OPINION OF MR ROEMER — CASE 2/56 GEITLING v HIGH AUTHORITY

Mr President,

Members of the Court,

I — Facts

This case, brought before the Court by 19 mining undertakings of the Ruhr basin and the selling agency which they have set up in the form of a limited company under German law against the High Authority of the European Coal and Steel Community, in which the oral procedure will be brought to an end by the delivery of my opinion, does not involve assessing the facts and their legal consequences. Nor does it involve legal examination of concrete events. The case is about a clearly defined passage in the text of an agreement. That text sets out an arrangement made by the coal-producing undertakings of the Ruhr concerning the joint selling and the rules applicable thereto. The Court is called upon to examine whether that specific clause of the trading rules submitted for authorization at the same time as the articles of association of the company is compatible with the provisions of the Treaty concerning cartels.

The text of the trading rules and the content of the decision adopted by the High Authority on the request for an authorization submitted by the applicants at 1 are known to you from the written procedure. The Judge-Rapporteur has presented them to you in outline during the oral procedure. The representatives of the parties have reproduced or quoted what seems to them to matter.

This treatment of the subject-matter enables me to limit myself to a reference in general terms. But it seems to me necessary to emphasize that in order to assess this single clause the rejection of which is contested by the applicants, one cannot neglect the context into which it has to be put.

The articles of association and the trading rules contain agreements concerning the joint selling of fuels from the installations of the 19 mining undertakings concerned, who are the applicants at 1, within the Common Market. We know that previously almost all the mining undertakings of the Ruhr basin had cooperated within one joint-selling organization. Thus the creation of the three independent selling agencies, among them the applicant at 2, constitutes a compromise between the joint-selling organization in which all the mining undertakings of the Ruhr had participated and the system whereby each of the some fifty mining undertakings of the Ruhr basin carries out its own sales independently. Basically the High Authority has authorized these agreements relating to joint selling, each of which has been drawn up in identical terms, by about one third of the undertakings of the Ruhr basin. It acknowledged that such joint selling would make for an improved distribution of fuels, taking into account in particular the position of the coal mining undertakings and that it was both necessary and sufficient to ensure that sales would be profitable, that employment would be stable, and that supplies would be regular. In so far as that purpose required it, the High Authority also authorized certain organizations common to the three selling agencies for Ruhr coal or agreed that no authorization was necessary for their creation. However, it did not authorize agreements more restrictive than was required by that purpose, and it subjected the authorized agreements to certain limitations and conditions intended in particular to guarantee the independence of the three selling agencies, and to permit them to form their own sales and production policy.

It is in this perspective that consideration must be given to the refusal to authorize one of the criteria which the applicants had imposed as a condition for admission to direct purchases from a selling agency, that is to say for qualifying as a wholesale trader at first hand.

II — Conclusions and admissibility of the application

1. The application is directed against the refusal to authorize that condition laid down in the trading rules. The authorization requested was refused by Article 8 of Decision No 5/56 of the High Authority of 15 February 1956, and the application claims that the said article should be annulled.

2. From the requisite formal examination as to admissibility the following facts appear: The partially contested decision was notified to the applicants on 22 February 1956. The application was lodged on 25 March 1956, and thus was lodged in due time as regards the provisions of the third paragraph of Article 33 of the Treaty in conjunction with Article 85 of the Rules of Procedure of the Court.

3. In limiting the application of the clause at issue, Article 8 of Decision No 5/56 imposes an obligation not to act and thus constitutes a decision for the purposes of Article 33 of the Treaty.

4. Therefore the application is admissible.

III — Infringement of essential procedural requirements

1. The applicants argue that essential procedural requirements have been infringed in that the supporting reasons for Article 8 of Decision No 5/56 are inadequate. In their opinion, the reason to the effect that the clause is not necessary for establishing a rule concerning a certain volume of wholesale business could equally have been used to prohibit the other criteria, with the exception of one criterion which would be sufficient to establish such a rule. The applicants further argue that the reasons do not state any findings of fact showing that the clause restricts competition and is incompatible with Article 65 (2).

2. Two points should be stressed in assessing this submission.

3. As I have already said at the beginning, the present case does not involve assessing concrete events. It involves reviewing the admissibilty of a part of the trading rules, namely provisions relating to the admission of first-hand traders to the selling agency. The decisive elements of those provisions are stated in the reasons for the decision (JO No 6 of 13.3.1956, p. 33). Before examining them from the legal point of view, the High Authority drew certain conclusions of fact from them.

4. It appears that the reasons on which Article 8 of Decision No 5/56 is based emerged sufficiently from the general reasons for the said decision. And this is equally true both as regards the circumstances which led to applying the prohibition on principle of the restrictions of competition laid down by Article 56 (1) and as regards the circumstances which, more particularly, led to deciding that Article 65 (2) did not permit the clause at issue to be authorized.

IV — Relationship between discrimination (Article 4 (b)) and restriction on competition (Article 65)

1. Several grounds have been put forward in support of the complaint of infringement of the Treaty. The applicants are of the opinion that the clause at issue is not caught by the prohibition on discrimination in Article 4 (b), nor by the prohibition on cartels in Article 65. The applicants keep to this order in all their pleadings, although they

2. The applicants are of the opinion that Article 65 constitutes a lex specialis in relation to Article 4. Apart from the special provision in Article 12 of the Convention on the Transitional Provisions, Article 65 (2) states the grounds of refusal exhaustively, so that Article 4, standing alone, has no significance. The applicants argue on the one hand that agreements involving discrimination cannot be authorized under Article 65 (2) (b), because they always go beyond what is necessary for their legitimate purpose and that conversely a set of rules which satisfies the conditions set out in Article 65 (2) does not constitute an infringement of Article 4. On the other hand, however, they affirm that discriminatory practices are covered by Article 65 (1) and that they can, therefore, be authorized under Article 65 (2).

3. A quick look at the works on cartels shows that the relationship between discrimination and the law on cartels has been under constant discussion. Undertakings participating in cartels claim in particular that some kinds of discrimination are inevitable if a cartel is to qualify for authorization. For their part, the authorities responsible start at the discrimination end with a view to prohibiting cartels. I shall not go into the vast literature, because I could only make an arbitrary and incomplete selection of items from it.

4. The first proposition that can be established is as follows: not every restriction on competition within the meaning of Article 65 is necessarily discrimination prohibited by Article 4 (b).

5. Does the opposite hold good, namely can the following be said:

6. The two considerations which I have just stated lead to the conclusion that the examination under Article 65 (2) can never be dispensed with. Therefore the authorization procedure must start with such an examination. Anyway it is doubtful whether a separate examination is possible.

7. The High Authority somehow seems to share this conception, as appears from certain points in its statement of reasons.

8. The above examination makes it clear that in the present case the right approach is to start by examining whether the conditions in Article 65 (2) are fulfilled. This examination will show how far, at the time when it is carried out, the aspect of discrimination must be taken into account and whether it is possible or necessary to proceed thereafter to a separate examination of discrimination. The general considerations set out above on the relationship existing between the two prohibitions will thus be confirmed or completed to the extend required by the present case.

V — Restriction on competition within the meaning of Article 65 (1)

1. Before the question whether the clause at issue fulfils the conditions in Article 65 (2) and whether it must therefore be authorized can be examined, it is first necessary to establish and to show in what way, directly or indirectly the clause prevents, restricts or distorts normal competition within the meaning of Article 65 (1).

2. In the statement of reasons for its decision, the High Authority reproduced the relevant part of the trading rules and then declared (I quote):

3. If the arguments of the applicants are taken literally, and if they are interpreted as meaning that the clause is not caught by Article 65, it is not necessary to proceed to a long examination in order to refute this conception.

4. In order to demonstrate this, it is not necessary to go further and examine what are the particular restrictions on competition which arise, in addition, from this clause. However, it seems that at this stage there should be an examination as to the particular point on which the clause affects competition, because the other restrictions on competition arising from the joint-selling agreement and from the trading rules have for the most part been authorized, unlike the clause at issue.

5. In examining whether the reasons for Decision No 5/56 are sufficient, I have already quoted the part of the reasons which is exclusively concerned with the clause at issue and not with the other criteria established in respect of direct supplies. The issue is one of a preference, resulting from the effects of that clause, given to the two other selling agencies for Ruhr coal as against the remaining producers of the Community, and of the taking into account of purchases made from certain agencies other than Geitling. Similarly, in examining the submission of infringement of essential procedural requirements, I have already said that this deduction made from the contents of the clause is not so much a finding of fact as an economic assessment of the probable consequences of a set of trading rules. That assessment is closely tied in with the legal assessment of the clause. Therefore, to elaborate on the assessment and to develop it during the hearing does not constitute the raising of fresh submissions. On the contrary, quite apart from the exposition of the parties, the Court has power to examine what are the particular restrictions on competition which arise from the clause at issue.

6. In order to examine the question, it is necessary to be clear about the contents of the clause. As regards this, two points call for consideration:

7. It is on this basis that it is now necessary to examine whether the clause has the effect of restricting competition and in what way.

8. Thus the possibility introduced by the clause has the effect, without the volume of purchases required playing a part, that Geitling partially sacrifices its own interests in selling its products in favour of the collective interests attaching to the sale, generally, of Ruhr coal. That involves partly giving up an independent sales policy, and doing so constitutes a restriction on competition as regards the two other selling agencies for Ruhr coal.

VI — Possibility of authorization under Article 65 (2)

1. In the reasons for its decision, the High Authority has given a negative answer to this question in finding, apart from the matter of discrimination, that the criterion at issue is more restrictive than is required by the need to fix the volume of purchases, namely the establishment of a standard for a certain volume of wholesale trade. Thus the criterion did not meet the conditions of Article 65 (2), and accordingly could not be authorized (JO No 6 of 13.3.1956, p. 34).

2. In order to assess this argument, it is necessary to start with the special restriction on competition which has been found and which, by reason of the clause at issue, is additional to the restrictions which, for the most part, have been authorized. We must consider whether that special restriction is necessary for a proper choice of firsthand traders accepted by Geitling. As to this, I would observe that this defining of wholesale traders only forms of itself a part of the joint-selling agreement concluded by the 19 undertakings participating in Geitling and that the said agreement itself can only be authorized in so far as it contributes to a noticeable improvement in the distribution of the products of Geitling and is necessary for that purpose.

3. Looked at from this angle, it clearly appears that none of the arguments of the applicants in favour of taking into account purchases made from the other two selling agencies shows that this contributes to a noticeable improvement in the distribution of their own coal. Their arguments, at most, show that the distribution of Ruhr coal taken as a whole, is favoured.

4. After the foregoing considerations, it is possible to give, a comprehensive answer to the question here considered, in so far as it is concerned with the taking into account of orders placed with the two other selling agencies.

5. I must now come back once again to the argument of the applicants concerning the quantity of purchases necessary.

6. In order that a trader might be accepted for direct purchase, the trading rules laid down as a third condition that a minimun of 25000 metric tons must be purchased from the selling agencies for Ruhr coal and as a fourth condition of which half at least must be from Geitling. Thus the two conditions were both fulfilled where a trader simply purchased 25000 metric tons from Geitling. Should not the High Authority have also taken this possibility into account and should it not have amended the requirement of 25000 metric tons of coal from the Ruhr to 25000 metric tons from Geitling, which would have rendered the fourth condition irrelevant?

7. Thus the applicants' assertion to the effect that the purchase of 25000 metric tons is necessary in order to qualify as their wholesalers cannot bring about the annulment of Article 8 of the decision, as they claim.

8. My examination leads me to the conclusion that it is impossible to see an infringement of Article 65 of the Treaty in the rejection of the clause at issue. Since the contested part of the decision is based on that article, especially paragraph (2) (b) thereof, and that it thus rests on a sufficient legal basis, the applications must already be rejected at this stage of the examination.

VII — Discrimination

1. In the statement of reasons for its decision, the High Authority says that in addition to having the effect of limiting competition to an extent more than necessary the criterion at issue also sets up discrimination, particularly as regards producers in other basins of the Community.

2. On the argument that it is not possible to conceive of discrimination between entities situated at one and the same economic level, it is to be said that any discrimination can have a number of different affects, some perhaps consciously intended in the first place, others following inevitably. The Treaty itself, in the second indent of Article 60 (1), supplies an example of discrimination on the part of producers, directed against competitors: it concerns local price reductions, called differential prices, which are intended to eliminate competitors situated in a certain area. As regards this it could be said that the purchasers in other areas are treated in a discriminatory way because the lower differential prices are not granted to them, but that is only a secondary consequence; the purpose is to encourage the purchasers situated in the area in question to give preference to the producer practising discrimination as against other producers, who are his competitors, It is always a fact that a differentiation at the same economic level can only be effected indirectly. But this indirectness does not give any indication whether the indirectly caused differentiation is objectively justified.

3. The High Authority has explained during these proceedings that there is also discrimination between traders, namely as between those who satisfy the other conditions, and who therefore, in the opinion of the High Authority, are sufficiently qualified to be Geitling's wholesalers, and on the other hand those who also meet the condition at issue. That differentiation is not objectively justified, because the extra purchases from certain other agencies have nothing to do with the qualifications required for being accepted as a wholesaler by the applicant agency. In practice it even leads to national discrimination, since the prohibited criterion scarcely matters for traders situated in Germany, whereas it is decisive for the other traders.

4. On this point again, we can say that for the most part the arguments raised have already been examined from the point of view of Article 65. They do not affect the substance of the case because the volume of purchases required cannot be taken into consideration, and because the clause does not have the effect of forcing the traders to obtain supplies from the other selling agencies for Ruhr coal. On the contrary, we have established that the decisive element is the possibility of crediting purchases introduced by the clause at issue. Thus it is necessary to compare the following two groups of traders:

5. In connexion with the general considerations on the relationship between the prohibition on discrimination and the prohibition on cartels, the present case affords confirmation that the two provisions can complement each other perfectly. The necessity or simply the suitability of examining, first, how far a restriction on competition is legitimate has appeared in the fact that, supposing different terms exist restricting competition, the question of their objective justification is closely bound up with the question whether the restriction on competition is essential and necessary for the legitimate purpose of the cartel.

VIII — Result and conclusion

I shall summarize the result of my exposition as follows:

1 Translated from the German.