JUDGMENT OF 20. 3. 1957 — CASE 2/56 GEITLING v HIGH AUTHORITY
In Case 2/56
THE COURT composed of: Massimo Pilotti, President, Ch. L. Hammes and P.J.S. Serrarens, Presidents of Chambers, L. Delvaux and J. Rueff, Judges, Advocate-General: K. Roemer Registrar: A Van Houtte
gives the following
JUDGMENT
Facts
I — Procedure and conclusions of the parties
II — Summary of the facts
III — Admissibility
IV — Summary of the submissions made by the parties
A — Infringement of essential procedural requirements
b — The High Authority replies to these arguments as follows:
B — Infringement of the Treaty
a — Preliminary question: Jurisdiction of the Court to undertake a review
b — Restriction on competition within the meaning of Article 65 (I)
c — The possibility of authorization under Article 65 (2)
d — The problem of discrimination
(I) Discrimination as regards traders
(II) Discrimination as regards producers
Law
A — Admissibility of the application
B — Substance
(I) Infringement of essential procedural requirements
(II) Infringement of the Treaty
a — In general
b — Infringement of Article 65 of the Treaty
c — Discrimination
C — Costs
I —. Procedure and conclusions of the parties
1. By application lodged at the Court Registry on 25 March 1956 through their Advocate, Werner von Simson, the 19 mining undertakings of the Ruhr basin being members of the Geitling selling agency for Ruhr coal, a limited liability company, and the Geitling selling agency for Ruhr coal, a limited liability company, with an address for service at the Chambers of their Advocate at Luxembourg-Capellen, asked for the annulment of Article 8 of Decision No 5/56 of the High Authority of 15 February 1956, published in the Journal Officiel, No 6, of 13 March 1956, p. 29et seq., and claimed that the Court should:
2. The High Authority, with an address for service in Luxembourg at its seat, 2 Place de Metz, and with the support of an order made upon its request extending the time-limit for sending in its defence, lodged its defence on 26 May 1956 within the time allowed, and contended that the Court should:
3. On 29 September 1956, the applicants lodged their reply within the time allowed by order of the President of the Court and reaffirmed the conclusions in their application.
4. The rejoinder was lodged on 15 November 1956, within the time allowed to the defendant by order of the President. The defendant reasserted its earlier conclusions.
5. After the case had been assigned to the First Chamber, the Judge-Rapporteur, Ch. L. Hammes, designated as such by the President of the Court by letter of 3 October 1956, lodged the preliminary report, pursuant to Article 34 (2) of the Rules of Procedure of the Court.
6. In his report, the Judge-Rapporteur concluded that there was no need for any preparatory enquiry in the case. In accordance with the last paragraph of Article 34 of the Rules of Procedure of the Court, the Court, upon hearing the views of the Advocate-General, decided to commence the oral procedure without any preparatory enquiry. In accordance with Article 45 (2) of the Rules of Procedure of the Court, the acting President of the Court set down the hearing of the oral procedure for 28 January 1957, and if necessary, on the days following.
7. At the opening of the hearing, the Judge-Rapporteur, in accordance with Article 21 of the Protocol on the Statute of the Court, read his report. The oral arguments of the parties were heard through their Advocates.
8. At the hearing on 11 February 1957, pursuant to the procedure laid down by Article 11 and by the last paragraph of Article 21 of the Protocol on the Statute of the Court, the Advocate-General delivered his opinion in which he advised that the application should be dismissed and that the applicants should be ordered to bear the costs.
9. In accordance with Article 50 (2) of the Rules of Procedure of the Court, the President of the Court declared the oral procedure at an end, and the case was reserved for deliberation.
10. Judges O. Riese and A. van Kleffens being prevented from attending, the judgment was delivered by the Court composed of five judges, in accordance with Article 18 of the Protocol on the Statute of the Court.
II —. Summary of the facts
1. The application contests Article 8 of Decision No 5/56 of 15 February 1956.
2. In accordance with the provisions of Article 65 of the Treaty, that reorganization and also an agreement made on 6 February 1956 in identical terms by each of the three selling agencies on trading rules, were submitted to the High Authority for authorization.
3. The abovementioned Decision No 5/56 approved for the most part the applicants' requests, in so far as in the opinion of the High Authority joint selling would make for an improvement in the distribution of fuels and was necessary in order to ensure that the sales would be profitable, that the employment would be stable, and that supplies would be regular.
(a). the trader sells within the Common Market a minimum of 75000 metric tons of fuel from the producer basins of the Community;
(b). of that total, 40000 metric tons at least are sold within the trader's sales area;
(c). of which at least 12500 metric tons come from the Geitling selling agency.
III —. Admissibility
IV —. Summary of the submissions made by the parties
1. The applicants claim that Article 8 of Decision No 5/56 of the High Authority of 15 February 1956 should be annulled.
2. The defendant contends that the application should be dismissed and that the applicants should be ordered to bear the costs. It is of the opinion that an adequate statement of reasons for the contested decision is given and that it is a just decision both on the facts and on the law. It denies that it has infringed the Treaty or has manifestly disregarded its provisions. It argues that its decision is based on a general economic assessment, which is not subject to review by the Court in the absence of any such disregard of the Treaty.
A —. Infringement of essential procedural requirements
1. According to the applicants, the contested decision infringes Articles 5 and 15 of the Treaty, since the High Authority has not indicated the reasons for which the criterion requiring the sale of 25000 metric tons of Ruhr coal, which it has rejected, is illegal.
2. The applicants also argue that in the reasons for its decision the High Authority is required, according to the case-law of the Court on Articles 5 and 15 of the Treaty (Judgment in Case 6/54), to mention the essential elements of the findings of fact on which the legal justification for the measure depends.
b —. The High Authority replies to these arguments as follows:
1. The applicants have failed to understand the scope of Articles 5 and 15 of the Treaty; In the statement of the reasons for Decision No 5/56, the High Authority did not limit itself to the essential elements of fact, which would have been sufficient; it set out, in addition, all the legal aspects.
2. In examining the procedural requirements, the only possible starting point is the legal assessment made by the High Authority; in this respect sufficient reasons are given in the contested decision.
3. It is an obvious fact that the establishing of sales areas and the setting of limits as to tonnage involve a sharing of the market and of customers. The applicants have themselves accepted the fact that an authoriza tion under Article 65 (1)(c) was necessary since they submitted a request for authorization.
4. It was for that reason that in its decision the High Authority stated that the clause not authorized more particularly (a) permitted discrimination and (b) was of a more restrictive nature than was required by the purpose of the trading rules.
B —. Infringement of the Treaty
a —. Preliminary question: Jurisdiction of the Court to undertake a review
1. (a) The application states first that there is a manifest failure to observe the provisions of the Treaty in the illogicality, on the part of the High Authority, of accepting discrimination in respect of other producers as legally possible. (b) Next the applicants say that there is a manifest failure to observe the Treaty in that a concept not specified in the Treaty has been applied to a situation to which it manifestly does not relate. The High Authority's conception regarding the qualifications required for approval as a wholesaler is erroneous and is foreign to the purposes of the Treaty. (c) Furthermore, there can be no question of assessing a situation arising from a set of economic facts. The assessing of the clause at issue is only concerned with one matter, namely the conditions necessary in order to qualify as a wholesaler. (d) The finding that the clause as to 25000 metric tons prevents, restricts or distorts normal competition within the meaning of Article 65 is also manifestly erroneous first because it is inconceivable that such consequences can arise having regard to the very large number of wholesalers all of whom are treated on the same basis, and secondly because there would no longer be any competition between the three selling agencies for Ruhr coal if the clause were struck out, for it is that very clause that renders competition possible. (e) Moreover the general finding contained in Decision No 5/56, that the clause at issue enables the applicants to determine prices or to control the extraction and sale of a substantial part of the coal production of the Community is obviously irrelevant as regards Article 8 of the decision. The High Authority has authorized the other provisions of the new rules as being in accordance with the Treaty, and yet, looked at in isolation, the clause at issue cannot put the applicants in a monopoly situation.
2. As regards the Court's power of review, the defendant denies that there exists any evidence of manifest disregard for the Treaty.
b —. Restriction on competition within the meaning of Article 65 (I)
1. The application starts on the basis that a restriction on competition exists and at first it only examines the possibility of authorizing the proposed criterion.
2. The defence sets out in detail the reasons for which the defendant is of the opinion that there is a restriction on competition.
c —. The possibility of authorization under Article 65 (2)
1. The applicants complain first that the High Authority did not consider whether the clause at issue could be authorized under Article 65 (2). They are also of the opinion that if a restriction on competition does exist it is within what is permitted by the provisions of the Treaty because it is not more restrictive than is required by the purpose of the trading rules.
2. (a) The High Authority rejects the complaint that it did not examine the possibilities of granting an authorization under Article 65 (2). (b) It also states that the disputed part of the trading rules: (1) as regards the relationship between Geitling and the traders of the Community, is more restrictive than is required by the purpose of the agreement; (2) as regards the relationship between Geitling and the two other selling agencies for Ruhr coal, results in restricting competition excessively. The additional requirement is not justified by Geitling's interest in an improved distribution of the fuel which it sells. Nor can it contribute in any way to an improvement in the sale of coal. It is therefore of a more restrictive nature than is required by its purpose.
d —. The problem of discrimination
1. On this subject, the applicants argue that agreements intended to create discrimination may not be authorized simply by virtue of the first subparagraph of Article 65 (2). For such discrimination is always, in effect, of a more restrictive nature than is required by their legitimate purpose (the improvement of distribution or of production). The prohibition in Article 4 (b) on discriminatory measures reappears in the conditions for authorization set out at (b) in the first subparagraph of Article 65 (2). In that respect, Article 65 constitutes the lex specialis in relation to Article 4. Of itself, Article 4 (b) does not suffice as a reason in support of a decision to refuse to authorize the creation of a cartel.
2. (a) The defendant argues this is quarrelling over words: A cartel between producers which results in discrimination between traders and between producers is not essential in order to obtain an improvement in distribution. Moreover it is always of a more restrictive nature than is required by its purpose. The case-law of the Court has given to Articles 2 to 4 of the Treaty the status of principles. The High Authority must therefore take those provisions into account in all its decisions. Therefore, when it examines whether and to what extent an agreement meets the conditions set out in Article 65 (2) (a), the High Authority must always consider whether that agreement involves discrimination. In effect, it matters little whether the defendant expressly refers to Article 4 (b) in the procedure for authorization and uses the concept of discrimination or whether it relies only on Article 65 (2). When the conditions set out in paragraph 2 (a) and (b) are met, it is always necessary directly or indirectly to consider whether the agreement involves discrimination. (b) In its rejoinder, the High Authority says that its refusal to grant the authorization is based both on an infringement of Article 4 (b) and on the fact that the provisions set out in Article 65 (2) are not met. Therefore the relationship between Article 4 and Article 65 matters but little. Secondly, the parties are not in agreement as to whether discrimination exists.
(I). Discrimination as regards traders
1. (a) The applicants argue that the concept of discrimination involves a difference in treatment between producers or customers bound by an agreement within the market. Now, under the rejected clause, the sellers do not discriminate between the purchasers, who are the only possible contracting parties. (b) In addition the applicants doubt whether Article 4 (b) is intended to ensure the independent protection of each trader. They are of the opinion that a measure affecting a trader can only be judged incompatible with the Common Market if it affects the position of the user or of the producer on the market. (c) Moreover, the prohibited clause only constitutes a condition of sale which does not differ fundamentally from other such conditions. If the defendant's point of view be adopted, all the conditions are of a discriminatory nature, because they establish a distinction between purchasers who satisfy them and those who do not. (d) The applicants have a legitimate interest in requiring not only that a wholesaler shall have proper experience of carriage, insurance and storage, but also that his business shall involve a sufficiently high tonnage of coal from the same source to enable him, should supplies from one of the selling agencies be temporarily inadequate, to turn to supplies from another agency instead. It is only with a sales figure of 25000 metric tons that there can be certainty that the business of a trader really runs to a sufficient tonnage.
2. (a) The defendant on the contrary asserts that the criterion at issue involves an unequal treatment of wholesalers, and thus of purchasers, in support of which the applicants cannot adduce any objective reason. It thus constitutes discrimination. The supplementary requirement that 12500 metric tons from the Ruhr must be purchased has no bearing on the definition of wholesalers. It thus constitutes excessive restriction (Article 65 (2)) and discrimination (Article 4 (b)). (b) In its rejoinder, the High Authority refutes the applicants' conception that the Treaty does not prohibit discrimination between traders. It appears necessary to protect traders against discrimination, since almost half the sales take place through traders. (c) In assessing the nature of the condition at issue, what is decisive is not whether an objective reason exists for establishing a distinction, but whether there exists an objective reason of such a nature as to justify that differentiation, taking into account its object and its effects, in accordance with the principles on which the Treaty is based. (d) Whereas until the opening of the Common Market it was necessary to sell a minimum of 6000 metric tons in order to be accepted as a first-hand trader, the applicants have not proved that the situation has changed so fundamentally that the figure of 12500 metric tons from one selling agency is now no longer sufficient. (e) In practice, a wholesaler is not concerned with storage. In the case of carriage by rail no problem arises. As regards carriage by water, the question of storage comes up only at the unloading stage, and here the agent for the selling agency uses the premises existing in the wholesale trade which are available for unloading. No insurance is necessary as regards carriage by rail. As gards carriage by water, it is usually the agent who insures. The general conditions of insurance apply to contracts of carriage. (f) The ostensible purpose of the clause can only be achieved if the trader purchases 12500 metric tons from each of the three selling agencies. Otherwise, he is a trader at second hand in the eyes of each of the other two selling agencies, and he must, for his part, obtain supplies from a trader approved by them, that is to say on terms different from those which are applied by the agency by which he is approved as a first-hand trader.
(II). Discrimination as regards producers
1. (a) The applicants see another infringement of the Treaty in the fact that the High Authority considers it as also legally possible for a producer to discriminate in respect of other producers. (b) The High Authority's conception that the sellers encourage the purchasers to discriminate, amounts to treating any competitive measures as prohibited discrimination. It is in the nature of competition for a seller to encourage the purchaser to discriminate between that seller and other sellers. The applicants' conception is based on the example of discount for quantity. (c) Moreover the clause at issue does not encourage the customers to distinguish between the different producers, but between one particular kind of coal, Ruhr coal, and other kinds. The advantages obtained from that distinction arise from natural conditions and failure to use them would amount to discrimination to the detriment of the other two selling agencies for Ruhr coal.
2. (a) The High Authority replies that the criterion of the purchase of 25000 metric tons from the Ruhr encourages wholesalers to defer, up to that quantity, the purchase of fuels from producers of other basins and that it involves unequal treatment of the other producers which is objectively unjustified. Thus the Geitling selling agency does not establish discrimination between itself and other producers, but between several other producers, that is to say on the one hand the other two selling agencies for Ruhr coal and, on the other hand, the remaining basins of the Community. (b) The defendant also argues that conditions encouraging the purchaser to make a distinction between the products of certain other producers cannot be considered as legitimate or fair competition. Moreover what matters as regards the existence of discrimination is not the subjective intention of the person who adopts a given measure, but the practical effect of that measure on the Common Market. (c) The example, mentioned by the applicants, of discount for quantity, legitimate in itself, clearly shows the boundary between the practice of legally acceptable competition and discrimination. The rejected criterion is tantamount in practice to a fidelity discount on a collective basis, a discount which is prohibited.
A —. Admissibility of the application
1. The application has been properly lodged in due form and within the prescribed time-limit. Its admissibility has not been contested by the defendant in the written procedure and the Court has no occasion to raise any objection of its own motion.
2. During the oral procedure it has been argued than an application cannot be admissible if it contests an isolated provision of a decision as a whole, since a partial annulment automatically transforms the remainder of the decision into a new decision, and that this is contrary to Article 34 of the Treaty, which provides that where a decision is annulled, the matter shall be referred back to the High Authority.
3. The contested decision individually concerns each of the 19 mining undertakings, the applicants at 1, being coal producing undertakings with a right to institute proceedings before the Court.
4. The application is therefore admissible. The applicants may raise all the grounds set out in the first paragraph of Article 33.
B —. Substance
(I). Infringement of essential procedural requirements
1. The applicants see an infringement of essential procedural requirements in the inadequacy of the reasons in support of Article 8 of the decision; according to them, an error as to reasons is equivalent to an absence of reasons.
2. In general terms, it was not necessary in the present case to state independent and exhaustive reasons for the contested article, as an element of a complex decision. Sufficient reasons can be deduced from the context of all the findings stated in support of the decision as a whole.
(II). Infringement of the Treaty
a —. In general
b —. Infringement of Article 65 of the Treaty
1. Is there a restriction on competition within the meaning of Article 65 (1)?
2. Is there a restriction on competition which may be authorized under Article 65 (2)?
c —. Discrimination
1. In support of a failure to understand the relationship existing between Article 4 (b) and Article 65, the applicants claim that the provisions of Article 65, since they rank as a lex specialis, exclude the fundamental provisions of Article 4 (b).
2. The High Authority was right in stating that the clause at issue could bring about discrimination.
C —. Costs
Upon reading the pleadings; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 4, 5, 15, 33, 34, 65 and 80 of the Treaty; Having regard to the Protocol on the Statute of the Court of Justice; Having regard to the Rules of Procedure of the Court of Justice and to the Rules of the Court on costs THE COURT hereby: