CJEC, April 30, 1974, No 155-73

THE COURT,

1. By order dated 25 July 1973, filed at the registry of the Court on 27 July 1973, the Tribunale of Biella raised various questions, under Article 177 of the EEC treaty, on the interpretation of Articles 2, 3, 5, 7, 37, 86 and 90 of the treaty.

The national court is concerned with penal proceedings against the operator of a private television-relay station for being in possession in premises open to the public of television sets used for the reception of transmissions by cable without having paid the prescribed licence fee.

The questions raised must enable the Tribunale of Biella to decide whether various provisions of Italian law are compatible with the treaty, which provisions reserve to the state the exclusive right to operate television, and in particular cable television, and more particularly insofar as this exclusive right extends to commercial advertising.

A - The competence of the Court

2. The Italian Government has cast doubt on the admissibility of the reference for a preliminary ruling by alleging that an answer to the questions raised was not necessary to enable the Court to determine the proceedings with which it is concerned.

3. Article 177, which is based on a clear separation of functions between the national courts and this Court, does not allow this Court to judge the grounds for the request for interpretation.

The objection therefore cannot be upheld.

B - Questions 1, 2, 6, 7, 8 and 9

4. The first two questions basically ask whether the principle of the free movement of goods within the common market applies to television signals, in particular in their commercial aspects, and whether the exclusive right granted by a Member State to a limited company to make all kinds of television transmissions, even for commercial advertising purposes, constitutes a breach of the said principle.

5. The reply is governed by the prior answer to the question whether television advertising must be treated as products or goods within the meaning of Articles 3 (a), 9 and the heading of title i of part two of the treaty.

6. In the absence of express provision to the contrary in the treaty, a television signal must, by reason of its nature, be regarded as provision of services.

Although it is not ruled out that services normally provided for remuneration may come under the provisions relating to free movement of goods, such is however the case, as appears from Article 60, only insofar as they are governed by such provisions.

It follows that the transmission of television signals, including those in the nature of advertisements, comes, as such, within the rules of the treaty relating to services.

7. On the other hand, trade in material, sound recordings, films, apparatus and other products used for the diffusion of television signals are subject to the rules relating to freedom of movement for goods.

As a result, although the existence of a monopoly with regard to television advertising is not in itself contrary to the principle of free movement of goods, such a monopoly would contravene this principle if it discriminated in favour of national material and products.

8. In the same way, the fact that an undertaking of a Member State has an exclusive right to transmit advertisements by television is not as such incompatible with the free movement of products, the marketing of which such advertisements are intended to promote. It would however be different if the exclusive right were used to favour, within the Community, particular trade channels or particular commercial operators in relation to others.

As is stressed by Article 3 of the Commission directive of 22 December 1969 on the abolition of measures having an effect equivalent to quantitative restrictions on imports and are not covered by other provisions, adopted in pursuance of the EEC treaty (OJ l 13-29 of 19 January 1970), measures governing the marketing of products where the restrictive effect exceeds the effects intrinsic to trade rules are capable of constituting measures having an effect equivalent to quantitative restrictions.

Such is the case, in particular, where the restrictive effects are out of proportion to their purpose, in the present case the organization, according to the law of a Member State, of television as a service in the public interest.

9. Since the sixth question relates to the interpretation of Article 37 of the treaty, it is fitting to examine it in conjunction with the problems raised by the provisions relating to the free movement of goods, among which this Article is placed.

This question asks whether Article 37 (1) and (2) applies in the case of a limited company on which a Member State has conferred the exclusive right to transmit broadcasts of any kind on its territory including advertising programmes and broadcasts of films and documentaries produced in other Member States.

10. Article 37 concerns the adjustment of state monopolies of a commercial character.

It follows both from the place of this provision in the chapter on the elimination of quantitative restrictions and from the use of the words 'imports' and 'exports' in the second indent of Article 37 (1) and of the word 'products' in Article 37 (3) and (4) that it refers to trade in goods and cannot relate to a monopoly in the provision of services.

Thus televised commercial advertising, by reason of its character as a service, does not come under these provisions.

11. Questions 7 and 9 do not arise since they were put only in the event of an affirmative reply to question 6. The same is the case as regards question 8.

C - Questions 3, 4 and 5

12. Questions 3, 4 and 5 relate to whether exclusive rights granted by a Member State to a limited company in relation to television broadcasts, and the exercise of such rights, are compatible with the competition rules of the treaty.

The third question inquires whether Articles 86 and 90 of the treaty taken together should be interpreted as meaning that an undertaking referred to in Article 90 (1) is prohibited from acquiring a dominant position, even as a result of an act of the national authorities, when the effect is to eliminate all forms of competition in the field in which it operates over the whole territorial area of the Member State.

If the answer to the third question is in the affirmative, the fourth question enquires whether a limited company on which a Member State has conferred by law the exclusive right to carry out television broadcasts of all kinds including those transmitted by cable, and those for commercial advertising purposes, holds a dominant position which is incompatible with Article 86, or at least abuses its dominant position by engaging in certain practices tending to eliminate competition and which are particularized by the national court.

If this question is answered in the affirmative, the fifth question asks whether the prohibitions referred to in the previous questions have a direct effect and confer rights on individuals which the national courts must safeguard.

13. The Italian and German governments have suggested that since television undertakings fulfil a task which concerns the public and is of a cultural and informative nature, they are not 'undertakings' within the meaning of the provisions of the treaty.

At least (it is argued) they are entrusted with a service of general economic interest so that they are subject to the rules contained in the treaty and in particular to the rules on competition only insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.

14. Article 90 (1) permits Member States inter alia to grant special or exclusive rights to undertakings.

Nothing in the treaty prevents Member States, for considerations of public interest, of a non- economic nature, from removing radio and television transmissions, including cable transmissions, from the field of competition by conferring on one or more establishments an exclusive right to conduct them.

However, for the performance of their tasks these establishments remain subject to the prohibitions against discrimination and, to the extent that this performance comprises activities of an economic nature, fall under the provisions referred to in Article 90 relating to public undertakings and undertakings to which Member States grant special or exclusive rights.

The interpretation of Articles 86 and 90 taken together leads to the conclusion that the fact that an undertaking to which a Member State grants exclusive rights has a monopoly is not as such incompatible with Article 86.

It is therefore the same as regards an extension of exclusive rights following a new intervention by this state.

15. Moreover, if certain Member States treat undertakings entrusted with the operation of television, even as regards their commercial activities, in particular advertising, as undertakings entrusted with the operation of services of general economic interest, the same prohibitions apply, as regards their behaviour within the market, by reason of Article 90 (2), so long as it is not shown that the said prohibitions are incompatible with the performance of their tasks.

16. In the fourth question the national court has cited a certain number of acts capable of amounting to abuse within the meaning of Article 86.

17. Such would certainly be the case with an undertaking possessing a monopoly of television advertising, if it imposed unfair charges or conditions on users of its services or if it discriminated between commercial operators or national products on the one hand, and those of other Member States on the other, as regards access to television advertising.

18. The national court has in each case to ascertain the existence of such abuse and the commission has to remedy it within the limits of its powers.

Even within the framework of Article 90, therefore, the prohibitions of Article 86 have a direct effect and confer on interested parties rights which the national courts must safeguard.

D - Question 11

19. The eleventh question asks whether it is a breach of Article 7 of the treaty to reserve for a limited company in a Member State the exclusive right to transmit television advertisements over the whole territory of that Member State.

20. It follows from the above considerations that the grant of an exclusive right in the nature of that referred to by the national court does not constitute a breach of Article 7, but discriminatory acts on the part of undertakings enjoying such exclusive rights with regard to nationals of Member States by reason of their nationality are incompatible with this provision.

21. The costs incurred by the Commission of the European Communities and by the Italian and German governments, who have submitted observations to the Court, are not recoverable, and as these proceedings are, insofar as the parties to the main action are concerned, a step in the action pending before a national court, the decision on costs is a matter for that Court.

THE COURT

In answer to the questions referred to it by the Tribunale of Biella by order of 6 July 1973, hereby rules:

1. The transmission of television signals, including those in the nature of advertisements, comes, as such, within the rules of the treaty relating to services. However, trade in material, sound recordings, films, apparatus and other products used for the diffusion of television signals is subject to the rules relating to freedom of movement for goods.

2. The fact that an undertaking of a Member State has the exclusive right to transmit advertisements by television is not as such incompatible with the free movement of products, the marketing of which such advertisements are intended to promote. It would however be different if the exclusive rights were used to favour, within the Community, particular trade channels or particular commercial operators in relation to others.

3. Article 37 of the treaty refers to trade in goods and cannot relate to a monopoly in the provision of services.

4. The fact that an undertaking to which a Member State grants exclusive rights within the meaning of Article 90, or extends such rights following further intervention by such States, has a monopoly, is not as such incompatible with Article 86 of the treaty.

5. Even within the framework of Article 90, the prohibitions of Article 86 have a direct effect and confer on interested parties rights which the national courts must safeguard.

6. The grant of the exclusive right to transmit television signals does not as such constitute a breach of Article 7 of the treaty. Discrimination by undertakings enjoying such exclusive rights against nationals of Member States by reason of their nationality is however incompatible with this provision.