JUDGMENT OF 6. 5. 1971 — CASE 1/71 CADILLON v HÖSS

In Case 1/71 Reference to the Court under Article 177 of the EEC Treaty by the Tribunal de Commerce, Lyon, for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, A. M. Dormer and A. Trabucchi (Rapporteur), Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore and H. Kutscher, Judges, Advocate-General: A. Dutheillet de Lamothe Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Summary of facts and procedure

II — Written observations submitted to the Court

Grounds of judgment

Costs

I —. Summary of facts and procedure

II —. Written observations submitted to the Court

1. Does an exclusive sales agreement which has been entered into between two undertakings in the Common Market come per se within Article 85(1) of the Treaty?

2. Does failure to notify an exclusive sales agreement which has been entered into before Regulation No 67/67/EEC of the Commission came into operation automatically make such an agreement void?

3. Does an exclusive sales agreement, under Regulation No 67/67/EEC mentioned above belong to a category granted exemption from notification, fulfil the conditions of Article 85(1) of the Treaty for this reason alone?

4. Does an exclusive sales agreement fall within the application of Article 85(1) of the Treaty when:

5. What would be the effects of nullity of such an exclusive sales agreement which had not been notified:

(a). Société Anonyme Cadillon replies to the first question in the negative and refers in particular to the judgments given in Cases 56/65 and 23/67.

(b). Lt claims that in the case of failure to notify an agreement, the court hearing the main action is competent to settle the question of its validity with regard to Article 85(1) of the Treaty.

(c). The exclusive dealing agreement which was entered into on 30 and 31 January 1968 automatically obtains the benefit of Regulation No 67/67.

(d). The question whether Article 85(1) is applicable must be considered in each particular case in the legal and economic context of the agreement. Most of the concessions granted do not come within Article 85(1). An agreement which has an insignificant effect on the market is not capable of affecting trade between Member States. An agreement which only provides for an exclusive right of sale does not have as its object the prevention, restriction or distortion of competition in the Common Market. Finally, agreements which allow competition on the part of the licensee without prohibiting either re-exportation by the licensee or parallel imports in the market for which the licence has been granted cannot produce effects which conflict with the Community rules on competition.

(e). On the assumption that the prohibition is applicable, agreements drawn up prior to the entry into force of Regulation No 67/67 are void ex tunc, whilst agreements drawn up after this regulation came into force are fully effective so long as they have not been held to be void, in accordance with the judgment of the Court in Case 43/69 (Firma Brauerei A. Bilger Söhne GmbH v fehle and Jehle [1970] ECR).

1. By decision of 24 September 1970, received at the Court Registry on 6 January 1971, the Tribunal de Commerce, Lyon, has requested the interpretation of Article 85 of the EEC Treaty and of the implementing regulations issued thereunder in the action pending before that court between Société Anonyme Cadillon and Firma Höss.

2. As appears from that decision, Société Anonyme Cadillon sued Firma Höss before that court for the payment of FF 533000 damages following the unilateral breach of the contracts of 19 March 1967 and 30 January 1968 granting exclusive rights of sale.

3. Firma Höss opposed this claim and maintained inter alia that the agreement of 30 January 1968 is void on the ground that Article 85 prohibits exclusive dealing arrangements.

4. Although the request for interpretation has not been made in the form of a precise question, it can be deduced from the wording of the decision that the court wishes to be informed whether agreements granting exclusive rights of sale which have not been notified to the Commission but were entered into between two undertakings situated in different Member States and relate to transactions to be carried out within the Common Market fall within the prohibtion contained in Article 85(1) of the EEC Treaty.

5. First of all, for Article 85 of the Treaty to apply to an agreement, that agreement must be capable of affecting trade between Member States.

6. This condition is fulfilled if the agreement, on the basis of all the objective factors of law or of fact, makes it possible to foresee with a sufficient degree of probability that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States in such a way that it might hinder the attainment of the objectives of a single market between States.

7. Moreover, the prohibition in Article 85 (1) is applicable only if the agreement has as its object or effect the prevention, restriction or distortion of competition within the Common Market.

8. Those conditions must be understood by reference to the actual circumstances of the agreement.

9. An exclusive dealing agreement may escape the prohibition laid down in Article 85(1) because, in view of the weak position of the parties on the market in the products in question in the territory covered by the exclusive dealing arrangement, it is not capable of hendering the attainment of the objectives of a single market between States, even if it creates absolute territorial protection.

10. This is even more the case when such an agreement does not prohibit third parties from effecting parallel imports into the territory covered by the agreement or the licensee from re-exporting the products covered by the agreement.

11. However it falls to the national court to examine whether these conditions are fulfilled in each case.

12. Where the agreement falls within the prohibition contained in Article 85(1) the possible effect of Regulation No 67/67 of the Commission which provides for block exemption for exclusive dealing arrangements must also be examined with regard to agreements of this type which have not been notified.

13. It follows from the decision making the reference that the objection that the agreement is illegal, which is based on Article 85 of the Treaty, only relates to the contract dated 30 January 1968.

14. Therefore Regulation No 67/67 need only be examined with regard to agreements entered into after its entry into force.

15. It follows from Article 7(2) of that regulation that such agreements, where they would fall within the prohibition contained in Article 85(1), may obtain the benefit of the block exemption in spite of failure to notify them to the Commission, provided that they satisfy the specific conditions laid down in Articles 1 to 3 of the said regulation.

16. The costs incurred by the Commission, which has submitted its observations to the Court, are not recoverable and since these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the parties to the main action and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 85 and 177; Having regard to Regulation No 67/67/EEC of the Commission of 22 March 1967; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, THE COURT in answer to the question referred to it by the Tribunal de Commerce, Lyon, pursuant to the judgment given by that court on 24 September 1970, hereby rules:

1 An exclusive dealing agreement entered into between parties which occupy a weak position on the market in the products covered by the agreement may escape the prohibition in Article 85(1) especially when it does not create absolute territorial protection.

2 An exclusive dealing agreement which falls within the prohibition contained in Article 85(1) and which was entered into after Regulation No 67/67 came into force may, even where there has been a failure to notify it to the Commission, obtain the benefit of the block exemption laid down in Article 1 of that regulation if it fulfils the conditions prescribed by Articles 1 to 3 of the said regulation.