to base the price of the product which has to be protected — sugar beet or, to a lesser extent cane sugar — on the price of a sugar product arising at a later stage. However as the Commission stated in its original proposals for the organization of the market: ‘because the marketing of beet is distinguished by special characteristics the income of beet growers can only be guaranteed by means of the price of sugar’.

It was moreover impossible to succeed in obtaining comparable prices for beet in all the Member States, having regard in particular to the very different rules governing the relations between beet growers and sugar manufacturers. Moreover the world sugar market is based on the price of white sugar.

Guided in this connexion by earlier Netherlands regulations the authors of Regulation No 1009/67 therefore tried to overcome the difficulty by taking into consideration the stage when the product is processed. Agricultural producers saw that an adequate price was only guaranteed indirectly through a link established between the intervention price in force in the production area under consideration and the price of beet

Having said that I must add that the provisions of Regulation No 1009/67, which apply more directly to the present cases, relate to the price system, to national quotas and to the system of aids: they enclose the market and keep it within bounds both at the production stages and at the prices level.

The white sugar produced by industrial companies is a homogeneous product which is standardized in accordance with strict criteria. It is its price rather than the trade-mark which induces the buyer to purchase.

Nevertheless Community regulations proceed on the basis that there are four qualities of sugar for the purposes, inter alia, of sugar purchases by the intervention agencies.

Of these four grades it is Category 3 (‘standard category or quality’, the basic quality on the Paris Sugar Market for white sugar) which in theory is the most important: it is for this standard quality that, according to Articles 2 and 3 of the basic regulation, the target and intervention prices are fixed each year.

I say ‘in theory’, because in fact this quality was not produced by the manufacturers of certain countries which only offered the most expensive kinds (Categories 1 and 2).

The processing industry on the contrary considered this quality to be satisfactory for their production. In particular the wish of German sweet manufacturers to obtain supplies of sugar in this category met, soon after the Community organization had been set up, with an unconditional refusal from the sugar industry. To purchase sugar of this quality produced in the other Member States afforded them no help, because the cost of transporting the latter quality of sugar was almost equivalent to the higher price asked for the category immediately above. This situation gave rise in 1969 to the opening of an inquiry by the Bundeskartellamt (The Federal Cartel Office) which apparently never came to anything.

The production of dearer kinds of sugar was also encouraged by the Community intervention system: a producer obtains for sugar in Category 1 offered to the intervention agency a price which is noticeably higher than the price of sugar in Category 2 and much greater than the actual cost of processing it.

Eventually producers managed to get Grade 2, which was dearer, accepted as the standard quality instead of Category 3 for which there was apparently no demand and this led to an increase in the processing margin of refineries of 0·50 u.a. per 100 kg, which had already risen to 0·88 u.a. per 100 kg in 1971/72.

Let me now examine the provisions governing prices.

Originally the Commission suggested that the Council should only control the production of sugar and the sugar market — as it did in the other market organizations — by means of the price mechanism, as the restriction of production by quotas was only envisaged as a last resort in order to stabilize the market in the case of any serious imbalance.

However under pressure from the German and Italian delegations who had come round to accepting this way of considering the problems of beet growers and national sugar manufacturers, and, moreover, with the support of the European Parliamentary Assembly (Resolution of 20 January 1965) the system of national quotas was retained side by side with the system of prices and in conjunction with this system.

Although the Community organization of the sugar market does not directly include within its field of application the wholesale and retail stages, its main feature, in comparison with the other market organizations, is a complicated ‘downstream’ (‘en aval’) price structure under which first of all the price of the finished product downstream is fixed and then the cost of the raw material upstream is determined. The target price was fixed for white sugar, a product of first-stage processing or even the end product, whereas, in the other organizations the target price is determined on the basis of the agricultural raw material. The reason for this, as I have said before, is that in most cases sugar beet is not in its original state strictly speaking capable of being marketed and exported.

We know that Regulation No 1009/67 provides that the Council shall fix each year, so far at any rate as the sugar produced in the common market is concerned, on the one hand, a target price, on the other hand, an intervention price and it is necessary to recall the respective functions which they perform in a common organization of the market

The first price fulfils an economic objective: it is the price at or near to which it is desired that transactions are carried out on the internal Community market

The intervention price is the price at which the intervention agencies empowered by the Member States to do so, must buy the sugar which is offered to them by producers. Fixed at a level slightly below the target price it tends to facilitate the movement of the product in question; but it is also a guaranteed price, a floor price, to the extent to which the normal effect of intervention should be to provide economic operators with a guarantee that the market price cannot in general fall, except in certain cases limited in time and space, below the intervention price.

On this point Regulation No 1009/67 in no way differs, so far as its objectives are concerned, from most of the texts governing the common organizations of the market in agricultural products. The Commission which has had the opportunity, in connexion with many disputes relating to the implementation of such organizations, to define before the Court the meaning and extent of the target price and the intervention price, cannot therefore in the present cases depart from the position which it has continually adopted.

But the system which applies to sugar is different, so far as the method of price-fixing is concerned, from the traditional plan adopted in the other sectors.

In the system adopted for cereals, for example, the basic target price and the method of fixing prices and the intervention price are fixed for the production area having the largest deficit isburg in Germany) which also happens to be an area where consumption is at a high level; the prices which are derived from them decrease according to the distance from this area.

Prices are therefore effectively fixed for each region.

However the opposite system has been chosen for sugar.

The common target price and the intervention price are fixed for the production area in the Community having the largest surplus, that is to say, the region formed by the eight sugar departments of the North of France. This price is also applicable for the three Benelux countries and Germany.

No provision has been made for fixing prices for each region, as was done in the case of the cereal sector of the market.

It is true that the regions where sugar is both produced and consumed are relatively near to each other and that Member States, with the notable exception of Italy and, to a lesser extent Luxembourg, are in a position to meet all their requirements of sugar for eating from their own production.

The immediate effect of such a situation, which moreover is due to natural and climatic factors, is that trade hardly crosses the boundaries of the region.

Target prices and derived intervention prices have only been fixed for Italy and the overseas departments of the French Republic.

Fixing regional prices for the area having a deficit which is furthest away (Palermo) is effected by adding transport costs from the North of France to Italy. To the extent to which these derived prices are higher than those fixed for the principal production zone, this system has the additional effect of placing marginal producers at an advantage.

Therefore the competitive position of producers is hardly affected by their situation in relation to the principal production area, but rather by the degree of self-sufficiency of the areas of consumption.

The common organization has, as it were, taken over the role of national provisions relating to the equalization of transport costs. The nearness or distance of the main production area, at least so far as Italy is concerned, only has a limited effect on the incomes of producers who are in the target price-intervention price bracket

Given that with very few exceptions the situation of national sugar factories in relation to the national areas of consumption is more favourable than that of a sugar producer of the other Member States, it was foreseeable that intra-Community trade would be limited, even on the assumption of a most favourable distribution of sugar and a reduction to the minimum of transport costs.

Finally the intervention price, a guaranteed price, must come somewhere between the beet growers' income and the price which, since it is the result of market forces, should in general tend to approximate to the target price.

Between these two poles the Council was called upon to take account of the need to guarantee farmers an appropriate purchasing power, so as to avoid in this way any decline in beet growing. Further, whereas the difference between the target price and the intervention price amounts to 8 % for cereals, the authors of the regulation have reduced this difference to 5 % for sugar. This alteration was considered adequate because, contrary to what happens in the case of most agricultural products, the marketing of sugar, a product which keeps well, is only fraught with limited risks.

These considerations explain that the intervention price was fixed at a relatively high level, especially profitable at least for the most efficient and best placed producers.

But, it will be said, this fact should have persuaded those producers who have surpluses available to offer them to intervention agencies, which, within the national quotas, must purchase all the sugar which is offered to them. These agencies can only resell it on the domestic market at a higher price than the intervention price; they are only authorized to sell sugar at a lower price for the purpose of denaturing or can only sell it at the world price if it is exported to third countries in its original state or after processing.

However, it is clear that, during the periods with which we are concerned, this system of intervention only operated occasionally — and moreover unsuccessfully — and made a loss, because the agencies hardly sold any sugar except at prices below the intervention price of sugar intended for denaturing or export outside the Community.

It appears that the Commission, on the assumption that large quantities would have been accepted by the intervention agencies, should have been able to maintain the market price at a level appreciably close to the intervention pnce as long as there was clearly over-production. This was evidently the case since it exceeded, during the period under consideration, domestic consumption by an average of 16 %.

So far as the producers were concerned, it would have been, as a rule, in their interests to offer their surpluses to the intervention agencies — that is to say, at the guaranteed floor price — if the price of sugar on the open market coming under the pressure of surpluses had been inclined to fall to a lower level.

But it has to be recorded that this situation never materialized to any significant extent, even in the countries which had a very large surplus like France and Belgium. On the contrary it is a fact that, with certain limited exceptions, producers of these countries and in particular la Raffinerie tirlemontoise showed a marked reluctance to offer sugar to intervention agencies whatever pretexts they put forward to justify this forbearance.

There is no doubt that the real reason for this is that the intervention agencies were in the eyes of the producers dangerous potential competitors, capable of exercising a considerable influence on the market if they had been able to intervene on a large enough scale.

In the second place I regard this as confirmation that the guaranteed price was fixed at a higher level than was made necessary by the need to avoid the risk of a decline in beet growing, although a wider distribution of beet cultivation in the Community would have been desirable.

Finally, on considering these findings I am inclined to think that, in spite of the pressure brought about by surpluses, an artificial shortage was in fact created, to a certain extent by means of export refunds and denaturing premiums which were an indisputable advantage for the sugar industry.

The most striking feature of the common organization of the market in sugar, which distinguishes it from all the other organizations of the market of the European Economic Community, is the fixing of production quotas.

This system was established, on a provisonal basis, by Article 23 (1) of Regulation No 1009/67 for a period which was to terminate on 1 July 1975; but we know that it has recently been extended, subject to an adjustment of quotas.

Contrary therefore to the initial proposals of the Community this organization of the market does not imply that the objective of freedom of production has been attained. It leads in fact in the end to a restriction by quotas of this production.

It is on the basis of a production target of 6480000 metric tons per marketing year in the Community that national basic quotas, expressed in terms of white sugar, were fixed for each of the Member States. They amounted during the period with which we are concerned to 1750000 metric tons for the Federal Republic of Germany, to 2400000 metric tons for France, to 1230000 metric tons for Italy, to 550000 metric tons for the Netherlands and the same quantity for Belgium and Luxembourg, production being practically non-existent in this latter State.

These national quotas, derived from the basic production target, are apportioned by the national authorities of each State among the factories and undertakings in their territory having regard, on the one hand, to their annual average production during a reference period and, on the other hand, to the size of the national quota.

In conjunction with the system of prices this system tends to restrict production and encourage its regional specialization, while at the same time guaranteeing a minimum level of production, even in those regions which are the most unsuitable for beet growing. Regional specialization should therefore, as I see the situation, cover production over and above the basic quotas.

The aim of the restriction of production by quotas is also to achieve guaranteed prices. Such a guarantee, at the level of the intervention price, was, in the beginning, granted, not at the rate of 100 % of estimated human consumption in the Community, but at the rate of 105 % of this consumption.

After having made considerable progress during the years preceding the 1964/65 marketing year, as a result of an increase in consumption per head of the population and also in the population growth, the rise in the amount of sugar consumed by human beings proved to be much slower and more limited; a partial drop in the consumption per head of the population was even recorded in Germany, Belgium and the Netherlands.

It follows that in determining the basic quotas the Council proceeded on the basis of an optimistic assumption and that, from the beginning of the first marketing year, the amount of these quotas exceeded human consumption by 500000 metric tons, that is to say by almost 10 % throughout the Community.

In addition, so far as that part of production which exceeds this quota of 105 % is concerned, the concept of a ‘maximum quota’ fixed at 135 % of the basic quota is applied. The sugar manufacturers can still within this limit benefit from guaranteed outlets, provided however they pay a production levy of which 60 % can be passed on to the suppliers of beet, the sugar manufacturers themselves only bearing 40 % of it.

The effect of this levy is therefore not only to reduce the manufacturing margins of sugar producers but also to lower appreciably the price paid to the beet grower. It is, as it were, an absorption levy.

But, as a maximum ceiling has been put on the production levy and as it would have been higher had it not been for this ceiling, the result is that the cost of absorbing surpluses has fallen not only on producers but also on the Community as a whole.

With regard to the amounts of sugar produced over and above the maximum quota, they cannot be sold on the domestic market; they must be exported in their original condition outside the Community without the producers being able to benefit from any export refunds.

Now the increase in production during the period under consideration tends to prove that, except in Italy, producers did not keep to the basic quotas which they were allotted. They have made extensive use of those maximum quotas in spite of the requirement to pay the production levy which reduced their return quite appreciably. It is therefore certain that it was still in their interest to produce sugar over and above the basic quotas. It even turned out in France, Belgium and the Netherlands that the maximum quotas themselves were exceeded.

Now that this analysis has been completed two observations can be made on the general system established by Regulation No 1009/67, so far as prices on the one hand and production quotas on the other hand are concerned:

(1) the method of fixing prices and especially the basic or derived intervention prices was, it must be admitted, scarcely such as to promote large sales of sugar between Member States;

(2) there is no doubt that the system of national quotas tends to restrict the amounts of sugar which producers are in a position to sell on the common market; together with the high cost of transporting a product, of which the value/weight ratio is small, this system has a definite effect on the volume and pattern of intra-Community trade. It amounts in itself to a factor likely to encourage the partitioning of national markets, as moreover the Commission has itself acknowledged in a recent communication to the Council and to Parliament last February.

Does this mean however that the common organization of the market in sugar has excluded all effective competition so that the concerted practices, in which the principal European producers are alleged to have engaged, could not in any case have any effect on trade between Member States?

I do not for one moment think so.

First of all the system established by Regulation No 1009/67 has in no way changed the unequal distribution of Community production between Member States in relation to national consumption. It has not in any way altered the fact that there are countries, principally France and Belgium, which owing to their structure have a very large surplus, and countries which have a deficit, especially Italy, to some extent the Netherlands and, at least for certain regions and in certain marketing years, the Federal Republic of Germany whose sugar balance has been in equilibrium since the beginning of 1971.

These facts implied that intra-Community trade should be developed, at least to the extent to which it was necessary to make good the deficits of those States which were not in a position to ensure their own self-sufficiency.

Such trade was in addition made possible by the provisions of Article 35 of the Regulation which prohibits, within the common market, any customs duty and quantitative restriction or measure having an equivalent effect and also recourse to a system of minimum prices as provided by Article 44 of the Treaty.

It is true that Community trade can only represent, in comparison with world production, a residual market covering a small fraction of this production; but this fact could not have the effect of abolishing competition within the Community. On the contrary, this competition had of necessity to be all the livelier on this market, because it could only cover relatively small quantities in relation to the total surplus production of the most favourably situated regions.

Finally the system of Community prices, which are not selling prices to users, dealers or consumers, allowed producers a sufficient margin of freedom to negotiate prices on the market, after having taken into account the strength and weakness of their position, the return, their plant and the actual level of their manufacturing costs.

In this respect fixing intervention prices at a high level allowed producers who engaged in the greatest degree of specialization to be particularly competitive and should have induced them to extend their sales to their competitors' markets in the nearest Member States, to the extent to which transport costs were not in this respect an insuperable obstacle.

I would like to add that since sugar is a homogeneous and to a very great extent a standardized product, in spite of certain consumer habits, competition could not only cover prices but also the other conditions of sale.

The conclusion can be drawn that the common organization of the sugar market did not exclude a considerable margin of competition capable of being impeded by concerted practices within the meaning of Article 85 (1) of the Treaty.

III — The concerted action between European producers

The findings of the procedure initiated by the Commission caused it to blame the principal European producers for engaging in such practices, which from the beginning had as their consistent objective the protection of national markets or, so far as Germany is concerned, the regional markets on which diese producers, neglecting completely the real opportunities for competition offered by the common organization of the market, tried to maintain their former position by obtaining acceptance of the principle of ‘chacun chez soi’ (‘everyone in his own home’).

It is therefore the partitioning of the markets which is the back cloth against which the various specific complaints made by the Commission must be seen.

It is therefore necessary to decide whether we are confronted with a general cartel or only, on the contrary, with practices which are isolated and precisely defined.

In order to do so it is necessary to take care not to confine our attention to the form of the complaints. A ‘fragmented’ presentation of the various infringements, artificially dividing up and severing the complaints from each other and leaving out of account at the same time the general objective of the cartel formed by the producers and the striking similarity of the techniques employed to achieve this objective would only succeed in giving a fragmentary view of the facts.

Conversely the fact that the Commission adopted a single decision and the Court ordered that for the purposes of the oral procedure the cases shall be dealt with jointly does not mean that there must necessarily be a finding in favour of a general cartel.

In fact it is indisputable that the Commission has from the beginning proceeded on the basis that there was one single cartel. If during the procedure it was led to modify this argument, the only reason is that owing to the partitioning of the national markets it was bound to examine the situation created by the concerted practices on each of the markets separately and has obviously only been able in the end to make complaints against each of the undertakings in question in connexion with those practices for which in its opinion those undertakings were to blame.

But, for my part, I do not think it is possible simply to rule out any idea of a general concerted action, because, as we shall see, the links which existed, even before 1968, between the large European producers, the common purpose pursued by them and the similarity of the methods employed to achieve this purpose throw light on their behaviour since the implementation of the common organization.

As is known the manufacturers in question are themselves responsible for 90 % of the sugar production of the Community. In each of the producing countries the combination of producers, which had been vigorously prepared even before 1968, has since then been consolidated.

In France, the principal European producer and a country having a very large surplus, five undertakings are responsible for three-quarters of national production: the companies Béghin and Say which merged on 1 January 1973, the companies Lebaudy Suc and Générale sucrière — the latter has since 1972 owned the majority of the capital of the first company — and finally Sucre Union. The Sucres et Denrées company plays a leading role in the sugar trade.

In Belgium — a country which also has a surplus — the Raffinerie tirlemontoise alone produces directly more than half the national output In addition, as it controls, by means of its majority holdings, the production of the factories of Warneton, Oreye and Moerbeke-Waes, and through marketing agreements the production of the undertakings of Liers, Embressin and Naveau, it exerts — or is in a position to exert — a decisive influence over approximately 85 % of Belgian production.

In the Netherlands two undertakings — Coöperatieve vereniging Suiker Unie (SU) and the Centrale Suiker Maatschappij (CSM), linked together by agreements for mutual cooperation, are responsible for the entire national production and, if account is taken of imports, control more than 80 % of the market

In Germany the producers have grouped themselves in marketing associations the territories of which are celarly demarcated:

The Norddeutsche Zucker for Schleswig-Holstein and part of Lower Saxony:

The Westdeutsche Zucker-Vertriebsgesellschaft for the Western part of Germany of which the most important member is the Pfeiffer & Langen undertaking which, itself, is responsible for about naif of the production of this area;

Finally in the Southern part of the Federal Republic of Germany the Südzucker-Verkaufsgesellschaft, within which the Süddeutsche Zucker AG occupies the most important position as it is responsible for 70 % of production.

In the case of Italy combinations of producers in that country also increased. Three principal groups share the market between themselves:

The first group was formed round the Eridania company: it produces more than one third of sugar production;

The second, the Gruppo Padano, is in practice on a par with the first group as a result of takeovers and the acquisition of controlling interests, in particular of such an interest in Società italiana per l'industri degli Zuccheri;

A third group was formed by a combination grouped round the ‘Agricola industriale Emiliana’ company.

Finally if certain smaller undertakings are responsible for the balance of Italian production, there is nevertheless no independent commercial network for marketing sugar as this is under the control of the large producers.

These European undertakings maintained, before the common organization of the market was brought into force, contacts which were encouraged, if not regularized, by the creation on a national scale of groups, associations and syndicates.

In Belgium it was the Confédération professionnelle du sucre and its off-shoots, in Germany the Verein der Zuckerindustrie and the Wirtschaftliche Vereinigung Zucker, in France, the Syndicat national des fabricants de sucre and la Chambre syndicale des raffineurs, in Italy, ‘Assozucchero’. In the Netherlands close cooperation exists, it has been said, between the two undertakings which are responsible for the whole of domestic production.

These organizations of national producers nave been a European Committee of sugar producers on a Community level. It is within this committee — and more particularly its common market commission — that discussions began, before the entry into force of Regulation No 1009/67, on the question of the foreseeable effects of the common organization of the market and that the measures which had to be taken by the European sugar industry in order, in particular, ‘to avoid the existing imbalance between the amount of sugar at a guaranteed price and the requirements of the domestic market’, were considered.

At a meeting held at Munich in May 1968 attended by representatives of national groups together with direct representatives of certain producers the common intention ‘that the solutions which have been worked out allow sugar manufacturers to ensure by their own efforts the marketing on the domestic market and for export of the whole of their production’ was confirmed.

The main prupose, to be implemented by identical methods on the various national markets, consists in distinguishing two markets.

— on the one hand, the market in sugar intended for human consumption, on which the producers intended to avoid any competitive inroad into their own sales territory and to maintain, as far as possible, the status quo ante by their concerted action;

— on the other hand, the market for surpluses intended for denaturing or export to third countries, on which the undertakings concerned had decided to come to an agreement with the object, according to the formula repeated in the agreement entered into between French sugar manufacturers on 1 July 1968, of guaranteeing each of them ‘equal opportunity’ to exploit their markets.

It is interesting in this connexion to refer to an introductory note drawn up by the Association syndicale française concerning this agreement which moreover was notified to the Commission and also to a draft agreement relating to a cooperative society for Belgian sugar manufacturers.

These documents enable us to understand the position taken up by the undertakings concerned in relation to the two different markets and the conclusion which must be drawn from this position, namely that ‘Community producers must be put on exactly the same footing with regard to these two markets, which is tantamount to saying that they must all be given the opportunity to earn the weighted average return corresponding to the quantities absorbed by each of the two markets in question’.

In order to achieve this result the first of these texts proposed special measures for the organization of the export and denaturing markets.

On the other hand no such proposal was made for the market in sugar intended for human consumption because in this field the problem could be adequately solved within the scope of the concerted action between producers by adopting the methods which undertakings could put into effect themselves without any difficulty, in accordance with a policy which was precisely defined by the representative of the Raffinerie tirlemontoise in the formula: ‘No movement of goods from country to country save by agreement between producer and producer’.

What is called ‘trade based on rationalization’ (‘le commerce de rationalisation’) which implied close cooperation between national groups of producer-refiners and was for them a preferential market had therefore to be applied to intra-Community trade in sugar.

Similar techniques were used to carry out this policy, which is the common foundation of the various concerted practices, against which specific complaints have been made, and also lays down the all important method of controlling deliveries of sugar from one Member State to another with the object of protecting national markets.

The first of these methods consisted of direct deliveries of white or raw sugar from one country to another, from producer to producer, in other words between competing undertakings.

Deliveries of white sugar were often made in packages supplied by the purchasers and bearing their own trade-mark. The sugar was resold at the same price as their own production price. The producer-suppliers refused to accept offers to purchase either from dealers or industrial consumers of sugar, giving as their reason that the amounts available had to be reserved for their domestic market.

These practices, which were carried out regularly, cannot be convincingly justified either by the situation of the Community market in sugar or by the commercial interests alone of the producers.

They can only be explained by a coordinated policy, the principles of which, laid down by the most important producers, were intended to maintain the partitioning of national markets.

Except in the case of the Italian market which is subject to domestic regulations specially designed for State control of the economy and moreover carefully drawn up so as to reserve the largest part of imports to national sugar manufacturers, deliveries from producer to producer amount at the very least to a strong prima facie evidence of a concerted action having as its object the elimination of competition in sales territories enjoying privileges.

This evidence is corroborated by the fact that, although certain deliveries — in smaller quantities — were nevertheless made to industrial consumers or dealers in these protected sales territories, these operations were, as a general rule, only carried out with the consent of producers established in these areas. Further such deliveries were exceptionally large.

Another procedure was also used which was designed to prevent traders and consumers from buying directly any sugar other than home produced sugar. It consisted in applying increased prices, calculated by reference to the prices fixed by producers, in their own territory, in such a way that in the end purchasers were induced to buy only from their own national undertakings.

Finally, producers brought pressure to bear on traders in order to compel them to conform to their policy, either by insisting that they refrain from operating in neighbouring countries unless they adhere to the conditions laid down by the undertakings of these countries, or by imposing clauses specifying the destination of the sugar. In this way they prevented their purchasers from putting on the market for human consumption quantities sold for denaturing, processing by industry or export to third countries.

These various methods were implemented jointly or severally, according to the situation on the various national markets, as the examination of specific complaints will confirm.

This implies, in my opinion, that, even if there was not a general cartel within the strict meaning of this word, the concerted practices between various producers or groups of producers were carried out in accordance with a single plan, and sprang from a common intention and not simply from parallel but independent conduct based on considerations of pure commercial interest

That is why, if the evidence of the concerted practices has to be specifically evaluated within the context of each of the complaints enumerated by the contested decision and after taking into account the individual behaviour of each of the undertakings, I am inclined to the view that the nature of these courses of conduct is such as to fall within the definition of a concerted practice which you laid down for the first time in the case of the dye-stuffs.

‘If Article 85 — as you held in particular in your judgment of 14 July 1972, Imperial Chemical Industries (Case 48/69, Rec. 1972, p. 619 et seq. ) — draws a distinction between the concept of concerted practices and that of agreements between undertakings or decisions by associations of undertakings, it does so with the object of bringing within the prohibitions of this article a form of coordination between undertakings, which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition.’

‘By its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants.’

It is this requirement that there must be conduct common to the participating undertakings which enables a distinction to be drawn between the concept of a concerted practice and that of an agreement, in that, according to the case-law of your Court, provided that the existence of an agreement is established and that its object is to produce an adverse effect on competition in the common market, it falls within the scope of the prohibition laid down by Article 85 (1), without it being necessary to ascertain whether it has in fact had any effect on competition.

A concerted practice, on the contrary, cannot be entirely severed, owing to its very nature, from the effects which it has on the conditions of competition, since it must become apparent from the behaviour of the undertakings concerned.

This view which I expressed in relation to the dye-stuffs case, is on the same lines as that given by Mr Advocate-General Joseph Gand in connexion with the international quinine cartel.

Unlike an agreement, he said, ‘a concerted practice presupposes, according to the majority opinion, that there is a specific concerted action, so that it is necessary to prove, on the one hand, the actual conduct of the undertakings concerned and, on the other hand, the existence of a link between this conduct and a pre-established plan’.

In fact, the finding of common or parallel courses of conduct of undertakings may not, in itself, be sufficient to amount to a concerted practice. It is still necessary to show that these courses of conduct do not originate in the structure or the economic conditions of the market But, as you held in your judgment of 14 July 1972: ‘Although parallel behaviour may not by itself be identified with a concerted practice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings and the volume of the said market.

This is especially the case if the parallel conduct is such as to enable the persons concerned… to consolidate established positions to the detriment of effective freedom of movement of the products in the common market and to the freedom of consumers to choose their suppliers’ … and, let it be added, so far as sugar is concerned, of industrial consumers of this product

Reference back to this case-law leads me to give my opinion also on the question of the taking of evidence of a concerted practice.

There is no doubt in my view that the burden of proof lies on the Commission but I do not share the opinion held by some of the applicants that the power conferred on the Commission to impose fines, in a matter which is quasi criminal, excludes the admission of presumptive evidence and that the rule ‘in dubio pro reo’ should prevail.

This argument in my opinion fails to acknowledge the fact that Community competition law is not governed by the principles of criminal procedure; the Commission has no judicial function; however inconsistent it must be, the procedure provided for by Regulation No 17 is at all times administrative.

On the other hand the evidence of a concerted practice may, in most cases, only consist of evidence or presumptions which the investigations of the Commission have brought to light

It is the combination of these presumptions — provided that they are strong, precise and relevant — which more often than not alone enables the existence of a concerted action corroborated by the actual conduct the undertakings concerned to be proved, and it only remains for the Community judge to determine, finally, whether the material produced as evidence by the Commission is conclusive.

Moreover this is the view which you took in the dye-stuffs case when you held that ‘the question whether there is a concerted action in this case can only be correctly determined if the evidence upon which the contested decision is based is considered, not in isolation, but as a whole, account being taken of the specific features of the market in question’.

IV — Applicability of the rules of competition to agriculture

Before I begin to examine each of the specific complaints made by the contested decision I must give my opinion on a question of general application.

It is the question of the application of the rules of competition enacted by the Treaty to production of and trade in agricultural products.

In fact according to Article 42 of the Treaty, the provisions relating, in particular, to cartels and the abuse of a dominant position do not apply, in this field, except to the extent determined by the Council, account being taken of the objectives of the agricultural policy of the Community set out in Article 39.

It must be clearly understood that the authors of the Treaty did not wish to exempt, in principle and permanently, production of and trade in agricultural products from the prohibitions of Articles 85 and 86; but they considered that is was necessary to adopt in this connexion specific measures taking into account the patterns of the various agricultural economies and also the implementation of the common organizations of the market.

In order to do so they gave the Council power to determine within what limits and subject to what exceptions the provisions of Articles 85 and 86 could be applied to agriculture.

Article 1 of Regulation No 26 of 4 April 1962 states, in principle, that Articles 85 to 90 of the Treaty and provisions made in implementation thereof apply to the production of and trade in agricultural products.

However this regulation provides in Article 2 (1), first sentence, for two exceptions to this principle by exempting from the rules of Article 85 (1) alone agreements, decisions and practices ‘which form an integral part of a national market organization or are necessary for attainment of the objectives set out in Article 39 of the Treaty’.

Further, and this is the object of the second sentence of the same paragraph, a specific preferential system is provided for agreements of farmers or farmers' associations belonging to a single Member State to the extent to which these agreements concern the production or sale of agricultural products or the use of joint facilities for the storage, treatment or processing of agricultural products and under which there is no obligation to charge identical prices, unless that Commission finds that competition is thereby excluded or that the objectives of Article 39 of the Treaty are jeopardized.

This special exemption is not moreover found in the proposal for a regulation submitted by the Commission. It was inserted at the request of the European Parliament and of the majority of the national delegations which wanted in this way to legalize cooperatives and groups of agricultural producers which exist in all the Member States and are considered with favour by the national legislative systems.

By virtue of paragraph 2 the Commission is given sole power to determine either on its own initiative or at the request of any of the persons concerned, after consulting the Member States and hearing the undertakings or associations of undertakings concerned, by a decision which shall be published, which agreements and concerted practices fulfil the conditions for exemption specified in paragraph 1.

The interpretation of Regulation No 26 is bound to raise many problems which relate, first of all, to the field of application of this text, in the second place to the procedure under which it may be implemented and finally to the nature and extent of the exemptions which it provides.

There is no doubt that the main purpose of Article 2 of the Regulation is to encourage collaboration by farmers, since such cooperation leads to modernization and rationalization as well as production and marketing of their products; this intention is particularly evident in the preferential treatment given to cooperatives and associations of farmers to the extent to which for example their objective is the production or sale of such products or the use of joint facilities.

The question may therefore be asked whether the benefit of the exceptions from the application of Article 85 (1) also includes industrial undertakings which process agricultural products such as sugar factories and refineries.

There does not appear to me to be any doubt that the answer to this question is in the affirmative:

— on the one hand, the list of agricultural products set out in Annex II of the Treaty is not limited to the raw products of the soil; it expressly includes products of first-stage processing such as sugar;

— on the other hand, the exceptions to the rules of competition provided by Article 2 of Regulation No 26 are designed to exempt agreements, practices and decisions relating not only to the production and sale of agricultural products ‘stricto sensu’, but also to their processing.

In addition the enumeration made in the second sentence of paragraph 1 is not exhaustive.

Further, although the undertakings which produce sugar are not farms, the common organization of the market establishes a close interdependence between these industrial processing undertakings and beet growers, either through quotas, which are indeed fixed at the sugar factory level but which have a direct effect on the cultivation of beet, or by a production levy, if the basic quotas are exceeded, since farmers can be charged with payment of part of this levy, or again by the system of Community sugar prices which determines the purchase price of the raw material, or finally by means of agreements between persons engaged in the sugar industry relating to the cultivation and purchase of beet

A second question therefore has to be asked: was the Commission legally entitled to make use of the powers conferred upon it by Article 85 (1) and Regulation No 17 in connexion with the concerted practices which it charged the undertakings in question with having engaged in, without having first made a decision in accordance with the conditions specified by Article 2 of Regulation No 26? In other words was it not under a duty to comply, first of all, with the procedure which this Regulation requires it to adopt?

If the answer to this question is in the affirmative, the Commission should, therefore, after consulting Member States and hearing the undertakings concerned, have taken a decision the purpose of which was to ascertain whether the conditions of exemption provided by paragraph 1 of this Article were or were not fulfilled.

Many applicants have not failed to submit that these procedural rules have been infringed by maintaining that the practices for which they are blamed were, according to the circumstances, ‘an integral part of a national organization of the market’, which in these proceedings consisted of the national regulations of the Italian sugar market, or ‘were necessary for attainment of the objectives laid down by Article 39 of the Treaty’; they infer from this that the Commission should have taken in relation to them a positive decision, which stated that for these reasons Article 85 (1) did not apply.

I ask you, My Lords, to reject this submission. The procedure provided by Regulation No 26 and, in particular, the prior consultation of Member States is in my opinion only obligatory if the Commission intends to ascertain whether the exemption conditions are effectively fulfilled and accordingly takes a ‘positive’ decision stating that the prohibitions of Article 85 (1) do not apply to the agreements, practices and decisions in question.

On the other hand, it does not appear to me that the Commission has to adopt this procedure if it is of the opinion that there are no grounds for admitting that one or other of the exemptions applies.

Regulation No 26 moreover does not make any reference to the procedure which must be adopted in order to apply Article 85 to agreements or concerted practices which did not fulfil the necessary conditions for benefiting from these exemptions.

In these circumstances the implication of the principle laid down in Article 1 of this Regulation, that not only Article 85 but provisions made in implementation thereof apply, is that the procedure to be adopted is the general procedure relating to competition specified in Regulation No 17.

It is this solution which you have recently advocated in your judgment of 15 May last (Frubo, Case 71/74), by stating that ‘To require it (the Commission) to consult Member States, even in cases where it is in no doubt that the exceptions provided for under Regulation No 26 cannot apply would oblige the Commission to fulfil unnecessary formalities and needlessly delay inquiries into the matters concerned’.

With regard to the discussion on the merits of this question, that is to say of the question whether the concerted practices — or some of them at least — were likely to benefit from one or other of these exceptions, I will only make the following observations.

So far as the first ground for exemption is concerned three of the French applicants, the companies Générale sucrière, Béghin and Say on the one hand, and two Italian firms Eridania and Industria degli zuccheri on the other hand, maintain, within the context of the complaint relating to the protection of the Italian market, that the regulations adopted by the Italian authorities must be treated as a national organization of the market within the meaning of Regulation No 26 or represent, at the very least, an internal regulation having equivalent effect within the meaning of Article 46 of the Treaty.

If this system is considered in conjunction with the common organization introduced by Regulation No 1009/67, it can be said to have aimed at the stabilization and regularization of the Italian sugar market, in order to guarantee the employment and standards of living of beet producers; it included, according to the applicants, measures having equivalent effect to customs duties, aids to sugar manufacturers and beet growers; it fixed maximum prices; finally it contained provisions for fixing quotas and sharing out sugar imports in

The concerted practices for the protection of the Italian market, which the Commission alleges that the applicants engaged in, were indissolubly linked to this national organization; they were an integral part of it.

There are two possible answers to this argument.

The first view which can be taken is that the exception was designed to ensure that national market organizations existing before the establishment of common organizations were not adversely affected. Regulation No 26, adopted in 1962, in fact preceded the development and fulfilment of the common agricultural policy. Its application would therefore in this connexion only be transitional, since these national market organizations, in the absence of any express provision to the contrary made by Community institutions, were to be replaced by progressive stages by common organizations.

You have held that from the beginning of the entry into force of the latter organizations the Community authority alone can in fact decide whether to retain, on a provisional basis, any national market organization relating to the products in question:

— judgment of 21 March 1972, Sail, Case 82/71, Rec. 1972, p. 138.

Similarly you held in your judgment of 10 December 1974 (Case 48/74, Charmasson) that, although the Treaty provided that the national market organization may be retained until such time as a common organization is established, it only contemplated such a retention however until the end of the transitional period, which is the date when the common agricultural policy must be finally adopted.

The application of these authorities implies that a national market organization could not therefore legally exist in Italy after the entry into force of Regulation No 1009/67. Althugh it is true that this Regulation provides for certain measures for granting aid to Italian sugar producers, it in no way guaranteed ana authorized the retention, in this country, of a national market organization or domestic regulations having equivalent effect

But it seems to me to be pointless to resolve in this field of argument the problem raised by the existence of the Italian regulations. It will be evident when the complaint relating to the protection of the Italian market is examined that it is mainly on the effects which this de facto system has had on competition that I shall base the reasons for my conclusions.

With regard to the second exception concerning the agreements necessary for attainment of the objectives set out in Article 39 of the Treaty, reliance thereon implies that the criterion of ‘necessity’ (‘nécessité’) be evaluated in the light of the specific facts of the case. The weight to be attached to these facts must therefore be determined during the examination of the particular complaints, to the extent to which a submission based on this exception is put forward.

V — Formal submissions of a general nature

Without referring to the submissions based on the absence or inadequacy of the reasons for the decisions or on internal contradictions in the decision, which I shall examine in connexion with the substance of the case, I would like now at this stage in my opinion to consolidate and consider the formal submissions of a general nature, whether they have been put forward by one undertaking only or are common to several of them. All these submissions may be reduced to one, namely the failure of the Commission to allow the applicants to avail themselves of their right to defend themselves. The evaluation of these submissions depends, to a great extent, on the view taken of the necessary procedure for the implementation of the provisions of Articles 85 and 86 of the Treaty and of the nature of the fines intended to punish infringements of these Articles.

In this connexion your case-law to date draws attention to some general principles that you will have to bear in mind: the procedure before the Commission is administrative and not judicial, moreover as I had the opportunity of saying following Advocates-General Roemer and Gand, fines are not criminal law sanctions.

These formal submissions are connected with the following points:

1. Taking great exception to the tendentious character of the policy adopted by the Commission for informing the public and seeing in this policy a deliberate intention to accuse them in public without having heard them before publication, the applicants submit that, even before the Commission notified them of the ‘objections’ it had raised against them, it — or more exactly its member having special responsibility for competition problems — should, during a press conference which aroused considerable interest, have informed the public that it had initiated the procedure specified in Regulation No 17 against the principal sugar producers of the Community and of the reasons which had led it to do so. I do not see how this fact would affect either the validity of the administrative procedure or consequently of the decision which was made. This communication to the press in no way deprived the applicants of the opportunity of effectively stating their own case by submitting their observations on the complaints made against them. It is agreed that the Commission had taken note of their arguments in answer to the objections before it took the final decision. Or would the applicants have preferred the Commission to publish the notification of objections in the Official Journal of the European Communities, as Article 2 (2) of Regulation No 99/63 allows it to do? If I understand why the reactions of some of the undertakings or their trade associations, UNICE and CEFS were lively, then it is my belief that the dispute between the Commission and the applicants lies in a different field; it is concerned with the policy adopted by the Commission for informing the public: it must be freely acknowledged that the Commission has not only the right but is under a duty to inform the public of its policy, which is often criticized for being too technical or esoteric.

2. So far as the notification of objections itself is concerned, Südzucker AG and the marketing organization Südzucker Verkauf complain that the objections which were notified to them were not accompanied by a German translation of the documents quoted in support of them by the Commission. It is alleged that this translation was only supplied later and further, that it was defective. I do not think that, in accordance with your judgment of 15 July 1970 in Case 41/69 (Chemiefarma, [1970] ECR 687), this fact prevented these undertakings from making themselves effectively acquainted with these documents, nor that the irregularity — if indeed there has been any — had in this case any adverse effect on the ability of the undertakings concerned to defend themselves and on the efficacy of their defence. Certain applicants complain that the Commission's objections were notified to them in a single text, which they allege did not specifically state the points which affected them individually. I believe that the fact that there was only one text is explained by the view which the Commission took of the cartel (‘general’ cartel entente ‘générale’)) and that as a result this aspect of the proceedings merges into the examination of the substance of the case. It appears to me in any case that each undertaking was in a position to discover which objections referred specifically to it

3. Several of the applicants also submit that there has been an infringement of Article 4 of Regulation No 99/63 on the hearings in that the time prescribed by the notification of objections for the submission of written observations was too short. The last date when the notification of objections was received by the undertakings is 1 August 1972 and the date when the last reply of these undertakings was lodged is 4 October. It seems to me therefore that the undertakings had at least two months in which to define their position, the period of time which they were in fact granted in the notification of objections; Article 11 of Regulation No 99/63 prescribes a time-limit of two weeks. Although this time-limit covers the period of the summer holidays, it appears to me to be sufficient to enable undertakings to submit any observations which they may wish to make. It cannot be contrasted with the time (of necessity much longer) which the Commission took to investigate the matter, that is to say to carry out the necessary investigations and to collect all the facts and information which enabled it to initiate the procedure specified in Regulation No 17. Moreover, during this investigation, the applicants, put on inquiry by the checks made at their head officies or various places of business and by the requests for information which had been addressed to them, were from that moment onwards in a position to know the essential facts covered by the statement of objections. They were certainly not taken unawares by the notification which was made to them officially. Further supplementary written observations were submitted by some of the applicants and accepted by the Commission until 21 November 1972.

4. With regard to the failure to notify the minutes of the separate hearing of certain undertakings to the other undertakings, there is no provision which places the Commission under a duty to undertake any such notification. On the contrary, some provisions could be found in Regulation No 99/63 (Article 2 (2) and Article 9 (3)) tending to show that if anything the Commission is under a duty not to make any such notification with a view to protecting the legitimate interest of undertakings in the nondisclosure of their business secrets.

5. With regard to the adoption of one single decision relating to all the applicants it appears to me that there is no reason why the Commission should not make such a decision covering several infringements, when some of the persons for whom it was intended are affected by one and the same infringement Here again everything turns in the end on the question whether the cartel and the concerted practices are of general application or not The undertaking Suiker Unie argues that there has been an infringement of Article 3 of Regulation No 1 of the Council of 6 October 1958 determining the language to be used by the European Economic Community (and of Article 191 of the Treaty), on the ground that the Commission apparently sent it not only the version in Dutch of the decision of which it was one of the addressees, but also this version in the other languages, without indicating that the Dutch text was the only authentic one so far as it was concerned. It appears to me that this fact has no effect on the opportunity which the applicant had of defending itself: quod abundat non vitiat.

6. Some applicants also consider the fact that the contested decision did not take into consideration certain facts or arguments which they put forward in their defence amounts to a procedural defect. It has to be remembered in this connexion that you have held that ‘in the statement of the reasons upon which its decisions are based the Commission is not obliged to define its position on all the arguments which the parties concerned may submit in their defence; it is sufficient if the Commission states the facts and legal considerations which are of crucial importance in the making of its decision’ (judgment of 14 July 1972, Case 55/69, Casella, Rec. 1972, p. 914). More recently you held that ‘if the Commission has to give the grounds upon which its decision is based, it does not however have to refute all the submissions made during the course of the administrative procedure’ (judgment of 21 February 1973, Case 6/72, Continental Can [1973] ECR 240). So far as the other aspects of this submission are concerned, I am of the opinion that they come within the purview of the examination of the substance of the case.

7. If there has been a certain development of the Commission's argument relating to the complaints which it intended to make against the undertakings when the objections which it finally raised in its decision were notified, such a development is only to be expected: this is in fact the whole purpose of the administrative procedure, provided that the Commission does not raise objections other than those in respect of which undertakings have had the opportunity of making known their views.

8. Finally, two of the Italian applicants submit that, since the Commission presumed that competition was distorted in the particular sector under consideration, it should have conducted an inquiry into this sector before initiating the infringement procedure. I will merely state that Article 12 of Regulation No 17 only mentions the mere possibility of the Commission conducting such an inquiry.

VI — Protection of the Italian market — The problem of sugar imports

It is known that Italian sugar production falls far short of national consumer demand. During the marketing years 1968/69 to 1971/72 it fluctuated between 1100000 metric tons and 1300000 metric tons, whereas during the same period consumption, showing a small but steady increase, went up from 1400000 metric tons to more than 1500000 metric tons.

Italy therefore depends upon imports, especially from the Member States of the common market which owing to their economic structure produce a surplus. It is in particular France and Belgium which have a surplus.

The Commission concludes from this situation that at least after the frontiers were opened following the entry into force of the common organization of the market Italy should have been pre-eminently a territory of lively competition for imports of sugar both for human consumption and the processing industries.

However it found that from the beginning of the first marketing year this free competition had in reality been eliminated. The reason it puts forward for this is that French and Belgian producers have shared out between them their deliveries to Italy, standardized their conditions of sale and in addition given undertakings to their customers, the Italian producers, that they would only sell to non-producers and in particular to consumer industries, at a higher price.

These conceited practices were organized and developed in a more special way from the beginning of the 1969/70 marketing year onwards when very large contracts for the import of sugar were entered into between:

— on the one hand the group of ‘producer-purchasers’ including to begin with the Eridania company, responsible for the coordination of these operations, and the firms Industria degli zuccheri, Romana, Volano, Cavarzere, Emiliana, Sermide and SADAM, and certain other undertakings, two of which have since been taken over by Eridania, and another of which has become la Société générale de sucrerie,

— on the other hand, the group of ‘producer-suppliers’ including primarily the French companies, Béghin, Say, Générale sucrière, Lebaudy Suc and at times Sucre Union (these two undertakings have not lodged any application at the Court); secondly the Belgian company Raffinerie tirlemon toise; finally Süddeutsche Zucker AG (only for the 1969/70 marketing year).

The members of this group with the exception of Süddeutsche Zucker AG entrusted a wholesaler, the French company Sucres et Denrées, with the task of centralizing the offers and organizing transport and deliveries.

The evidence of the concerted action, according to the Commission, is found in the meetings held by the parties concerned first in Paris on 29 July 1969 and then at Genoa on the eleventh of the following September. At the first meeting the parties concerned discussed the methods which should be adopted to prevent ‘outsiders’ making offers on the Italian market at prices lower than the ones which they applied themselves; during the second meeting they solved the problems connected with deliveries in such a way, as the commercial letters exchanged afterwards show, that sugar has in fact been imported into Italy in accordance with principles laid down by a common accord.

The Italian producers, who alone had a distribution network, resold the sugar delivered direct to them, amounting to 75 % of total imports, either direct for consumption or to the processing industries at the same prices and subject to the same conditions as home produced sugar.

In so far as any free sales had been effected, and the volume was small, the suppliers undertook to demand payment of a surcharge which varied, according to the marketing year, from FF 1-25 to FF 1-75 per quintal.

During another meeting on 22 September 1970 the members of the two groups confirmed and clarified their arrangements with a view to overcoming certain difficulties which had arisen between suppliers and importers.

These are the main grounds upon which the contested decision is based and from which the Commission infers that these actions, which it considers are concerted practices within the meaning of Article 85 (1) of the Treaty, have eliminated all competition between operators on the Italian market.

According to the Commission's argument, had it not been for the concerted action, the producers in countries with a sugar surplus would have been able to sell their products individually to Italian buyers after freely negotiating the pricies and the amounts offered and use the normal distributive networks.

There can be no doubt, my Lords, that the suppliers and importers have engaged in a concerted action. The findings of facts disclosed by the Court file show clearly that, if exports to Italy were relatively small during the first marketing year because in this country there were stocks left over from an exceptionally good harvest in the previous year, they increased in the following marketing years to and sometimes exceeded 300000 metric tons; nor can it be denied either that in this particular trade the proportion of deliveries to Italian producers by the supplier's group increased by progressive stages until it reached on average three-quarters of these imports.

Similarly some of the telex messages exchanged, particularly between Eridania, the representative of the Italian group, and Sucres et Denrées, show that in general the operations were carried out on the basis of the principles laid down during the meetings mentioned by the Commission.

But, my Lords, leaving out of account the formal submissions made by some of the applicants, it is my belief that the fundamental — essential — problem raised by the first complaint, which some of the applicants have not failed to stress, must be examined straightaway.

In fact their argument is based on the fact that during the relevant period Italian national regulations were in force, which they maintain made their conduct, to which exception is taken, necessary and inevitable and did not leave any appreciable margin of competition on the Italian market.

Has not the Commission itself acknowledged in its decision that there was a special situation on this market created both by Community regulations and ‘special measures taken by national authorities’?

These measures led first of all to the establishment by Order No 1195 of the Interdepartmental Committee on Prices, on 22 June 1968, that is to say on the eve of the entry into force of Regulation No 1009/67, of the Cassa conguaglio zucchero (a sugar equalization fund), which moreover replaced the three pre-existing equalization agencies. Its function is to undertake ‘the necessary equalizations for the gradual integration of the Italian sugar economy into that of the Community and for the establishment of a common market in the sugar sector’.

There is no doubt that the funds of the Cassa, which were raised by a contribution called ‘sovraprezzo’ levied on both domestic and imported sugar, whatever the quality and kind, had to be used for financing aids authorized for the benefit of beet producers and beet processing industries by Article 34 of the basic Community regulation, but they were also used for other purposes which are not provided for by Community regulations and arise out of various measures of aid granted by the Italian government to sugar producers, to which I shall have occasion to return to later in my opinion.

The ‘sovraprezzo’ fixed by the same regulation at Lit 23 per kg — this rate remained unchanged until 1973 — represented the difference between Italian prices and the new Community prices, that is to say the derived intervention price applicable in this country.

On the other hand it had been the policy of the Italian Government for a long time to fix a uniform sugar price throughout the whole of the national territory for home produced as well as imported sugar in such a way that consumers in the regions furthest away from production centres do not pay a higher price for this foodstuff than consumers living in the Po valley.

Before the introduction of the Community system maximum prices had been fixed, the last one by an Order of 6 August 1965 (No 1119) both for sales by producers free at factory and for sales for direct consumption. These prices naturally varied according to the qualities. This order, which was repealed on the entry into force of the common organization of the market, was nevertheless reissued in November 1969: ‘in order to prevent increases to Italian consumers which are not caused by ‘a variation in Community prices’’. Order No 1236 of the Interdepartmental Committee on Prices (CIP) did not however fix a new maximum consumer price but decided, which comes to the same thing, that the maximum limits of the ‘price differentials’ for the various qualities and varieties of sugar, the charges for packaging the product, the trading margins tor the sale of this product for consumption must remain ‘those which result from a comparison with the price quotations in Order No 1119 of 1965’, both for sales by producers and for sales for consumption.

A circular, No 1237, gave the ex-works price of sugar; the maximum standard price for consumption was derived directly from that price, since it is arrived at by adding together various items, some of which arise under Community provisions fixing the derived intervention price while others arise under measures taken by the CIP.

In spite of the argument which arose on this point during the hearing it seems to me therefore to be an established fact not only that the system of maximum prices has been extended by these measures but that these maximum prices were in fact applicable not only when the sugar was consumed but also when it was produced, in particular therefore to sales of sugar to industrial consumers.

It is not moreover disputed that, although on the application of the Italian sugar industry, the Consiglio di Stato annulled on 29 February 1972 Order No 1236 and its explanatory circular, this Court admitted that the measures taken were in substance lawful; the system of prices which was implemented in this way has in fact continued to be applied.

However, as the Commission has itself conceded, the requirement that the whole of the ‘sovraprezzo’ must be paid in conjunction with the impact of transport costs made it in fact impossible to import Community sugar into Italy. The suppliers could in fact only offer their products at a price higher than the maximum fixed by the Italian authorities. The CIP itself took the view that imported sugar could only be supplied to consumers at prices higher than domestic prices, which, it acknowledges, ‘conflicts with the objectives to be pursued’.

Even before the common organization of the market an ‘equalization fund’ for the price of imported sugar had moreover been in existence since 1963, which was given the task of granting financial aid for the purpose of covering the difference between the price of sugar on the world market and the prices fixed on the home market This body showed a loss, because it had imported sugar at a price above the home market price. This deficit had to be taken over by the new equalization fund, set up, as has been mentioned, in 1968.

It was therefore necessary to find a way of making it possible to import from the other Member States.

In February 1969 by a first transitional measure the flat rate of the ‘sovraprezzo’ was reduced to Lit 8 per kg on imported sugar for industrial use. Then in May by Order No 1215 of CIP a system of open tenders for import quotas was introduced, the purpose of which was the intention of the Italian administration to obtain from successful tenderers the highest rate of the ‘sovraprezzo’ having due regard to the maximum internal prices.

The task of organizing the invitations to tender, open in principle to all the operators concerned, was assigned to the sugar equalization fund, which had the power to fix the proportion of the ‘sovraprezzo’ which it considered to be adequate. From 1969 to 1972 this rate varied from Lit 6·40 to 11·50 per kg according to the particular invitation to tender.

The Cassa fixes the quantities as well as the qualities of sugar to be imported through each invitation to tender.

Tenders shall not be accepted unless they are for at least 1000 metric tons.

After examining the tenders which it has received the Cassa awards import quotas according to the quantity and amount of the ‘sovraprezzo’ offered by the tenderers.

Completion of the arrangements made for importing the sugar covered by the quota was guaranteed by security of a relatively high amount Finally, if a successful tenderer did not comply with the conditions specified in the notification of the award, he had to pay the whole amount of the ‘sovraprezzo’ on the sugar which he had imported.

This system was applied to imports of white sugar, while in the case of raw sugar a fixed reduction of about 50 % of the ‘sovraprezzo’ was granted outside any of the tendering procedures.

Finally in order to allow commercial operators who did not have an organization enabling them to take part in open tenders — an instructive definition which refers in particular to industrial users — it was decided by Order No 1234 of 24 October 1969 to authorize certain imports outside the tendering procedures but subject to the quantities being limited and the rate of the ‘sovraprezzo’ being fixed by the Cassa. However these operations could only cover a very small proportion of the import quotas awarded.

Such regulations combining maximum prices with invitations to tender could not fail to have a decisive impact on the behaviour of Italian producer-purchasers and also on French, Belgian and even German suppliers.

In this connexion the following considerations must be borne in mind:

In the first place, as it has been the aim of Italian policy only to allow those quantities to be imported which are absolutely necessary to fill the gap between home production and demand, this objective could be and has in fact been attained because the Cassa has the right to decide when an invitation to tender should be held and how much sugar should be imported at each of these invitations.

Consequently it can be asserted that the concerted action between the buyers' group and the suppliers' group could not affect the total volume of imports coming from other Member States.

In the second place the amounts put up to tender were so large (between approximately 50000 to 170000 metric tons) that, on the one hand, buyers found that there was a strong incentive to tum to exporters, whose output is adequate, who can guarantee regular bulk deliveries and are able to enter into an agreement at sufficiently low prices, mainly because they can get unusually satisfactory freight rates which the railway undertakings could not have offered for smaller amounts.

These considerations account for the fact that buyers therefore applied to a ‘pool’ of foreign producers. With the exception of Süddeutsche Zucker AG these producers came to the conclusion that it was to their advantage to entrust an international dealer, who could give the necessary guarantees for the successful completion of the import operations, with the execution of these operations.

On the other hand because there is no independent distributive network in Italy, and also because it was almost impossible for industrial consumers, who have no storage facilities and more often than not have to obtain their supplies on a day to day basis, to take part in the invitations to tender, there is no doubt that the only buyers who were in a position to do so were Italian producers.

Just as Sucres et Denrées was appointed as their agent by most of the exporters, the task of conducting the commercial negotiations for each invitation to tender was assigned in the same way to one of the Italian producers, Eridania, a company, whose commercial and financial operations and output are among the largest in Italy.

Moreover the Court file gives the impression that if the grouping of Italian producer-buyers round Eridania was not actually enforced by the national authorities it was at least strongly ‘recommended’ by them.

Besides it is also quite clear that before the entry into force of the common organization Italian producers had already set themselves up as importers.

It must also be remembered that CIP by its Order of 24 October 1969, had to take certain special measures designed to allow consumers, even if they had not themselves applied to take part in an invitation to tender, to benefit, to a limited extent, from the tenders, provided that they gave notice of their intention to import individually amounts less than the 1000 metric tons which is the minimum amount which participators must tender.

If however the total amounts for which these consumers applied exceeded 10000 metric tons, the entitlement of each of them was reduced in proportion. Many of the applications submitted upon these terms were only accepted in part, a fact which was unlikely to encourage the parties concerned to make use of this opportunity. In the final analysis it suited them better to obtain their supplies direct from domestic producers. Finally the total number of licences to purchase without participating in the invitations to tender was in any case confined to 20 % and later to 25 % of total imports.

Having regard to the effects of these regulations I doubt, my Lords, whether any really effective margin of competition can still remain for those importing Community sugar.

By the use of maximum prices combined with the system of invitations to tender, which was clearly organized so as to reserve to the greatest possible extent the right to participate to producers only, the national authorities have clearly ‘locked up’ (‘verrouillé’) the Italian market

However, although there is no doubt that the group of purchasers and the group for foreign suppliers negotiated, conferred together and in the end saw to it that they procured by their efforts about three-quarters of the import quotas under the invitations to tender, it must nevertheless be shown that the object of the practices, to which exception is taken, was to restrict or distort competition to an appreciable extent.

You have invoked this criterion of appreciable extent in several judgments:

You have not yet given your views on the question whether it cannot be said that the concerted practices restrict competition to an appreciable extent, as the Commission claims they do, if normal competition is strictly limited, if not eliminated, by national regulations for State control of the economy which force commercial operators to agree to adapt their behaviour to the requirements of such regulations. It appears to me that this is the situation in this case and that the reduction of the margin of competition must be attributed to the system worked out and applied by the national authorities and not to the concerted action of the group of importers and of the similar group of suppliers. In these circumstances deliveries from producer to producer cannot be regarded, at least so far as the Italian market is concerned, as conclusive proof of an infringement of Article 85 (1) of the Treaty.

However the Commission has merely mentioned the ‘special measures taken by the national authorities’ without having ascertained their consequences. It simply states that, if there had not been the concerted action to which it objects, suppliers would have been able to sell freely on the Italian market However this statement which is not accompanied by any evidence does not seem to me plausible in the light of the analysis which I have just made of the machinery set in motion by the Italian regulations.

In my opinion it must at least be accepted that the Commission completely failed to examine what is after all an essential aspect of the problem and that it has therefore been ed to take a decision, which is not only with regard to its form based on inadequate reasons but is founded on inadequate data and disregards certain crucial facts.

The conclusion to which I have therefore come is in my view sufficient to justify the annulment of the contested decision in so far as it finds that there have been infringements of Article 85 (1) relating to the protection of the Italian market and imposes fines in respect thereof.

There is nevertheless another legal ground upon which a similar solution can be based and which some of the applicants, in particular Générale sucrière and also moreover — although for other reasons — the intervener, Unione Nazionali Consumatori (The National Association of Italian Consumers) have not hesitated to invoke.

I refer to the question whether Italian regulations are not incompatible with certain provisions of the Treaty and of Regulation No 1009/67.

My examination of this question is subject to some preliminary observations.

In the first place it is advisable in this connexion to disregard the concept of a national organization of the market, within the meaning of Regulation No 26/62, in so far as Article 2 (1) of this regulation provides that Article 85 shall not apply to such of the agreements, decisions and concerted practices which form an integral part of such an organization. There appears to me to be no doubt that any incompatibility of Italian regulations with Community law would, in itself, be likely to prevent the application of the exemption provided for in this Regulation.

However — and this is my second observation — that does not mean that Regulation No 1009/67 and the later texts have not called for the adoption by Member States of certain supplementary measures with the object of ensuring their application, if only for example for the purpose of dividing the quotas granted to Member States among their undertakings.

It must therefore be borne in mind that the organization of the European sugar market is governed both by Community rules and by measures taken by Member States intended to supplement them without nevertheless altering its structure and its scope.

In order to safeguard the exclusive powers of Community institutions your case-law has in fact unequivocally determined the limits within which national authorities can intervene when there