JUDGMENT OF 12. 7. 1962 — CASE 16/61 MODENA v HIGH AUTHORITY

In Case 16/61

THE COURT composed of: A. M. Donner, President, O. Riese (President of Chamber), L. Delvaux, Ch. L. Hammes (Rapporteur) and A. Trabucchi, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

II — Conclusions of the parties

III — Submissions and arguments of the parties

A — As to the first charge (Reductions in favour of Sidercomit)

B — As to the second charge (Reductions allowed on payments by bills of exchange)

C — As to the third charge (Exemption from transport costs)

D — As to the fourth charge (Allowance granted to Orsi)

E — As to the amount of the fine

IV — Procedure

Grounds of judgment

I — The first charge (Reductions in favour of Sidercomit)

II — The second charge (Reductions allowed on payments by bills of exchange)

III — The third charge (Exemption from transport costs)

IV — The fourth charge (Allowance granted to Orsi)

V — The amount of the fine

VI — Costs

I —. Facts

1. As the result of checks carried out between 14 and 31 January 1959 and 30 September and 14 October 1959 on the company Acciaierie Ferriere e Fonderie di Modena (hereinafter called Modena), the High Authority found that the said company had committed certain infringements of Article 60 of the Treaty establishing the European Coal and Steel Community and of the Decisions of the High Authority Nos 30/53, 31/53, 1/54 and 2/54 relating to practices prohibited by Article 60(1) of the Treaty and to the conditions for publicizing price lists and conditions of sale applied by undertakings in the steel industry.

2. According to the contested Decision these infringements consist of the following:

3. By a registered letter dated 20 July 1960 the High Authority notified Modena, pursuant to Article 36 of the Treaty, of the abovementioned irregularities and invited it to submit its comments within a period of 15 days from the receipt of the letter.

4. Having sought and obtained two extensions of the time which it had been allowed, Modena submitted its comments first by letter dated 15 October 1960 and then orally at a hearing granted to its representatives by the High Authority on 15 May 1961.

5. Being of the opinion that Modena had not disputed the substance of the matters alleged against it and that the explanations which it had provided did not constitute justification of the irregularities which had been found to exist, the High Authority, by a Decision of 21 June 1961 capable of enforcement under Article 92 of the Treaty, imposed upon the applicant company, pursuant to Article 64 of the Treaty, a fine of 8000000 lire payable within thirty days from the date of notification of the Decision. The Decision was notified to Modena by registered letter dated 30 June 1961 which was received on 2 July 1961.

b. On 2 August 1961 Modena lodged in the Registry of the Court an application for the annulment or variation of the said Decision.

II —. Conclusions of the parties

III —. Submissions and arguments of the parties

A —. As to the first charge

1. The applicant submits principally that the contested Decision infringes Article 60 of the Treaty, together with Article 80 and Decisions Nos 1/54, 2/54, 30/53 and 31/53, by incorrectly applying the concept of illegal reductions.

2. The applicant submits as a subsidiary point that the contested Decision takes no account of the concept of non-comparability. Even allowing that the relationship between certain shareholders in Modena and Sidercomit had a bearing on a commercial transaction within the framework of the ECSC, preferential treatment accorded to a buyer who cannot be compared with those to whom the applicant usually sells its products must nonetheless be regarded as lawful within the context of the Treaty.

3. As a further subsidiary point the applicant submits that the High Authority was guilty of a misuse of power and of contravening the law by failing to take account of an essential feature of the present case. This essential feature is that the prices paid directly by Sidercomit are within the limits of authorized alignment on the most favourable prices quoted in the price lists of competing undertakings. They do not exceed the extent laid down in Article 60(2) (b) of the Treaty enabling the quotation to be aligned on the price list, based on another point which secures the buyer the most advantageous delivered terms.

4. The applicant points out ad abundantiam that the allegation of concealment made against it cannot be sustained as it cannot be accused of any irregularity in its book-keeping.

5. The applicant submits as a further subsidiary point that the High Authority was guilty of a misuse of power consisting of a failure to give reasons for its Decision, of an incomplete appreciation of the facts, and of acting in a patently unjust manner in that it did not take into account certain fundamental aspects of the case in point which, although not advanced by way of an excuse, nonetheless constitute mitigating circumstances,

B —. As to the second charge

1. The applicant maintains that the contested Decision infringes Article 60 of the ECSC Treaty and also Decision Nos 1/54, 2/54, 30/53 and 31/53 of the High Authority in that it wrongly applies the concept of illegal reductions. It observes that the commercial transactions complained of are perfectly lawful. The acceptance of payment by bills of exchange is both in accordance with commercial practice and is provided for by the conditions contained in its price list. The increased charges for deferred payment stipulated in its price list were correctly invoiced.

2. The applicant submits as a further subsidiary point that the contested Decision wrongly applies the concept of alignment on the list prices of competing undertakings. In this connexion it maintains that, even if one only takes account of the amount recovered, quite apart from the balance outstanding, the price actually paid by means of the bills is not lower than the prices laid down in respect of the same products by the price lists of certain competing firms; this comes within the framework of the variations legally allowed in respect of alignment.

3. The applicant further maintains that in the preamble to the contested Decision the High Authority wrongly states that the alleged illegal reductions were entered in the accounts by way of discount charges. In fact they were entered under the heading discount on invoice, a generic term under which Italian accountancy terminology includes in particular outstanding balances in respect of which there is no point in taking legal action. According to the applicant the facts have thus been misrepresented by the High Authority, and this constitutes according to accepted doctrine a clear indication of abuse of power.

4. The applicant further maintains that, supposing it were possible to show that an infringement did exist, the High Authority should at the very least have taken account, by way of mitigating circumstances, both of the serious state of the market, of which the company was a victim, and of the crisis of organization in which it was involved.

C —. As to the third charge

1. The applicant contends that the contested Decision infringes Article 60 of the Treaty and Decisions Nos 1/54, 2/54, 30/53 and 31/53 of the High Authority as a result of the failure to apply the concept of alignment on the list prices of competing undertakings.

2. The applicant contends, as in the first two grounds of complaint, that the High Authority is at fault for having failed to take account in its Decision, even by way of mitigating circumstances, of the situation which it had described.

D —. As to the fourth charge

1. The applicant submits, with regard to the allowance granted to its depositary Orsi, that the High Authority failed to take account of the special nature of the relations governing this contract.

2. The applicant contends that this was not really a case of an allowance but of a waiver by force of circumstances of the recovery of the balance of various accounts outstanding between itself and the firm Orsi. The latter firm was at the time on the verge of bankruptcy. Legal proceedings for the recovery of the balances had no prospect of succeeding and would only have precipitated a crisis which could have had very serious financial repercussions extending beyond the company itself.

3. The applicant contends that the part of the price which Orsi paid is not lower than the list prices of other steelworks and that accordingly, as far as this charge is concerned, account should be taken of the mitigating factor constituted by the alignment authorized by Article 60 (2)(b) of the Treaty.

4. The applicant repeats the arguments which it has already expounded and contends that the High Authority is at fault for having failed to take into account market conditions and the applicant's own situation, even by way of mitigating circumstances, especially as its relations with Orsi were particularly close.

E —. As to the amount of the fine

IV —. Procedure

I —. The first charge

1. It is alleged, and moreover not disputed in the case at issue, that on the one hand the payment for goods supplied, for which the applicant invoiced Sidercomit, was entered in Modena's accounts at its list price and that the accounts show that price as having been paid in full by Sidercomit, and that on the other hand this was not the truth of the matter, since part of the price was paid, on behalf of Sidercomit, by a third party, a substantial shareholder and managing director of Modena, allegedly by way of a donation for the benefit of Sidercomit with the sole aim of enabling a contract to be concluded with such an important customer.

2. As a subsidiary point Modena accuses the High Authority of failing to appreciate the fact that S.A. Sidercomit, the commercial agency of the State steel industry, is a buyer which is not comparable with its usual customers and that it was not illegal in its case to grant preferential treatment, since the prohibition on reductions applied only to comparable transactions.

3. As a further subsidiary point Modena contends that in any event the amount actually paid by Sidercomit falls within the limits of its list prices, when reduced to their equivalent at other points which secure the buyer the most advantageous delivered terms; that in fact the amounts paid by Sidercomit alone are still above the minimum price which could have been applied to it on the basis of the price list of the company known as Acciaierie, Ferriere, Trafilerie Cravetto which it quotes as an example; and that by failing to take account of this possibility of alignment the High Authority has been guilty of a misuse of power and contravened the law.

4. Lastly, the applicant submits that the Decision of the High Authority did not fully evaluate the facts and constituted a patent injustice tantamount to a misuse of power in the form of an unreasonable act, in that the High Authority did not take account in its Decision of the special circumstances of the case. These should have been taken into consideration either as grounds of justification or as mitigating factors.

II —. The second charge

1. According to the Decision, the applicant accepted payments by bills Of exchange with varying maturity dates and correctly applied the increases for deferred payment laid down in its price list. As regards the amounts of the bills, it credited its customers with the net amount of the discounted bill, the difference between this sum and the amount of the invoice being entered in its books as a balance due under the heading of discount charges.

2. With regard to this charge the applicant submits, as it had already done in the administrative proceedings, that liquidity problems caused it to issue, immediately upon the dispatch of the goods and before the prices were invoiced, bills for estimated amounts which were less than they should have been in relation to the value of the consignments, so that the sums it actually received by means of these bills were less than the actual amounts due from the customers according to the correct invoices which were prepared after the issue of the bills. It proved to be impossible to recover the balances due to Modena, thus established ex post facto. The customers adhered to the original sums shown on the bills, and it was difficult to go back on these figures owing to the sensitivity of customer reaction. Furthermore, the issue of supplementary bills might have damaged its credit with the bank. In any event in view of the refusal by customers to pay the balances, the applicant would have had to incur legal expenses out of all proportion to the amounts to be recovered.

3. The applicant contends as a further subsidiary point that, quite apart from the unpaid sums alleged to have been written off as discounts on invoices, the amounts actually paid by its customers in respect of the consignments to which the present charge refers are still higher than prices correctly aligned on the price lists of competing firms, among which it cites Lavorazione Metalli Vari of Brescia. For the reasons more fully set out above in relation to the first charge, the applicant must fail in this submission since the alignment was made after the quotations were issued for the contracts in question.

III —. The third charge

1. The applicant does not in fact dispute that, contrary to the provisions of its price list, it took over the transport costs relating to the contracts referred to in the contested Decision.

2. In this case too it relies a posteriori on a correct alignment on price lists of competing undertakings. On the basis of these lists its own prices were not below the minimum prices permitted by its alignments.

IV —. The fourth charge

1. Although it does not dispute the truth of the facts set out in the Decision and which the High Authority purposes to prohibit, on the grounds that they consist of reductions of list prices in contravention of Article 60 of the Treaty, the applicant contends that the substantial reductions which it granted to its depositary Orsi did not contravene these provisions and could not constitute illegal reductions.

2. In the first place it contends that its transactions with Orsi were concerned with a buyer which was not comparable with its other customers because of the personal connexions between the shareholders of the two firms which derived their origins from a single family business as the result of the distribution of an estate.

3. Secondly, the applicant states that the present case is not concerned with real reductions, but rather with a release of debts which were in fact irrecoverable, since Orsi was in a very precarious financial position. Owing to the family relationships between the owners of the ordinary shares in Modena and the owners of Orsi, the only means of assisting the latter without undertaking personal liability with regard to other creditors was to write off the debts which Orsi owed to the applicant. Moreover, this was justified objectively by the remote prospects of recovering these debts and the futility of incurring irrecoverable costs of enforcement proceedings after establishing that Orsi was insolvent by protesting the bills drawn upon it.

V —. The amount of the fine

1. There are no grounds for considering whether the aggravating circumstances envisaged by Article 47 of the Treaty existed in the present case. This High Authority made no reference in its Decision to this provision and moreover did not apply the increased penalties provided for therein. Although it declared that, as regards the first charge, false information had knowingly been entered in the applicant's books of account, the High Authority confined itself to describing this, quite rightly, as a device on the part of Modena but did not infer, to the further detriment of the applicant, that any aggravating effects had thereby resulted.

2. Modena's criticism of the High Authority for refusing to admit the existence of mitigating circumstances cannot be accepted. Neither the fact that other undertakings used similar devices to those noted in the case of the applicant nor the difficult situation in which it claims to have found itself owing to the generally unfavourable short-term economic circumstances, although it has furnished no proof on this point, can prevail over the strict obligation to comply with the rules laid down by the Treaty. Moreover, by making sufficient alterations to its price list, the applicant could have obtained the same results which it sought to achieve by granting illegal reductions. However, in view of the considerations previously stated, the applicant must be exonerated from the fourth charge against it, and consequently the total amount of the illegal reductions which it granted to its customers is reduced by approximately one half. The fine imposed on it should therefore be reduced proportionately.

VI —. Costs

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 33, 36, 47, 60, 64, 80 and 92 of the Treaty establishing the European Coal and Steel Community; Having regard to the Protocol on the Statute of the Court of Justice of the European Coal and Steel Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT hereby:

1 Rules that the application against the individual Decision of the High Authority of 21 June 1961 is admissible; dismisses the application as regards the first three charges made against the applicant company and grants the application as regards the fourth charge;

2 Reduces to 4000000 lire the amount of the fine imposed on the applicant by the contested Decision;

3 Orders the applicant to pay three-fifths of the cost of the defendant.