Court of Justice of the European Communities (including Court of First Instance Decisions)

Legal background

The objectives of the common agricultural policy shall be:

(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;

(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;

(c) to stabilise markets;

(d) to assure the availability of supplies;

(e) to ensure that supplies reach consumers at reasonable prices.

The provisions of the Chapter relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by the Council ... in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 33.

1. Article [81](1) of the Treaty shall not apply to such of the agreements, decisions and practices referred to in the preceding Article as form an integral part of a national market organisation or are necessary for attainment of the objectives set out in Article [33] of the Treaty. In particular, it shall not apply to agreements, decisions and practices of farmers, farmers' associations, or associations of such associations belonging to a single Member State which 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 the Commission finds that competition is thereby excluded or that the objectives of Article [33] of the Treaty are jeopardised.

2. After consulting the Member States and hearing the undertakings or associations of undertakings concerned and any other natural or legal person that it considers appropriate, the Commission shall have sole power, subject to review by the Court of Justice, to determine, by decision which shall be published, which agreements, decisions and practices fulfil the conditions specified in paragraph 1.

1. Each year a target price for milk shall be fixed for the Community.

2. The target price shall be that price which it is aimed to obtain for the aggregate of producers' milk sales, on the Community market and on external markets, during the milk year.

3. The target price shall be fixed for milk containing 3.7% fat, delivered to dairy.

4. The target price shall be fixed in accordance with the procedure laid down in Article [37](2) of the Treaty.

The main proceedings and the questions referred for a preliminary ruling

- raised the average price of milk above levels that would otherwise have been reached by engaging in price discrimination taking various forms;

- inhibited the secondary trade in milk between processors by levying excessive redirection charges on them and placing restrictions on the sale of milk;

- removed milk from the formal selling process and thereby constrained the volumes of milk offered to its customers in the face of largely unchanged demand, thereby raising the marginal price of milk;

- operated its selling system in such a way as to create an asymmetry of information between itself and its customers, thereby generating unnecessary uncertainty for those customers, and so inducing them to purchase milk at higher prices than would otherwise have been the case;

- been slow to recognise the importance of proactive traceability and reluctant to meet its customers' requirements in that regard; and

- paid insufficient regard to the legitimate demand of its customers, both large and small, in respect of the contract types it offered them and other matters.

(i) increases in the price of raw milk, which have at least in part been passed on to consumers so that consumers pay more for fresh milk than they would if Milk Marque had not been able to secure milk prices above competitive levels; and

(ii) increased costs and greater uncertainty for the dairy processing industry in Great Britain, so that processors in Great Britain have invested less and have become less competitive in internationally-traded products than they would otherwise have been and output in Great Britain is at a lower level and value than would otherwise have been the case.

(a) not take any further steps towards making or carrying out any agreement to acquire or build processing plants;

(b) not make any further contract processing arrangements, save in an emergency and where the only alternative would be to avoid destruction of milk;

(c) not enter into any individually negotiated milk supply contracts with processors on terms that are not published and available to all purchasers;

(d) not enter into any milk supply contracts which contain any restrictions on the use to which the milk is to be put pursuant to those contracts; and

(e) not place any restrictions on diversions of milk from one delivery point to another and should make no charge for diversions except to cover additional costs actually incurred.

- the new cooperatives would carry out all policy making and selling of milk independently of each other;

- there would be no joint ventures between the successors in marketing or processing of milk;

- there would be no common directors between the new cooperatives; and

- there would be no shareholdings by any one of the businesses in either of the others.

1. Are Articles 32 to 38 ... EC, Council Regulation [No 26 of 4 April 1962] and Council Regulation (EEC) No 804/68, as amended, to be interpreted as precluding a Member State from applying national laws such as the Fair Trading Act 1973 and the Competition Act 1998 to the manner in which producers of milk choose to organise themselves into co-operatives and conduct themselves in regard to the sale and processing of their milk:

(a) in all circumstances; or

(b) where the intended or actual effect is to deprive such producers of the ability to increase the price obtained for their milk; or

(c) where the intended or actual effect is to reduce the price that producers obtain for their milk in circumstances where that price is already below the target price fixed pursuant to Article 3 of Regulation No 804/68; or

(d) in a way which is not consistent with any one or more of the following:

(i) the objectives set out in Article 33 EC ...; and/or

(ii) the policy, aims or functioning of the common organisation of the market in milk and milk products: and /or

(iii) the policy of Article 36 EC ... and Regulation No 26?

2. Does the function of the target price for milk set by the Council under Regulation (EEC) No 804/68 preclude a Member State from:

(a) making use of the target price as an indicator of the actual price movements due to the common agricultural policy; and

(b) treating the fact that a milk producers' co-operative in that State has achieved for its members milk prices that are below the target price, but are nearer to the target price in one period of time than another, as supporting a conclusion that the co-operative exercises market power which contributes to prices being higher than they would have reached under more competitive conditions?

3. Are Articles 28 to 30, EC ... and Articles 49 and 55 EC ... to be interpreted as precluding a Member State from applying national laws such as the Fair Trading Act 1973 and the Competition Act 1998 in such a way as to prohibit a milk producers' co-operative which has been found to enjoy market power from sending milk produced by its members to be processed by contractors on its behalf, including in other Member States, as a step being taken by the co-operative for the purpose of exploiting its position in the market in its favour?

4. Where large vertically-integrated dairy co-operatives exist and are permitted to operate in other Member States, is the general principle of non-discrimination, whether independently or as a given specific effect in Articles 12 and/or 34 EC ..., to be interpreted as precluding a Member State from applying national laws such as the Fair Trading Act 1973 and the Competition Act 1998 to prohibit a milk producers' co-operative which has been found to enjoy market power from:

(a) acquiring or building further plants for the processing of milk produced by its members, which would give the co-operative the ability to exploit still further its position in the market in its favour; or

(b) sending milk produced by its members to be processed by contractors on its behalf, whether within the Member State concerned or in other Member States, as a step being taken by the co-operative for the purpose of exploiting its position in the market in its favour?

Admissibility

Observations submitted to the Court

Findings of the Court

First question

Whether the Member States are competent to take steps under their national competition law in the sector governed by the common organisation of the market in milk and milk products

Observations submitted to the Court

Findings of the Court

The limits of the Member States' jurisdiction to act under national competition law in the sector governed by the common organisation of the market in milk and milk products

Observations submitted to the Court

Findings of the Court

Where the national competition authorities act in the sector governed by the common organisation of the market in milk and milk products, they are under an obligation to refrain from adopting any measure which might undermine or create exceptions to that common organisation.

Measures taken by national competition authorities in the sector governed by the common organisation of the market in milk and milk products may not, in particular, produce effects which are such as to impede the working of the machinery provided for by that common organisation. However, the mere fact that the prices charged by a dairy cooperative were already lower than the target price for milk before those authorities intervened is not sufficient to render the measures taken by them in relation to that cooperative in application of national competition law unlawful under Community law.

Furthermore, such measures may not compromise the objectives of the common agricultural policy as set out in Article 33(1) EC. The national competition authorities are under an obligation to ensure that any contradictions between the various objectives laid down in Article 33 EC are reconciled where necessary, without giving any one of them so much weight as to render the achievement of the others impossible.

Second question

Observations submitted to the Court

Findings of the Court

Third question

Observations submitted to the Court

Findings of the Court

Fourth question

Observations submitted to the Court

Findings of the Court

Costs