Is an Italian ban on the use of milk powder in cheese compatible with EU free movement rules?
An Italian law from 1974 bans the use of milk powder and milk concentrates in cheese products. The European Commission (‘Commission’) considers that this law is a technical barrier to the free movement of goods within the EU and thus infringes basic EU law.
The Commission is the Guardian of the Treaties. This implies that the Treaties give the Commission the competence to initiate legal actions against Member States when it considers that they infringe EU law.
The Commission has initiated an infringement procedure against Italy in relation to the ban on milk powder and concentrates in cheese products. If Italy and the Commission do not reach an agreement, or – to put it more bluntly – if Italy cannot convince the Commission that the ban is not a barrier to free movement, then the Commission will bring Italy before the Court of Justice seeking to have a ruling stating that the ban is a barrier to trade.
If Italy is found to be in breach of its obligations in relation to free movement of goods, Italy will have to change the law. Delays in complying with the ruling of the Court of Justice can result in heavy fines on Italy and open the way to actions for damages to compensate cheese manufacturers who consider that they have suffered economic loss because of the ban.
This is not the first time that Italy has come into conflict with the Commission in relation to cheese products. In October 1990 Italy was found to be in breach of the rules on free movement of goods because national rules set down a minimum fat content in cheeses. Accordingly, Italy amended those rules.
The factual background and the legal framework will first summarised. The main arguments put forward by the Commission and the possible defence from Italy will then examined. A conclusion will be provided.
The Factual and legal framework
The Commission’s initiatives
By letter on 12 November 2013, the Commission first contacted the competent Italian authorities questioning the legality of the ban on the use of milk powder in cheese introduced by Law No 138/1974. The Italian authorities answered on 20 February 2014. The Commission concluded that that response did not counter the Commission’s concerns. Accordingly, the Commission moved to the next step of the infringement procedure by sending the letter of formal notice under Article 258 TFEU maintaining that the Italian Law No 138/1974 is a breach of the principle of free movement of goods within the EU.
Should the Italian response still not remedy the Commission’s concerns, the likely response of the Commission is the sending of a reasoned opinion setting out the detailed legal arguments why the Commission considers that the ban on the use of milk powder in cheese infringes the free movement of goods in the EU. At that stage, Italy has the choice either to comply with the reasoned opinion or to be subject to an action for failure to fulfil its obligations before the Court of Justice pursuant Article 258(2) TFEU.
Subsequent developments in Italy
On 23 June 2015, the Italian Ministry of Agriculture (hereinafter, ‘Mipaaf’) met the representatives of the Italian milk sector in order to discuss the issue.
Reports of the meeting indicate that inter-branch organisations would like to maintain, as far as possible, the law that limits the import and use of powdered and evaporated milk for the production of diary products. Confagricoltura, CIA and Fedagri are aware that keeping the current legislation in place could lead to new legal actions against Italy. As one solution they proposed the idea of improving food labelling requirements for milk products so as to better clarify which products contain fresh milk, and which contain powdered or evaporated milk. In addition, inter-branch organisations agreed to maintain rules setting the maximum quantity of powdered or evaporated milk that cheese producers can use.
Mipaaf indicated that Italy would seek to maintain the main elements of Law No 138/1974, but if this was not be possible, it would propose an amendment to the current food labelling legislation.
The Italian law banning the use of milk powder in cheese products
Law No 138/1974 bans the holding or selling or use of fresh or liquid milk intended for the preparation of diary products if milk powder is added. In particular:
- Article 1(1) prohibits the use or selling or putting up for sale or otherwise putting on the market of: a) fresh milk intended for human consumption or for further preparation of dairy products to which contains milk powder or other milks preserved with any chemical treatment or anyway concentrated; b) liquid milk intended for human consumption or for further preparation of dairy products obtained, even partially, with milk powder or with other milks preserved with any chemical treatment or anyway concentrated; c) dairy products prepared with the products referred to in subparagraphs a) and b) or derived anyway from milk powder;
- Article 1(2) prohibits the use of powdered or evaporated milk in the factories where drinking milk or diary products are produced.
EU provisions on free movement of goods
Article 34 TFEU provides that:
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
Article 36 TFEU provides that:
The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.
Article 38(2) TFEU provides that:
Save as otherwise provided for in Articles 39 to 44, the rules laid down for the establishment and functioning of the internal market shall apply to agricultural products.
EU provisions on food information to consumers
Article 17 of Regulation (EU) No 1169/2011 on the provision of food information to consumers provides that:
- The name of the food shall be its legal name. In the absence of such a name, the name of the food shall be its customary name, or, if there is no customary name or the customary name is not used, a descriptive name of the food shall be provided.
- The use in the Member State of marketing of the name of the food under which the product is legally manufactured and marketed in the Member State of production shall be allowed. However, where the application of the other provisions of this Regulation, in particular those set out in Article 9, would not enable consumers in the Member State of marketing to know the true nature of the food and to distinguish it from foods with which they could confuse it, the name of the food shall be accompanied by other descriptive information which shall appear in proximity to the name of the food.
- In exceptional cases, the name of the food in the Member State of production shall not be used in the Member State of marketing when the food which it designates in the Member State of production is so different, as regards its composition or manufacture, from the food known under that name in the Member State of marketing that paragraph 2 is not sufficient to ensure, in the Member State of marketing, correct information for consumers.
- The name of the food shall not be replaced with a name protected as intellectual property, brand name or fancy name.
- Specific provisions on the name of the food and particulars that shall accompany it are laid down in Annex VI.
Part A of Annex VI of Regulation (EU) No 1169/2011 headed ‘Mandatory particulars accompanying the name of the food‘ requires that:
The name of the food shall include or be accompanied by particulars as to the physical condition of the food or the specific treatment which it has undergone (for example, powdered, refrozen, freeze-dried, quick-frozen, concentrated, smoked) in all cases where omission of such information could mislead the purchaser.
Article 18(2) of Regulation (EU) No 1169/2011 provides that:
Ingredients shall be designated by their specific name, where applicable, in accordance with the rules laid down in Article 17 and in Annex VI.
Article 19(1) letter d) of Regulation (EU) No 1169/2011 provides that cheese, butter, fermented milk and cream, to which no ingredient has been added other than lactic products, food enzymes and micro-organism cultures essential to manufacture, or in the case of cheese other than fresh cheese and processed cheese the salt needed for its manufacture shall not be required to bear a list of ingredients.
Article 39 of Regulation (EU) No 1169/2011 provides that:
- In addition to the mandatory particulars referred to in Article 9(1) and in Article 10, Member States may, in accordance with the procedure laid down in Article 45, adopt measures requiring additional mandatory particulars for specific types or categories of foods, justified on grounds of at least one of the following: a) the protection of public health; b) the protection of consumers; c) the prevention of fraud; d) the protection of industrial and commercial property rights, indications of provenance, registered designation of origin and the prevention of unfair competition.
- By means of paragraph 1, Member States may introduce measures concerning the mandatory indication of the country of origin or place of provenance of foods only where there is a proven link between certain qualities of the food and its origin or provenance. When notifying such measures to the Commission, Member States shall provide evidence that the majority of consumers attach significant value to the provision of that information.
Article 45 of Regulation (EU) No 1169/2011 provides that:
- When reference is made to this Article, the Member State which deems it necessary to adopt new food information legislation shall notify in advance the Commission and the other Member States of the measures envisaged and give the reasons justifying them.
- The Commission shall consult the Standing Committee on the Food Chain and Animal Health set up by Article 58(1) of Regulation (EC) No 178/2002 if it considers such consultation to be useful or if a Member State so requests. In that case, the Commission shall ensure that this process is transparent for all stakeholders.
- The Member State which deems it necessary to adopt new food information legislation may take the envisaged measures only 3 months after the notification referred to in paragraph 1, provided that it has not received a negative opinion from the Commission.
- If the Commission’s opinion is negative, and before the expiry of the period referred to in paragraph 3 of this Article, the Commission shall initiate the examination procedure referred to in Article 48(2) in order to determine whether the envisaged measures may be implemented subject, if necessary, to the appropriate modifications.
- Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on Information Society services shall not apply to the measures falling within the notification procedure specified in this Article.
Legal arguments in relation to the ban
According to the Commission, Article 1 of Law No 138/1974 infringes Article 34 TFEU and provisions on the Single Common Market Organisation for agricultural products. The Italian ban cannot be justified under Article 36 TFEU, or by any of the mandatory requirements identified in the case-law of the EU Courts.
In this section we look at the arguments put forward by Commission and the possible counter arguments that Italy can use in order to protect the legality of its legislation.
- a) Articles 34 and 36 TFEU
Certain obstacles to free movement of goods within the EU do not breach Article 34 TFEU if they are necessary to satisfy ‘mandatory requirements’, often referred to as matters of overriding public interest. Fairness of commercial transactions, consumer protection and culture have been recognised by the EU Courts as being of overriding public interest. But classification as an issue of overriding public interest is not enough. Their use must be proportionate.
Italy could argue that the milk powder ban is a measure aiming to protect consumers in light of the EU case-law, that it is adequate to attain the objective and that it is proportionate. Italy could then add that the contested measure also aims at achieving the objectives of the Common Agriculture Policy listed in Article 39 TFEU, namely, to ensure a fair standard of living for agricultural community.
- b) Quality Schemes
The Commission argues that the quality of local products can be protected adequately by means of quality schemes, i.e. by registering a name as a Protected Designation of Origin, a Protected Geographical Indication, or a Traditional Speciality Guaranteed. A product specification for a quality cheese product can clearly require that the milk is produced locally and/or it can only be subject to specific treatment. In other words, the product specification for quality products can provide that the use powdered or concentrated milk is not allowed for certain products.
Although the EU rules on quality schemes can allow restrictions on the use of certain raw materials, this option does not address the underlying problem addressed by the Italian law.
First, not all cheese products made in Italy are registered under a quality scheme, and thus not all cheese products may benefit from the restrictions that those rules allow. Italy has around 400 cheese products that are not protected under quality policy rules. Currently these products are characterised by the absence of powdered or concentrated milk. Second, requiring registration as a quality product to preserve this characteristic could result in the distortion of the very concept of quality schemes (for instance, not all the cheese product are likely to qualify as quality products). Third, registration under one of the quality schemes implies costs and a control system that could place an unnecessary burden on producers.
- c) What is ‘Cheese’?
There is no harmonised definition of ‘cheese’ in EU law. This is clear from an earlier debate between Italy and the Commission in 2008 on casein. In a letter dated 29 October 2008 the Commission stated that Member States can maintain national definitions of ‘cheese’ until such time as an EU-wide definition has been adopted. The following considerations may then be of relevance.
First, the case of the milk powder ban can be compared with Case C- 210/89 on the amount of fat in Italian cheese and Joined Cases C-12/00 and C-14/00 on cocoa and chocolate products containing fats other than cocoa butter.
In the Spanish Cocoa case, the Court of Justice held that: ‘Member States may, for the purpose of protecting consumers, require to alter the description of a foodstuff where a product offered for sale under a particular name is so different, in terms of its composition or production, from the products generally understood as falling within that description within EU that it cannot be regarded as falling within the same category’. The Court then specified that where the difference is of minor importance, appropriate labelling should be sufficient to provide consumers with the necessary information.
Therefore, the question is to determine whether the use of milk powder or condensed milk makes the cheese products ‘different’ or ‘so different’ that they no longer present the characteristics expected by consumers buying products bearing the name ‘cheese’.
During an international conference held in Geneva in 1908 on food fraud, cheese was defined as: ‘il prodotto della maturazione della cagliata ottenuta con la coagulazione presamica o acida del latte intero e puro, o della crema da esso ricavata, o del latte puro e scremato parzialmente o totalmente, che non abbia subito alcuna aggiunta di sostanza, a eccezione di quei prodotti che entrano normalmente nella fabbricazione dei formaggi, come fermenti, sale, spezie, coloranti per formaggi, etc.’ This definition appears to exclude the use of powdered or condensed milk.
Article 32 of Royal Decree of 15 October 1925, No 2033, provides that the name ‘cacio è riservato al prodotto che si ricava dal latte intero ovvero parzialmente o totalmente scremato, oppure dalla crema, in seguito a coagulazione acida o presamica, anche facendo uso di fermenti e di sale di cucina’.
Both these definitions require the presence of milk – not milk powder – as a necessary ingredient for ‘cheese’. On this basis, Italy could argue that consumers consider that cheese products can only be made from fresh milk.
Second, Part II of Annex VII of Regulation (EU) No 1308/2013 provides that ‘milk’ means exclusively the normal mammary secretion obtained from one or more milking without either addition or extraction therefrom. The word ‘milk’ may be used (a) for milk treated without altering its composition, or (b) in association with a word or words to designate the type, grade, origin and/or intended use of such milk or to describe the physical treatment or the modification in composition to which it has been subjected, provided that the modification is restricted to an addition and/or withdrawal of natural milk constituents.
The same provision then specifies that ‘milk products’ are products derived exclusively from milk, on the understanding that substances necessary for their manufacture may be added provided that those substances are not used for the purpose of replacing, in whole or in part, any milk constituent.
Cheese and yogurt are included in the list of milk products. However, this does not mean that all products containing milk powder can be automatically considered as cheese or yogurt. According to Article 17(3) of Regulation (EU) No 1169/2011, the name of the food in the Member State of production shall not be used in the Member State of marketing when the food product which it designates in the Member State of production is so different, as regards its composition or manufacture, from the food known under that name in the Member State of marketing that a descriptive information appearing in proximity to the name of the food.
In these circumstances, the physical condition of the food, or the specific treatment it has undergone, are relevant to Italian consumers. Therefore, Italy would have to show that the physical conditions of milk is so relevant for consumers that a diary product produced with milk powder could not be understood as being cheese.
- d) Food Fraud
The Commission considers that the milk powder ban is a fraud and if the measure was abolished the fraud itself would automatically end. First, this argument seems, at the very least, circular. Second, sanctions imposed by Law No 138/1974 are administrative in nature, and not criminal. Fraud is a crime in the sense of Articles 640, 515 -517 of the Italian Criminal Code. Thus, the Commission’s argument is not applicable to the Italian law.
The ban on the use of milk powder and milk concentrates is a measure to prevent fraud. The prohibition set out in Article 1(2) of Law No 138/1974 is directly linked to Article 1(1). Prohibiting the presence of these products in factories where fresh milk or cheese production are produced, contributes to objective of the fraud prevention.
Last but not least, the question is whether the ban on powdered or concentrated milk in factories making fresh milk can be regarded as inappropriate or disproportionate with respect to the aim of preventing adulteration of milk. Surely this is an issue for Italy to determine in the light of practice in Italy. Proportionality must be examined not in the abstract but in the territory where the measure is applied.
- e) Food Labelling
The Commission argues that Article 39 of Regulation (EU) No 1169/2011 gives Member States the option to require that the name of specific food products be accompanied by the list of ingredients. Furthermore, as to diary products that do not fall within the scope of the exception in Article 19(1)(d) of Regulation (EU) No 1169/2011, Article 18(2) therein already requires that a list of ingredients must be included on the label.
Part III of Annex VII of Regulation (EU) No 1308/2013 provides that the term ‘milk’ may include milk powder: ‘the term “milk” may be used: for milk treated without altering its composition or for milk the fat content of which is standardised under Part IV. Thus, powdered milk can be considered milk as well’.
Thus the Commission appears to be mistaken that a solution could be found within the terms of Article 39. In addition, in its letter of May 2015, the Commission indicates that Article 39 of Regulation (EU) No 1169/2011 is the legal basis allowing Italy to introduce mandatory labelling particulars. This is not an immediate solution. Italy cannot change the current law tout court. Rather, it would have to introduce an amendment to its national legislation, and then notify it to the Commission within the meaning of Article 45 of Regulation (EU) No 1169/2011. And it could not be excluded that the Commission would not agree with the proposed amendment.
However, Article 17(3) read in conjunction with Annex IV of Regulation (EU) No 1169/2011 provides that the indication of milk in the list of ingredients must be accompanied by the particulars as to its physical condition and the specific treatment which it has undergone in all cases where omission of such information could mislead the purchaser. Neither Article 17(3) nor Annex VI of the Regulation make reference to Article 45. Italy could argue that it is entitled to require the mandatory indication of the physical condition of milk in diary products without notifying this requirement to the Commission under Article 45.
In addition, Annex VI aims to protect all purchasers, not only consumers. This means that the additional mandatory particular on the cheese products labels can be imposed from the very first moment the product goes out of the factory, and not only when the product arrives on supermarket shelves.
- f) Consumers perception
According to the Commission, it is not scientifically proven that milk powder decreases the nutritional value of diary products. Is this argument decisive? In 2011 the Italian consumer organisation U.Di.Con succeeded in blocking an amendment to Law 138/1974 that would have allowed the use of powdered milk in yogurt. This episode indicates that Italian consumers do perceive a difference between dairy products produced with fresh and powdered or concentrated milk.
At a first glance, the milk powder ban appears to contravene the EU rules on the free movement of goods.
A deeper examination shows that Italy has some arguments to justify its law. The preparatory works to the adoption of Law No 138/1974 indicate that the protection of Italian milk producers was prominent in the mind of the Italian regulator, but consumer protection was also a leading argument. And it has been seen that consumer protection can justify obstacles to free movement of goods in the EU.
Is labelling a sufficient means to inform the consumer that the cheese has not been made with fresh milk? Do consumers take particular attention to the list of the ingredient on the label? How can the consumer be informed when the cheese itself is an ingredient in another product? A ban like the one at hand may be an appropriate measure to attain the legislative objective. This is particularly so it is considered that the use of milk powder and concentrates has the effect to adulterating the content and altering the nature of the cheese product.
 Case C-210/89, Commission v Italy, judgment of 11 October 1990, ECR1990 I-3697.
 Ministerial meeting of Interbranch organisations of diary sector concerning infringement procedure regarding Law No 138/1974. The minutes of the meeting is available at this link:
 Legge 11 Aprile 1974, No 138, Nuove norme concernenti il divieto di ricostituzione del latte in polvere per l’alimentazione umana, GU n.117 of 7.5.1974.
 Regulation (EU) No 1169/2011 of 25 October 2011 on the provision of food information to consumers, OJ L 304, 22.11.2011, p.18.
 Case 120/78, see above, paragraph 8.
 Joined Cases 60 and 61/84, Cinéthèque SA and others v Fédération nationale des cinémas français, judgment of 11 July 1985, ECR 2605.
 Case C-210/89, Commission v Italy, judgment of 11 October 1990, ECR1990 I-3697.
 Case C-12/00, Commission v Spain, judgment of 16 January 2003, ECR 2003 I-459.
 Case C-14/00, Commission v Italy, judgment of 16 January 2003, ECR 2003 I-513.
 Case C-12/00, Commission v Spain, judgment of 16 January 2003, ECR 2003 I-459.
 Regulation (EU) No 1308/2013 of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007, OJ 347, 20.12.2013, p.671.
 Article 640 of the Criminal Code deals with a general definition of fraud, specific definitions regarding commercial fraud are provided by Article 515 – 517 of the criminal code. None of those provision affects Article 1(2) of Law No 138/1974.
 The reasons of those prohibitions are explained in the Minutes of the Meeting of 21 February 1974 (Gazzetta Ufficiale 7 May 1974 No 117).