CJEC, January 30, 1985, No 123-83

THE COURT,

1. By a judgment of 21 June 1983, which was received at the Court on 1 July 1983, the Tribunal de Grande Instance, Saintes (France), referred to the Court for a preliminary ruling under Article 177 of the EEC treaty three questions on the interpretation of Article 85 of the EEC treaty.

2. Those questions were raised in proceedings brought by the Bureau National Interprofessionel du Cognac (National Inter-trade Board for Cognac, hereinafter referred to as 'the Board'), whose registered office is in Cognac, against Guy Clair, Director of Etablissements Clair et Cie, dealers in Brie-sous-matha, for the annulment of contracts for the purchase of potable spirits which the latter had concluded at prices lower than those laid down in accordance with the procedure described below.

3. As is apparent from the judgment of the national court and from the other documents relating to the case, the board is an inter-trade organization in the wine and cognac sector and was set up by an order of 5 January 1941. The income of the board is provided by para-fiscal levies. According to the order of the minister for agriculture of 18 February 1975 (Journal Officiel de la Republique Francaise of 26 February 1975), which was in force at the material time:

'The Bureau national interprofessionnel du cognac shall be composed of :

(a) Two persons, one representing wine-growers and the other representing dealers in the area defined by the decree of 1 May 1909;

(b)Upon submission of lists drawn up by the trade organizations concerned :

19 delegates of wine-growers and distilling co-operatives;

19 delegates of dealers and commercial distillers;

A delegate from the Syndicat des vins vines (association for wines fortified for distillation);

A delegate of the producers of pineau des Charentes;

A delegate of the brokers;

A delegate for ancillary industries;

A delegate of the executive and managerial staff (trade);

A delegate of workers in cognac cellars;

A viticultural technician;

A vineyard worker.

No person carrying on the trade of a dealer, broker, distiller or any related trade shall represent producers and vice versa.

Members of the board shall be appointed for three years by order of the Minister for Agriculture. Their mandate shall be renewable.

The following shall attend meetings of the board and may take part in discussions in a consultative capacity:

Regional Directors for agriculture and Directors of the revenue authorities of Charente and Charente-Maritime;

The divisional inspector responsible for investigating fraud;

The officials responsible for the economic and financial control of the board.'

In addition, a Chairman and Government Commissioner are to be appointed by the Minister.

4. By virtue of Article 5 of Law No 75-600 of 10 July 1975 on agricultural inter-trade organizations, as supplemented and amended by Law N° 80-502 of 4 July 1980, the board may, at its request, claim the benefit of certain provisions of the law.

5. Under the board's internal rules, as they stood at the time of the facts, its members were divided into two groups, namely dealers and wine-growers. After each had adopted its position by qualified majority following internal negotiations, the groups were permitted to conclude an agreement which, according to Law No 75-600 of 1 July 1975, could be aimed at promoting: the monitoring of supply and demand; the adjustment and regularization of supply; the implementation, subject to state control, of marketing rules, prices and conditions of payment; the quality of products; inter-trade relations in the sector concerned; and the sale of the product on domestic and external markets.

6. According to the aforesaid Article 5, in conjunction with Article 2, upon a request by the general meeting of the board, the agreement may be made generally binding by ministerial order. The effect of this is that the agreement becomes binding on all members of the trades making up the trade organization.

7. According to Article 4 of the above-mentioned law, a contract of supply between private persons which does not comply with the provisions of an agreement that has been adopted and made generally binding is automatically void, and the inter-trade organization concerned may seek a declaration to that effect from the appropriate court and also claim compensation for any damage it may have suffered.

8. In accordance with the aforesaid provisions and procedure, the board unanimously adopted on 7 November 1980 an agreement entitled'inter-trade agreement relating to the prices of distillable white wines and cognac'. The agreement, which provided that it was to apply throughout the whole of metropolitan France, fixed a minimum price for wines for distillation, the price of potable spirits distilled in 1980 and earlier years, and a minimum price for cognac. It provided that any contract concluded in breach of its provisions would be void and that the penalties provided for in Article 4 of the aforesaid law of 10 July 1975 would apply. It was signed by the representatives of the two groups at a meeting of the board and by the board's director and was made generally binding by an order issued by the Minister for Agriculture on 27 November 1980.

9. Mr Clair bought cognac from various wine-growers at prices lower than those laid down by the order in question, and the board therefore brought an action against him before the Tribunal de grande instance, saintes, for a declaration that the contracts in question were void.

10. Mr Clair, the defendant in the main proceedings, contended that the action was unfounded because it was based on an agreement which was incompatible with Articles 85 and 86 of the treaty. For its part the board claimed, on the one hand, that cognac did not come under the aforesaid provisions of the treaty and, on the other, that the ministerial order which Mr Clair was charged with infringing was an administrative measure and therefore its validity could not be examined by non-administrative courts.

11. The Tribunal de grande instance, Saintes, proceeded on the assumption that cognac was an industrial product and that consequently Articles 85 and 86 of the EEC treaty were in principle applicable. Furthermore, it held that, although the board had a quasi-administrative status and the order of 27 November 1980 making the agreement generally binding constituted an administrative measure, the agreement was nevertheless concluded and signed, without the intervention of the government commissioner on the board, by the representatives of the two groups; the agreement was separate from the order even though it was made in the presence of the Chairman of the Board, who had no power to issue Regulations.

12. On the basis of those considerations, the Tribunal de grande instance, Saintes, by judgment of 21 June 1983, stayed the proceedings and referred the following three questions to the Court for a preliminary ruling :

'(1) Since the wine-growers' group and the dealers' group are both represented within the Bureau National Interprofessionnel du Cognac, are they to be regarded as an association of undertakings, having regard to the fact that the agreement reached between them was also signed by the Chairman of the Bureau?

'(2)Must the fixing by the wine-growers'group and the dealers'group of a minimum purchase price for potable spirits be regarded as a concerted practice?

'(3)Must the fixing of a minimum purchase price for potable spirits be regarded as capable of affecting trade between Member States and as having as its effect or purpose the prevention, restriction or distortion of competition within the common market, in the light of the fact that the potable spirits referred to in the agreement of 7 November 1980 conform to the requirements for the registered designation of origin for cognac and that cognac distilled from grapes is consumed undiluted almost without exception?

First question

13. The national court's first question is designed essentially to ascertain whether an agreement concluded within an organization and according to a procedure such as those described above falls within the scope of Article 85 (1) of the treaty and in particular whether an agreement concluded by the two groups (the wine-growers and dealers) is an agreement made between undertakings or associations of undertakings.

14. The Board claims as a preliminary that there is no point in discussing whether under the EEC treaty cognac is to be regarded as an agricultural product or as an industrial product. Article 85 of the treaty is in any event not applicable because cognac is of considerable economic importance to the farmers of the region concerned. The income of 63 000 wine-growers is directly dependent on the price of cognac. Since 1973 the wine-growing industry in Charente has been heavily burdened with debt. Moreover, it has been faced with a structural imbalance between supply and demand. Thus, the fixing of a minimum price for cognac is intended to ensure a minimum income for the farmers in Charente.

15. That argument must be rejected. As appears from Annex II to the treaty (ex. 22.09), potable spirits are expressly excluded from the category of agricultural products. Consequently, they must be regarded as industrial products and that classification cannot be called in question by the economic importance that the products may have for farmers in the region concerned.

16. The Board maintains that the agreement between the two groups was not made on the initiative of undertakings but under the aegis of, and according to the procedure laid down by the internal rules of the board, which, according to French administrative case-law, constitutes an institution of public law in view of the manner in which it was created, the rules concerning its financing, organization, functioning and the appointment of its members and the public-service mission entrusted to it. Consequently, its activity is not covered by Article 85 of the treaty.

17. That argument cannot be accepted. Article 85 states that it applies to agreements between undertakings and decisions by associations of undertakings. As the defendant in the main proceedings and the Commission have rightly observed, the legal framework within which such agreements are made and such decisions are taken and the classification given to that framework by the various national legal systems are irrelevant as far as the applicability of the Community rules on competition and in particular Article 85 of the treaty are concerned.

18. The board observes that the members who attended its general meeting and who negotiated and concluded the agreement in question were all appointed by the minister for agriculture. Thus they do not represent the various trade organizations from which they come and the agreement made between them cannot be regarded as an agreement between associations of undertakings.

19. That argument cannot be accepted. Article 85 must be interpreted as covering such an agreement, since it was negotiated and concluded by persons who, although appointed by the public authorities, were, apart from the two appointed directly by the Minister, proposed for appointment by the trade organizations directly concerned and who consequently must be regarded as in fact representing those organizations in the negotiation and conclusion of the agreement.

20. It must be added that an agreement made by two groups of traders, such as the wine-growers and dealers, must be regarded as an agreement between undertakings or associations of undertakings. The fact that those groups meet within an organization such as the Board does not remove their agreement from the scope of Article 85 of the treaty.

21. The board maintains, moreover, that agreements concluded within it are not binding and that its role is solely to advise the central public authorities, which alone may make the said agreements binding by means of ministerial orders.

22. It must be pointed out in that respect that for the purposes of Article 85 (1) it is unnecessary to take account of the actual effects of an agreement where its object is to restrict, prevent or distort competition. By its very nature, an agreement fixing a minimum price for a product which is submitted to the public authorities for the purpose of obtaining approval for that minimum price, so that it becomes binding on all traders on the market in question, is intended to distort competition on that market.

23. As the defendant in the main proceedings and the Commission have rightly contended, the adoption of a measure by a public authority making an agreement binding on all the traders concerned, even if they were not parties to the agreement, cannot remove the agreement from the scope of Article 85 (1).

24. Finally, the national court asks whether the fact that the inter-trade agreement was signed by the chairman of the Board affects the legal nature of the agreement for the purposes of Article 85 of the treaty.

25. The fact that the Chairman or Director of a body within which an agreement intended to prevent free competition is concluded places his signature at the foot of the agreement, even though national law does not provide for such a signature, does not affect the applicability to the agreement of the provisions of Article 85 (1) of the treaty.

26. It follows from the foregoing that the reply which must be given to the first question is that Article 85 (1) of the EEC treaty must be taken to apply to an inter-trade agreement fixing a minimum price for a product such as cognac concluded by two groups of traders within the framework of, and in accordance with the procedures of, a body such as the Bureau National Interprofessionnel du Cognac.

Second question

27. The national court asks further whether the fixing of minimum prices for potable spirits must be regarded as a concerted practice for the purposes of Article 85. In view of the answer given to the first question, it is unnecessary to reply to the second question.

Third question

28. It appears from the documents before the Court and from the arguments presented at the hearing that the third question is concerned essentially with the fixing of prices for potable spirits used in the manufacture of cognac, that is to say an intermediate product which is not normally sent outside the cognac region. The national court asks in substance whether the fixing of a minimum price for such a product is capable of affecting trade between Member States and has as its purpose or effect the restriction of competition, having regard to the fact that the finished product, cognac, is protected by a registered designation of origin.

29. It must be observed in that respect that any agreement whose object or effect is to restrict competition by fixing minimum prices for an intermediate product is capable of affecting intra-Community trade, even if there is no trade in that intermediate product between the member states, where the product constitutes the raw material for another product marketed elsewhere in the Community. The fact that the finished product is protected by a registered designation of origin is irrelevant.

30. The reply which must be given to the third question is therefore that the fixing of a minimum purchase price for an intermediate product is capable of affecting trade between Member States where that product constitutes the raw material for another product marketed elsewhere in the Community, irrespective of whether the finished product is protected by a registered designation of origin.

Costs

31. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision as to costs is a matter for that Court.

On those grounds,

THE COURT,

In answer to the questions submitted to it by the Tribunal de grande instance, saintes, by judgment of 21 June 1983, hereby rules :

1. Article 85 (1) of the EEC treaty must be taken to apply to an inter-trade agreement fixing a minimum price for a product such as cognac concluded by two groups of traders within the framework of, and in accordance with the procedures of, a body such as the Bureau National Interprofessionnel du Cognac.

2.The fixing of a minimum price for an intermediate product is capable of affecting trade between Member States where that product constitutes the raw material for another product marketed elsewhere in the Community, irrespective of whether the finished product is protected by a registered designation of origin.