JUDGMENT OF 17.10.1972 — CASE 8/72 CEMENTHANDELAREN v COMMISSION
In Case 8/72
THE COURT composed of: R. Lecourt, President, R. Monaco and P. Pescatore (Rapporteur), Presidents of Chambers, A. M. Donner and H. Kutscher, Judges, Advocate-General: H. Mayras Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Facts
II — Procedure
III — Conclusions of the parties
IV — Submissions and arguments of the parties
A — Subject-matter of the dispute
B — Infringement of essential procedural requirements
C — Inadequacy of the statement of reasons upon which the decision is based
D — Infringement of the Treaty
1. Economic background to the dispute
2. Influence on trade between Member States
(a) The proportion of imports in the total consumption of cement in the Netherlands
(b) The coordination of pricing policies
(c) Influence on trade patterns
(d) The foreign producers' share of the market
(e) Obstacles to the creation and expansion of undertakings and to imports
3. Influence on competition within the common market
Grounds of judgment
The subject-matter of the contested decision
The infringement of essential procedural requirements
The substance of the case
(a) Adverse effect on competition within the Common Market
(b) Influence on trade between Member States
Inadequacy of the statement of reasons upon which the decision is based
Costs
I —. Facts
1. found that the Algemene Bepalingen en Prijsvoorschriften der VCH (General and Price Provisions) including the Prijsbladen (Price Lists) I-VI referred to in Paragraph III, Article 5 of those Provisions and the Algemene Koop- en Verkoopvoorwaarden 1955 FGB-RBB (General Conditions of Purchase and Sale) referred to in Paragraph III, Article 10 including also the Aanvullende Koop- en Verkoopvoorwaarden van de VCH (Supplementary Conditions of Purchase and Sale) contravene Article 85(1) of the EEC Treaty;
2. rejected the application for exemption under Article 85(3) submitted by the VCH in respect of the rules referred to above;
3. ordered the VCH immediately to bring to an end the infringement which had been found.
II —. Procedure
III —. Conclusions of the parties
IV —. Submissions and arguments of the parties
A —. Subject-matter of the dispute
B —. Infringement of essential procedural requirements
C —. Inadequacy of the statement of reasons upon which the decision is based
(a). The General Conditions of Sale and Purchase of the VCH were laid down by the Federation of Associations of Builders' Merchants and by the Directorate for the Building Industry. They were, on several occasions, declared applicable to the trade in building materials, both by the most varied associations of builders' merchants, especially the VCH, and by all the contractors in the Netherlands. They are comparable to the general conditions which are lodged in respect of many sectors of industry and commerce. They have no binding force, but must as from the date on which they are declared applicable be observed in their entirety.
(b). Furthermore in view of the finding that the rules of the VCH may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition within the Common Market, it should be stated that the reasons given in the recitals of the contested decision, in particular in paragraph (17), are not stated sufficiently or clearly.
(a). The contested agreements are contained in the General and Price Provisions of the VCH. The specific agreements concerning prices and conditions of sale are laid down in the Prijsbladen (Price Lists) and the Supplementary Conditions of Purchase and Sale. The General Provisions refer continually to the latter documents so that they may be considered together to form a whole. It is therefore perfectly normal for Article 1 of the contested decision merely to mention those documents, since the recitals thereof are devoted more especially to an examination of the contents of certain parts of that body of agreements.
(b). More generally, it needs only a perusal of the recitals of the contested decision to ascertain that the reasons relied on in support of the operative part fully satisfy the requirements laid down by the Court with regard to the statement of the reasons upon which decisions are based.
D —. Infringement of the Treaty
1. Economic background to the dispute
2. Influence on trade between Member States
(a). The proportion of imports in the total consumption of cement in the Netherlands
(b). The coordination of pricing policies
(c). Influence on trade patterns
(d). The foreign producers' share of the market
(e). Obstacles to the creation and expansion of undertakings and to imports
3. Influence on competition within the common market
(a). The target prices of the VCH are not in fact adhered to by its members because of the competition on the market from non-members. With regard to packed cement variations of up to 12 % below the target price have been recorded and with regard to loose cement, variations of up to 4.5 %.
(b). In any case, the Commission has misunderstood the nature of target prices. Traders affiliated to the VCH adjust their selling prices according to local competition on a regional basis. Moreover, the various traders individually purchase cement at different prices. This means that the floor price indicated by the VCH (the duty to sell only at a profit) involves for the trader in question a different price in each case which depends mainly on the level of the purchase price. The meaning of the legal duty to use the target prices as a standard and a guide is quite different from that attached to it by the Commission. It is, in fact, an open system of calculating the cost price with an individual floor price dependent upon the purchase price of the distributor in each transaction.
(c). The contested decision also wrongly regarded the prohibition on members of the VCH from supplying traders with a quantity of cement larger than required for a particular job as a restriction on competition. In fact it is a means of maintaining the guarantee of quality which binds all members of the VCH by ensuring adequate stocks.
1. By an application entered at the Court Registry on 21 February 1972 the Vereeniging van Cementhandelaren (Netherlands Cement Dealers' Association) requested the annulment of the decision of 16 December 1971 (OJ 1972, L 13, p. 34) by which the Commission found that a body of decisions of the applicant association was incompatible with Article 85(1) of the Treaty establishing the European Economic Community, rejected the application for exemption made by the same association under Article 85(3) and ordered the applicant immediately to bring to an end the infringement established.
2. The applicant has pleaded grounds relating to the subject-matter of the decision, the infringement of essential procedural requirements, the infringement of provisions of the Treaty and the inadequacy of the statement of reasons upon which the decision is based.
3. The applicant claims that before the decision of 16 December 1971 it had already on 7 December 1971, completely abolished the system of imposed prices for supplies of cement in quantities of less than 100 tonnes.
4. Because of the connexion between that system and the fixing of target prices for supplies of cement of 100 tonnes or more, the decision is said to have become purposeless.
5. The contested decision was taken against the internal rules of the applicant association which were notified by the latter for the purposes of the application of Article 85 (3), and were the subject-matter of the notification of objections and of the administrative procedure.
6. At the time when it abolished imposed prices for supplies of less than 100 tonnes, the applicant knew that, as the procedure had ended, a decision of the Commission was imminent.
7. It should have informed the Commission immediately of the alteration to its internal rules so that the Commission could, if necessary, draw from this the appropriate conclusions.
8. In those circumstances, the applicant cannot rely on that alteration, which was made on its own initiative, to call in question the decision of the Commission.
9. The complaint must therefore be dismissed.
10. The applicant maintains that the notification of objections referred to in Article 2 of Regulation No 99/63 of the Commission was defective because it was signed not by a Member of the Commission, but the Director-General for Competition by delegation.
11. It is not in dispute that the Director-General for Competition merely signed the notification of objections which the Member of the Commission responsible for competition matters had previously approved in the exercise of the powers which the Commission had deleeated to him.
12. That official therefore acted not under a delegation of powers, but merely under an authorization to sign which he had received from the Member of the Commission.
13. Such an authorization constitutes a measure concerning the internal organization of the services of the Commission, in accordance with Article 27 of the Provisional Rules of Procedure adopted under Article 7 of the Treaty of 8 April 1965 establishing a single Council and a single Commission.
14. The submission based, in opposition to the contested decision, on an alleged formal defect in the notification of objections cannot therefore be upheld.
(a). Adverse effect on competition within the Common Market
15. The applicant maintains that after the abolition of the system of imported prices, which was applied only to a small proportion of transactions, there remains only a system of target prices.
16. According to the applicant these target prices, moreover, rarely adhered to in practice, far from constituting a constraint on members, in fact only represent a basis of calculation which leaves largely untouched the freedom for each of the members of the association to calculate its prices in accordance with the facts of each individual transaction.
17. In any case since the variations in production prices are slight in the sector in question, competition is said to be exerted mainly over other factors of the transactions, such as product quality and services to the customer.
18. Article 85(1) of the Treaty expressly identifies agreements which directly or indirectly fix … selling prices or any other trading conditions as incompatible with the Common Market.
19. If a system of imposed selling prices is clearly in conflict with that provision, the system of target prices' is equally so.
20. It cannot in fact be supposed that the clauses of the agreement concerning the determination of target prices are meaningless.
21. In fact the fixing of a price, even one which merely constitutes a target, affects competition because it enables all the participants to predict with a reasonable degree of certainty what the pricing policy pursued by their competitors will be.
22. This prediction is all the more reliable because the obligation to make a demonstrable profit in every case is limited to the provisions concerning target prices and those provisions must in addition be considered within the framework of the internal rules of the applicant association as a whole which are characterized by strict discipline in conjunction with inspections and penalties.
23. Apart from the fixing of prices properly so-called, the agreement to which the contested decision relates contains in addition a body of restrictive clauses concerning other trading conditions.
24. This applies especially to clauses the object of which is to prevent the sale of cement to traders other than members of the association or resellers approved by the association, to prevent the creation of stocks of cement by third parties who are not subject to the discipline of the association, to limit strictly the commercial benefits which may be granted to purchasers and to prevent any services being provided for customers which fall outside the framework of what is regarded as normal.
25. Thus an examination of all the rules to which the contested decision relates shows these to be a coherent and strictly organized system the object of which is to restrict competition between the members of the association.
(b). Influence on trade between Member States
26. According to the applicant association, the Community nonetheless has no jurisdiction to appraise the cartel to which the contested decision relates because it is a purely national cartel, limited to the territory of the Netherlands, which does not apply in any way to imports or exports and which consequently has no influence over the patterns of trade between Member States.
27. In this respect, it emphasizes more especially the fact that the total production of cement in the Netherlands far from satisfies the needs of the Netherlands economy and leaves a substantial need for imports, that furthermore there is, apart from its members, a large number of cement sellers not affiliated to it and that therefore there is no danger of intra-Community trade being affected.
28. According to Article 85(1) all agreements which have as their object or effect the prevention, restriction or distortion of competition are incompatible with the Treaty once they may affect trade between Member States.
29. An agreement extending over the whole of the territory of a Member State by its very nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about and protecting domestic production.
30. In particular, the provisions of the agreement which are mutually binding on the members of the applicant association and the prohibition by the association on all sales to resellers who are not authorized by it make it more difficult for producers or sellers from other Member States to be active in or penetrate the Netherlands market.
31. It appears therefore that the objection based on the fact that trade between Member States is not capable of being affected by the decision of the applicant association must be rejected.
32. It follows from the foregoing that the complaints based on an alleged infringement of the rules of the Treaty must be dismissed.
33. The applicant also raises the complaint that the statement of reasons upon which the contested decision is based is inadequate.
34. This criticism relates in essence to the fact that, although the operative part of the decision concerns a body of rules comprising the General and Pricing Provisions (Algemene Bepalingen en Prijsvoorschriften der VCH), Price Lists I-VI (Prijsbladen I-VI), the General Conditions of Purchase and Sale (Algemene Koop- en Verkoopvoorwaarden 1955 FGB-RBB) and the Supplementary Conditions of Purchase and Sale (Aanvullende Koop- en Verkoopvoorwaarden van de VCH), it is impossible to identify from the statement of reasons, which expressly refers to the first of these documents, the reasons why the Commission also objected to the General Conditions and the Supplementary Conditions of Purchase and Sale.
35. Although it is true that the General Conditions and the Supplementary Conditions of Purchase and Sale include common commercial clauses, which in themselves are unconnected with the subject-matter of the cartel, none the less several provisions are capable of assisting the functioning of the latter.
36. Furthermore the General and Pricing Provisions, in which the main provisions found to be contrary to the competition rules of the Treaty are concentrated, contain an express reference to the said General Conditions and Supplementary Conditions of Purchase and Sale.
37. It therefore seems normal for the Commission to have referred in the operative part of its decision to all the measures which, according to the intention of the applicant itself, are intended to form a coherent whole.
38. In its statement of the reasons for the decision the Commission expressly singled out from all the measures referred to those provisions which are not in conformity with the requirements of Article 85(1).
39. It will be for the applicant, when it revises its internal rules in order to make them conform to the Community's rules on competition, to determine which clauses must be eliminated as contrary to the Treaty and those which may remain.
40. Consequently the complaint based on the inadequacy of the reasons for the decision must be dismissed.
41. Under Article 69(2) of the Rules of Procedure, the unsuccessful party must bear the costs.
42. The applicant has failed in its submissions.
43. It must accordingly be ordered to pay the 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 the Treaty establishing the European Economic Community, especially Articles 85, 173 and 190; 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 hereby:
1 Dismisses the application;
2 Orders the applicant to pay the costs.