The Commission is or the opinion that although the principle of free movement of goods and the principles contained in Articles 2, 3 (f) and 5 of the Treaty certainly constitute the foundations of the Community legal system, they are however not as such directly applicable in the sense that they give private parties individual rights which the national courts must safeguard. The function of these principles, the imperative nature of which has been stressed by the Court (Case 6/72, Europemballage Corporation (1973) E.C.R., p. 216) is to delimit the possible exemptions provided by the particular provisions of the Treaty so that the objectives of the Treaty may not be undermined.

As the Court has stated in respect or the second paragraph of Article 5, these provisions constitute general obligations on the part of the Member States, the substance of which depends, in each particular case, on the provisions of the Treaty or on rules which emerge from its eeneral svstem.

The first question thus calls for a negative reply, and the second question does not arise if its form is strictly regarded, since it was raised only in the event of an affirmative reply to the first question.

It follows however from the previous considerations that the question as to the extent that the exclusive right granted to RAI and the prohibitions which flow from this exclusive right or from its exercise are incompatible with the Treaty and whether this incompatibility has a direct effect, depends on an analysis of the particular provisions of the Treaty which apply these general principles and in particular, according to the national court, of Articles 7, 37, 86 and 90 of the Treaty, which will be examined below.

Article 90 of the Treaty is, in the Commission's view, the one primarily relevant to the dominant position of RAI, since that position arises from the concession granted to it by the State, that is to say, by the measure of an authority. RAI is a public undertaking or, at least, an undertaking to which special or exclusive rights have been granted within the meaning of this provision, so that the Italian State can neither enact nor maintain in force as regards it any measure contrary to the rules of competition.

The grant of exclusive rights however does not constitute in itself an infringement of Article 90. Since Article 86 does not prohibit a dominant position as such nor even the granting of exclusive rights as regards private undertakings, Article 90 cannot give rise to liabilities greater than those arising under Article 86.

On considering whether the extension of exclusive rights over radio television to cable television could be regarded as incompatible with the prohibition on enacting measures contrary to the rules of competition, the Commission concedes that Article 90 allows a State to grant exclusive rights to an undertaking which would not necessarily give it a dominant position, but it is doubtful whether this power can always and necessarily include that of enacting a measure reinforcing the dominant position of a public undertaking, or one treated as such, so as to eliminate all possible competition.

It appears from the above analysis that a Member State which grants exclusive rights to an undertaking to make all kinds of television transmissions, including cable transmissions, over all its national territory, even for purposes of commercial advertising, does not by this fact alone infringe the rules of competition.

Although such a dominant position is as a structure not automatically condemned by the Community rules on competition, since such rules prohibit its abuse, they nevertheless impose not inconsiderable limits on the behaviour within the market of an undertaking which has such a position.

Behaviour, therefore, by the holder of the monopoly, capable of preventing the appearance of new forms of competition or involving the fixing of prices at too high a level or the refusal to transmit or a preference given to certain advertisements, be it for the purpose of safeguarding the commercial interests of the monopoly or for political reasons, or finally discrimination in televising items such as films or documentaries is capable of constituting an abuse which is prohibited, expressly so in certain cases, by Article 86.

Finally since Articles 86 and 90 (1) are, in the opinion of the Commission provisions which are directly applicable, individuals are given rights which the national courts must safeguard.

These questions relate to the interpretation of Article 37 of the Treaty regarding the progressive adjustment of monopolies of a commercial character so as to ensure that no discrimination exists between the nationals of Member States, and the obligation on Member States to refrain from introducing any new measure of a discriminatory nature.

According to the Commission, Article 37 applies only if three conditions are fulfilled: there must be a State monopoly or a delegated monopoly; the monopoly must be of a commercial character; it must appreciably influence trade between Member States. The second condition is not fulfilled in the case of RAI. The concept of a commercial monopoly excludes monopolies of services, as is clear from the very position of Article 37 under the Title Free movement of goods, from the use in the text of the words product and conditions under which goods are procured and marketed, and the reference in paragraph 2 to provisions dealing with the abolition of customs duties and quantitative restrictions, which provisions are unanimously regarded as being inapplicable to services.

The Commission likewise cites the judgment of the Court in Case 6/64 (Costa-Enel, Rec. 1964, p. 1165), according to which the monopolies to which it refers should relate to transactions concerning a commercial product.

Even if it were not necessary to exclude in an abstract and general way monopolies of services from the scope of Article 37, it would nevertheless be necessary definitely to establish that the service in question is a commercial product, that it lends itself to competition and to trade between Member States and plays an effective part in this trade (Judgment Costa-Enel). It is necessary to assess the possibilities of discrimination inherent in the monopoly in question.

If Article 37 had to be understood as embracing services, there would be no doubt, according to the Commission, about the commercial nature of the activity constituted by television advertising.

The actual possibilities of competition should therefore be considered taking into account the new prospects offered as regards television by the availability of coaxial cable. Both the technical reasons which justify a monopoly for radio transmission (the limited number of available frequencies) and the obstacles to transmissions' of televised programmes beyond frontiers are practically eliminated by the technique of diffusion by cable. Finally, the Commission likewise thinks that the monopoly in question is capable of playing an effective role in trade between Member States, as an aid to advertising.

As regards discrimination it is necessary to enquire whether the fact of adding to the monopoly in the production of national programmes a monopoly in the distribution of both national and foreign programmes does not intrinsically constitute a preferential system in favour of the national production and is not therefore discriminatory. The Commission refers in this respect to the arguments which it developed in Case 82/71 (SAIL, Rec. 1972, p. 131).

Taking into account the attitude it has adopted against the assimilation of monopolies of services to commercial monopolies within the meaning of Article 37, the Commission considers that it does not have to reply to Question 7, which concerns the effect of the expiration of the transitional period on the existence of the exclusive rights which the monopoly enjoys.

The Commission nevertheless recalls that in its observations in Case 82/71 (SAIL) it had already expressed the opinion that the adjustment provided for in Article 37 (1) must place in such a way that the monopoly may no longer give rise either actually or potentially to discrimination in trade between Member States to the detriment of imported or exported products. Monopolies could continue to exist only if they did not hinder the functioning of the Common Market, that is to say that the exclusive rights should be neutralized. Such neutralization does not necessarily imply that the exclusive rights must lapse, for each case must be considered individually.

Case 82/71 (SAIL) has likewise already enabled the Commission to show that in its view Article 37 (1) has become, in principle, directly applicable at the expiration of the transitional period. The Court has already declared that Article 37 (2) has a direct effect; the difference between it and Article 37 (1) is not the obligation which it contains, but only the date on which the obligation became effective.

While it is true that Article 37 (1) provides that Member States shall progressively adjust any State monopolies, which implies a certain discretionary power, the final obligation, that is to say the exclusion of all discrimination, is clear and precise, unconditional and not or Community institutions. In this subject to intervention by Member States respect the Commission refers to the judgment of the Court of 16 June 1966 in Case 57/65 (Lütticke, Rec. 1966, p. 294) relating to Article 95 of the Treaty. Should, contrary to the view of the Commission, Article 37 be regarded as applicable to the case in question, the exclusive right granted to a limited company to make television transmissions could not be regarded as abolished, and the wide interpretation of this right could be considered as an infringement of the standstill aimed at by Article 37 (2) only in the event that it appeared that the exclusive right in question or its extension in fact entailed discrimination or the possibility of discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed.

The Commission is of the opinion that Article 7 constitutes an ancillary rule when dealing with a sector for which the Treaty provides specific rules.

The German Government is of the opinion that a negative reply should be given to the first question.

Although the principles of free movement of goods and free competition are fundamental to Community law, they do not as such give rise to subjective rights for individuals. Such rights can arise only from definite provisions of the Treaty (such as Articles 9 et seq., 30 et seq., 85 and 86) or of secondary Community law which defines and puts the said principles into practice.

Articles 2 and 3, one of which describes the objectives of the Treaty, the other the means to be taken to achieve them, could not, even if they were combined with Article 5, give rise to a direct effect, since the said Article 5 too lacks, as regards the obligation which it contains, the necessary specificity for immediate application.

On considering, in spite or the negative reply proposed to the first question, the compatibility of the existing monopolies for radio and television, including radio and television advertising, with the principles of free movement of goods and services, the German Government states that in its view the object of the provisions of the Treaty which put these principles into practice (Art. 30 et seq. and 59 et seq.) is to ensure equal outlets for domestic and imported products on the internal market, and the provisions do not prevent the existence of monopolies. This appears clearly, as regards monopolies of a commercial character, from the very wording of Article 37. The possibility that Member States may maintain and enlarge the monopoly in radio and television transmission does not mean, however, that any behaviour whatsoever on the part of the monopoly accords with Community law, as is shown by the prohibition on discrimination in Article 37 itself.

Public undertakings within the meaning of Article 90 (1) are, in the German Government's view, subject to the prohibitions of Articles 85 and 86 of the Treaty. Nevertheless the prohibition on establishing a monopolistic position, the principle of which was confirmed by the judgment in Continental Can (Case 6/72, (1973) E.C.R., p. 215) could not apply as such to the public sector. Indeed Article 90 (1) shows that Member States are empowered to grant exclusive rights to public or private undertakings, even amounting to a monopoly. Moreover Article 90 (2) shows that in any case any prohibition on monopolies applies to undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly only to the extent that such prohibition does not obstruct the performance of the particular tasks assigned to them.

Further, organizations concerned with transmitting radio and television are not in the German Government's view undertakings within the meaning of the Treaty, since they provide a public service and, in accordance with the Constitution, they must have the status of free institutions to accomplish their tasks. These organizations are therefore undertakings within the meaning of the rules on competition only as regards some of their activities. In this event, however, it is Article 90 (2) which should apply and this is so likewise as regards the transmission of advertisements, which forms part of services of general economic interest. Indeed, the radio and television transmission of advertisements is possible only within the framework of more general programmes whilst, on the other hand, by reason or its impact on the formation of public opinion, it must reflect the guidelines and the principles governing radio and television transmission in general. There is exemption from the rules of competition nevertheless only to the extent that their application would obstruct the performance of this task of general interest. Here too a case-by-case examination is called for.

The German Government considers that it does not have to reply to the fifth question which arises only in the event of an affirmative reply to the fourth question. It appears, in any event, from the case law of the Court that citizens can deduce individual rights from the obligations of Member States only where such obligations are sufficiently precise and refer to a duty to refrain which is not subject to reservations.

In the view or the German Government the reply to the sixth question is negative.

The public television service, even as regards advertising, is not a commercial monopoly, but part of a monopoly of services. Moreover trade in films between Member States is not trade in products but trade in services, as appears from the fact that the EEC Directive No 63/607 of the Council of 15 October 1963 liberalizing the import, loan and use of films (OJ No 159 of 2 November 1963, p. 2661) was based on Article 63 (2).

This fact makes a reply to Questions 7, 8, 9 and 10 unnecessary.

The German Government considers that the prohibition on discrimination in Article 7 of the Treaty is not infringed when a Member State grants a monopoly of commercial television to a company resident in its territory.

The Italian Government is of the opinion that the reply to the first question must be in the negative. Under Articles 2 and 3 (f) of the Treaty Member States are required to pass laws in conformity with the interests of the legal system of the Community without nevertheless being bound by definite obligations giving rise to subjective rights in favour of individuals.

Since the reply to second questior depends on an affirmative reply to the first, it too must be negative.

The Italian Government does not consider that television services come under the scope of Article 86, for they are not an economic activity but operate a public service of a cultural, recreational and informative nature. The advertising activity of television is purely utilitarian and ancillary and is intended to meet the costs of the service whilst avoiding an increase in the licence fee. Moreover Article 86 prohibits only practices that may affect trade between Member States.

As regards Article 90, the Italian Government recalls that under Article 90 (2) the rules of competition are applied to undertakings entrusted with the operation of services of general economic interest only insofar as they do not obstruct the performance, in law or in fact, of the particular tasks assigned to them.

According to the Italian Government, when the Member States defined in the Treaty the rules governing national monopolies having a commercial character, they did not intend to include in this concept television services, which are usually regarded as public utility organizations and which engage in advertising activities only on a purely utilitarian and ancillary basis.

The spirit ot Article 7 ot the Treaty is to avoid discrimination against the subjects of Member States in the exercise of economic and commerical activities and to prevent nationality from giving rise to advantages or disadvantages. The exclusive grant of television services to a single organization implies that none of the other subjects, whatever his nationality, may exercise the activity in question.

Advertising should be regarded as an intangible asset in its own right, or at least as having, to the products to which it relates, the relationship of accessory to principal, and on this double basis it is subject to the customs union and the principle of the free movement of goods. It appears from the case law of this Court that intangible assets — such as electricity — come under the application of these rules (Case 6/64 Costa/Enel, Rec. 1964, p. 1157) and all products on which a monetary value can be placed, and which are as such capable of being the object of commerical transactions, must be regarded as goods. (Case 7/68, Commission v Italie, Rec. 1968, p. 625).

This assimilation of the advertisement with the product is indispensable for progressive unification of the market, effective equality of opportunity for penetration and distribution which is not beyond the means of all save the large multinational undertakings.

The tact that the national court, in its first question, has referred to the principle of the free movement of goods rather than to the various articles in the Treaty which apply it in detail, is because the instances do not on their own reveal the whole scope of the principle. The principle of the free movement of goods must indeed be understood and applied as one of the fundamental freedoms guaranteeing the functioning of the market.

It follows that it cannot be reduced to a simple guarantee of the sale of goods within the Common Market, but it must likewise ensure their sale with a view to consumption, so that any measure is prohibited which, outside the strict circumstances laid down in the Treaty, restricts the use of certain goods. The principle of free movement must therefore cover everything for which different arrangements are not expressly provided. There is no doubt as to the direct effect of the fundamental rule thus recognized, since the general principle is as precise, clear and free from ambiguity as the particular applications which the Treaty makes of it.

In the light of this an affirmative reply should be given not only to the first question relating to the direct effects of the principle of free movement but also the first two parts (a) and (b) of the second question. The advertisement enjoys as an intangible asset the guarantee of free movement. It enjoys it also in its capacity of a support and accessory for the movement of products. This free movement implies the free prepararion of the latter for sale and the free exercise of activities on which the movement of goods depends, such as distribution and marketing.

Question 2 (c) enquires whether the principles of free movement of goods is infringed by the ban on export, hire or distribution of television films, television documentaries and other productions capable of being broadcast by television except for the purposes of the authorized company. The reply should likewise be in the affirmative, since the objects bearing the advertisements televised fall without any doubt within the category of goods. It is essential, moreover, that once the free movement of the advertisement televised has been recognized, the free movement of the carrier should also be recognized.

According to the defendant it is necessary to extend the examination of the question raised to that of whether the restrictions imposed on the movement of the television signal do not come under the prohibition on measures having equivalent effect to quantitative restrictions as defined in Articles 30 et seq. of the Treaty. A Commission Directive (No 70/50 of 22 December 1969, OJ No L 13 of 19 January 1970) has shown that this concept covers measures indiscriminately affecting all products both national and foreign when they are not necessary for the attainment of an objective within the scope of the powers for the regulation of trade left to Member States by the Treaty. The restrictions on the use of means or vehicles of advertising resulting from RAI's monopoly have a greater effect on foreign producers by reason of the important part played by cable television in the advertising sector, particularly as regards selective advertising, and by reason of the restricted opportunities for advertising on the official networks. The objective of the restrictions thus exceeds the scope of the effects appropriate to a regulation of trade since it relates to a control of information. Since the government measures are thus incompatible with Community law, they should have been abolished at the latest as from the establishment of the customs union, to the extent that the abolition of quantitative restrictions is laid down as a directly applicable rule.

As regards the questions relating to the monopoly and the prohibition on discrimination, the sixth and seventh questions rightly raise the problem of the delimitation of the scope of the application of Article 37 of the Treaty, especially as to whether it covers the monopoly of television.

Although at first sight Article 37 does not relate to the activities of the invisible sector, the fact must nervertheless be taken into account that the concept of services in Chapter 3 of Title III of Part Two of the Treaty, as appears from Articles 60 and 61, has a residual character, that is to say much more limited than the concept of services in national laws.

Further, it appears from Article 59 that the scope of the Community rules on services relates to the abolition of obstacles to the provision of services from a Member State for the benefit of a beneficiary in another Member State. It therefore does not cover the transmission of advertisements by cable coming from a public undertaking of a Member State, since this transmission is necessarily local. Taking into account, moreover, what has been said regarding the character of an advertisement as an intangible asset or an ancillary product, it must be concluded that Article 37 applies to the monopoly of television advertising.

Further, all the conditions tor the application of Article 37 obtain. There is intervention, at least indirect, by the law in the transmission of the television signal by the control of the erection of facilities for telecommunication and by the grant of exclusive rights to operate on television frequencies; the monopoly is indeed concerned with transactions relating to commercial products or an entity relating to economic activity, capable of forming the subject matter of competition and trade between Member States; finally, transactions relating to advertising have a very real weight in intra-Community trade and there is discrimination to the prejudice of foreign suppliers by the fact that fundamentally different situations as regards the needs of advertising (opportunities for access to the national market, the preferences of the consumer and linguistic obstacles) are treated alike in comparison with the Italian producers. These considerations provide an answer to the eleventh question of the national court. Since it is caught by Article 37, the television monopoly as regards advertising has lapsed under the second paragraph thereof.

The defendant refers to the judgment of the Court in Case 6/64 (Costa/Enel, Rec. 1964, p. 1149) regarding the direct applicability of Article 37 (2).

As regards the tenth question the defendant sets out what he regards as the infringement of the standstill required by Article 37 (2).

Law No 645 of 27 February 1936 entitled Postal and Telecommunications Code envisaged only television by Hertzian waves. Subsequent to the expiration of the transitional period, Law No 156 of 29 March 1973 (GU No 113 of 3 May 1973) extended this monopoly to cable television by providing that facilities for the transmission of sound and visual programmes by cable … are likewise deemed to constitute radio facilities …. The 1973 Law, moreover, attached a penal sanction to the unauthorized installation and operation of cable television, which sanction did not previously obtain. Finally another breach of the standstill requirement arose from the Presidential Decree of 15 December 1972 extending the exclusive rights of RAI, which would have lapsed on 31 December 1972, to 31 December 1973.

In this respect the second question of the national court must be recognized as having no relation to the problems under discussion. The 1973 Law did not have the character of a law interpreting the previous 1936 Law but enacted new rules.

According to the defendant Questions 7, 8 and 9 do not raise only the question of the breach of the standstill requirement contained in Article 37 (2), but, in a more radical manner, that of the legality of the monopoly as it exists with regard to the provisions of Article 37 (1). The object of Article 37 is to achieve during the transitional period an adjustment of monopolistic structures to exclude the possibility after the expiration of this period of maintaining or introducing discrimination against competitors. Should it appear that the maintenance of exclusive rights necessarily involves recourse to discriminatory measures, the reconciliation sought by Article 37 would be impossible and the monopoly itself would be brought into questions as such, since its adjustment would be shown to be impossible to achieve. According to the defendant the danger of discrimination cannot be removed without abolishing the exclusive rights of the monopoly, in particular as regards advertising and trade in films intended for television. It is not possible to argue the contrary by reason of the fact that Article 37 does not provide for the abolition of monopolies but for their adjustment, since the monopoly exists in any event as regards third countries. In short there would be a monopoly involving exclusive rights as regards products coming from third countries whilst for products coming from Member States the monopoly could not longer operate as such. Every company producing films, documentaries and advertisements should have access to the national market of every Member State without being obliged to have recourse to a monopolistic corporation (as in France or Italy) or to an oligopoly (as in the Federal Republic of Germany). This point of view is confirmed by the draft Regulation relating to the tobacco market (OJ C 25/70 of 28. February 1970), Article 1 of which provides that in spite of commercial monopolies in certain Member States tobaccos manufactured in other Member States may be imported freely and directly. Suppliers of these tobaccos shall be entitled to establish their own wholesale distribution network in every Member State and to maintain supplies there.

The real danger of discrimination arises in the present case from the fact that virtually all the shares of RAI-TV are registered in the name of the Istituto per la Ricostruzione Industriale (IRI). When there is a risk of conflict of interest between an undertaking of IRI and a competing Community undertaking, RAI-TV and SIPRA (the company having the advertising rights) cannot maintain a position of neutrality. The defendant refers in this respect to the judgment of this Court and the opinion of Mr Advocate-General Roemer, in Case 82/71 (SAIL, Rec. 1972, p. 119).

According to the defendant it is doubtful whether RAI can be described as a public undertaking within the meaning of Article 90, but if it could be so described it is not in any event an undertaking entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly within the meaning of Article 90 (2), so that the restrictions on the application of the rules relating to competition which paragraph 2 allows do not obtain in the case of a television undertaking. Thus as a public undertaking RAI is fully subject to Article 90 (1).

The measures prohibited by this provision relate rather to the Member States than to the actual undertakings. In other words it is not necessary in the case of a public undertaking, as it is under Article 86 in respect of a private undertaking, to find that there is an abuse of a dominant position; Article 90 is infringed as soon as legislative measures of a Member State aim at allowing a public undertaking to achieve a result which undertakings are prohibited from obtaining.

In any event a television relay monopoly is an abuse of a dominant position within the meaning of Article 86.

It appears from the judgment of the Court of Justice of 22 February 1973 in the Continental Can case (Case 6/72 Europemballage Corporation v Commission [1973] E.C.R., p. 215) that Article 86 is aimed not only at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure and, further, that, for this provision to apply, it is not necessary that there should be complete elimination of all competition but that any abuse may occur if a dominant position is strengthened in such a way that it substantially fetters competition. Therefore the activity of an undertaking holding in fact and in law the position of a monopoly involving the elimination of competition in such a way that the strengthening of this position is not even necessary, is incompatible with the Treaty. Since the monopoly involves the elimination of competition, abuse of the dominant position arises from the existence of the monopoly. There is in this respect a parallel between what may be deduced from Article 37 with regard to the prohibition on discrimination by commercial monopolies and what the concept of the abuse of the dominant position involves as regards public undertakings enjoying a legal position of a monopoly.

Finally and in any event, an abuse of a dominant position is constituted by the extension of the original monopoly of radio television to cable television. It involves, in the light of the Europemballage Corporation judgment, an infringement of the standstill obligation on undertakings in a dominant position prohibiting them from strengthening this position to the extent of impairing an effective competition structure.

At the hearing on 19 February 1974 the defendant, represented by G. M. Ubertazzi and F. Capelli of the Milan Bar, the Italian Government, represented by its Ambassador A. Maresca and Mr Saveresi, the German Government, represented by M. Seidel, and the Commission, represented by A. Marchini Camia, made oral observations.

In particular they replied to questions put to them by the Court.