Opinion of Mr advocate-general Warner
My Lords,
It appears that for many years fruit imported into the Netherlands, for the most part citrus fruit, has been sold by auction in Rotterdam. Currently, about 75 % of the citrus fruit so imported is disposed of at those auctions. Nine importers established in the Netherlands regularly sell at the auctions. Some 350 wholesalers attend as buyers.
Since 1952 the conduct of the auctions has been governed by the provisions of an Agreement made in that year between the two applicants in this case, who are respectively an association of importers and an association of wholesalers of fruit. The Agreement has been amended many times.
On 25 July 1974 the Commission adopted a Decision in which it held that the Agreement contained a restriction that infringed Article 85 of the EEC Treaty. That Decision is challanged by the applicants on no fewer than 12 grounds. Having regard to the nature of some of those grounds, I must recount in some detail the events leading up to the Decision.
In 1968 an Amsterdam wholesaler, Messrs Govers en Zonen, complained to the Commission under Article 3 (2) (b) of Regulation No 17 that the Agreement contained restrictions infringing Article 85. As a result, the Commission, on 12 November 1969, served on the applicants and on their members a notice of objections under Article 2 of Regulation No 99/63/EEC. To this, it seems the applicants did not respond directly. They left it to their members to do so individually. But, on 2 January 1970, the applicants sent to the Commission a request under Article 2 (3) of Regulation No 26 for a decision that the Agreement satisfied the conditions of Article 2 (1) of that Regulation. That request (Annex VIII to the application) set out in detail the applicants' reasons for saying that the agreement satisfied those conditions.
Your Lordships will remember that Article 42 of the Treaty provides that:
It was pursuant to that Article that the Council, on 4 April 1962, adopted Regulation No 26 (OJ 30 of 20. 4. 62) Article 1 of that Regulation provides:
Article 2 (1) contains two sentences, of which the first is in these terms:—
The second sentence confers a particular exemption on certain agreements, decisions and practices of farmers, farmers'associations, or associations of such associations. It has been the subject of controversy between learned writers, but it is not in point in this case.
The remaining paragraphs of Article 2 provide:
The contention of the applicants was, and indeed still is, that the agreement promoted three of the objectives set out in Article 39, viz. objective (c) to stabilize markets, objective (d) to assure the availability of supplies and objective (e) to ensure that supplies reach consumers at reasonable prices.
On 6 April 1970 the Commission wrote to the applicants that their request under Article 2 of Regulation No 26 would be considered in the framework of the proceedings already initiated under Regulation No 17 and that, if the Commission were of opinion that the Agreement could not be exempted under that Article, it would give its reasons in the decision that it envisaged taking to put an end to the infringements of Article 85. The Commission accordingly invited the applicants to submit their observations on the objections formulated in the notice of 12 November 1969 (Annex XII to the Application).
This drew from the Applicants a letter dated 20 April 1970 (Annex XIII to the Application) in which they contended that it was improper for the Commission to deal with the proceedings under Regulation No 17 and those under Regulation No 26 together. They said that the proceedings under Regulation No 17 were against their members and not themselves and that, for this and other reasons, the two sets of proceedings should be kept distinct. It seems that the Commission never replied to this letter or to further letters written in May and August 1970 on behalf of the applicants or of their members asking that the proceedings be expedited. On 24 March 1971 the applicants wrote to Mr Mansholt, a Vice-President of the Commission, with copies to the Director-General of Agriculture and to the Director-General of Competition, protesting about the delays and asking for an interview (Annex IX to the Application). On 1 June 1971 the Director-General of Agriculture replied on behalf of the Commission that it had not yet made up its mind about the applicability of Article 2 of Regulation No 26 and suggesting that the applicants should contact the Head of Division responsible for competition in agriculture about an interview (Annex X to the Application). On 30 June 1971 the Director-General of Competition wrote to the applicants saying that the Commission did not consider that the Agreement fell within Article 2, setting out in detail its reasons for taking this view and giving the applicants an opportunity to comment on those reasons before the Commission took a final decision (Annex XI to the Application).
It appears that the applicants did not comment in writing but asked for an interview. This resulted in a meeting being held on 9 July 1971 under the chairmanship of the Head of Division responsible for competition in agriculture at which were also present representatives of the Directorate-General of Competition and of the Commission's Legal Service. The applicants say that the purpose of this meeting was to seek a solution acceptable both to the applicants and to the Commission. Its only concrete outcome, however, seems to have been an agreement to hold a further meeting under the chairmanship of a representative of the Directorate-General of Competition. This further meeting was fixed for 15 October 1971, and the Commission agreed that the time limit for the applicants to reply to the letter of 30 June 1971 should be extended to that date (see Annex I to the Defence).
The meeting was duly held on 15 October 1971 under the chairmanship of Mr Jaume, the then Director of Restrictive Practices and Dominant Positions. A letter written to him on 29 October 1971 on behalf of the applicants (Annex XVI to the Application) evinces that they hoped, by amendments to the Agreement, to meet the Commission's objections to its terms and that, in the light of the discussion at the meeting, they proposed to make certain amendments to it. The main effects, so far as I understand, of these amendments were to be as follows:
In view of a contention advanced before the Court on behalf of the applicants, I should mention that the very terms of that letter make it clear that neither Mr Jaume nor anyone else on behalf of the Commission had committed himself at the meeting to the view that, if those amendments were made, the Commission's objections to the Agreement would disappear.
On 2 December 1971 Mr Jaume wrote to the applicants acknowledging their letter of 29 October and saying that the Agreement, even as amended, still contained an objectionable restriction in that, by the effect of its Articles 9 and 10, Dutch wholesalers, if they wished to be admitted to the auctions, were precluded from buying in other Member States for sale in the Dutch market fruit imported from third countries. This prevented competition to which Dutch importers could otherwise be subjected from importers in other Member States selling direct to Dutch wholesalers. Mr Jaume suggested that the applicants, if they wished the case to be disposed of swiftly, should amend Articles 9 and 10 by eliminating that restriction (Annex XVII to the application).
The applicants responded by a telex dated 16 December 1971, suggesting that Article 9 should be amended so as to make it easier for importers established in other Member States to sell at the auctions. This suggestion was discussed on 17 December 1971 between representatives of the applicants and Mr Jaume. Following that discussion, on 21 December 1971, Mr Jaume wrote to the applicants a letter (Annex VI to the Application) on which they found one of their grounds of complaint against the Commission's Decision. In that letter Mr Jaume expressed the view that, having regard to the amendment last proposed as well as to those set out in the applicants' letter of 29 October 1971, they should notify the new text of the Agreement with a view to obtaining exemption under Article 85 (3) of the Treaty. He added that, in his opinion, the only restriction on competition remaining in the new text, which was the prohibition on wholesalers attending the auctions from buying in other Member States fruit originating from third countries, could be the subject of exemption under Article 85 (3). He concluded that the proceedings could be brought to an end by a decision of the Commission based on such notification.
On 15 March 1972 the new text of the Agreement was adopted by the Applicants and on 21 April 1972 it was notified to the Commission under Article 4 of Regulation No 17. The applicants say that they were subsequently informed by telephone by someone in the Directorate-General of Competition that publication under Article 19 (3) of that Regulation would probably take place in October 1972 and that a decision of the Commission in application of Article 85 (3) could be expected towards the end of 1972.
It seems that by a letter dated 2 April 1973 (which is not in evidence) Mr Jaume informed the applicants that doubts had arisen about the applicability of Article 85 (3), in particular because it was doubtful whether the restriction in the Agreement conferred any advantage on consumers, and suggesting that that restriction should be abolished. To counter this the applicants submitted statistics designed to show that prices at the Rotterdam auctions were, on average, 13 % below corresponding prices in other Member States.
On 23 July 1973, having heard no more from the Commission, the applicants wrote to its President complaining of the manner in which the proceedings had been conducted and of the delay in reaching a decision.
They received a reply dated 6 November 1973 from the Director-General of Competition (Annex VII to the Application) saying that, at the time when Mr Jaume had expressed the view that Article 85 (3) might be applicable, he was relying entirely on what he had been told by the applicants themselves. Subsequent enquiries made of French and of German importers had suggested that the requirement that Dutch wholesalers should buy only at the Rotterdam auctions was not indispensable in the sense of Article 85 (3). Hence the suggestion that that requirement should be abolished. That suggestion not having been followed, the Commission would shortly be sending a fresh notice of objections to the Applicants which would enable them once again to state their case and to counter the facts and arguments relied on by the Commission.
That fresh notice of objections (Annex 2 to the Defence) was sent to the applicants on 19 November 1973. It was signed by the Director-General of Competition himself and was directed to the Agreement as notified on 21 April 1972. It carefully set out the reasons why the Commission considered that the requirement or restriction in question was hit by Article 85 (1) of the Treaty and exempted neither by Article 2 (1) of Regulation No 26 nor by Article 85 (3) of the Treaty — and it punctiliously mentioned the applicants' rights to comment both in writing and orally on those reasons.
The applicants did not avail themselves of their rights to comment in writing. They sought another interview, which took place on 3 December 1973, and at which they proposed yet a further amendment to Article 9 of the Agreement. Under this amendment a Dutch wholesaler was to be permitted to buy fruit from an importer established in another Member State provided that that fruit had already been imported, cleared through customs and unloaded by such importer. There is no evidence as to how the representatives of the Commission reacted to this proposal at the time.
I infer from the applicants' pleadings that they subsequently sent a written memorandum to the Commission saying that the Agreement should now be considered as so amended and that the reasoning of the Commission contained in the notice of objections of 19 November 1973 was therefore obsolete. That memorandum is not however in evidence.
On 30 January 1974 there was a formal hearing under the chairmanship of a new Director of Restrictive Practices and Dominant Positions, Mr Jaume having retired. The minutes of this hearing are in evidence (Annex XIV to the Application). It was attended, on behalf of the Commission, by representatives both of the Directorate of Restrictive Practices and Dominant Positions and of the Directorate-General of Agriculture. It was also attended by representatives of the Member States, by representatives of the applicants — in particular by the late Mr J. J. A. Ellis who had acted for them as Counsel throughout — and by representatives of a number of Dutch fruit wholesalers who, like Messrs Govers en Zonen, eomplained about the Agreement.
I need not take up Your Lordships' time with a summary of that hearing, important though I think it was. I will mention only three points about it:
On 21 February 1974, the applicants formally amended Article 9 of the Agreement in the way they had proposed.
On 19 April 1974 they sent to the Commission a bundle of documents concerning a particular importation, which they described as manifestly ficticious (Annex XXV to the Reply). Their purpose, in so doing, was, as I understand it, to justify the requirement, in Article 9 of the Agreement as amended, that fruit bought by a Dutch wholesaler from an importer in another Member State should first have been unloaded in that State.
There was, it seems, no reaction from the Commission to that communication, except an acknowledgement. So the applicants asked for another interview and this took place on 19 June 1974. There is no direct evidence as to what transpired at this interview, but I infer from a telex dated 24 June 1974 addressed by the applicants to the Commission (Annex XXVI to the Reply) that they proposed yet another amendment of Article 9, viz. the deletion of the requirement as to unloading.
By the time the Commission received that telex its Decision, which Your Lordships remember was dated 25 July 1974, was in draft. The proposal referred to in the telex is recorded in a footnote to the formal text of the Decision and the Decision states (in recital II (2)) that Removal of the requirement that the fruit must have been unloaded in the other Member State makes no appreciable difference to the restrictive effects of the Agreement, 'since the ban on the marketing in the Netherlands of fruit from third countries imported by Dutch wholesalers themselves into another Member State remains unaffected thereby. It is therefore clear that Article 9 of the Agreement effectively restricts the freedom of supply of the wholesalers taking part in the Rotterdam auctions and that this restriction is particularly marked since those wholesalers are responsible for a major share of the distribution of citrus fruit intended for consumption in the Netherlands (OJ L 237 of 29. 8. 1974).
The recitals of the Decision are in four parts. Part I states the facts. Part II states the Commission's reasons for thinking that Article 85 (1) applies to the restriction. Part III states its reasons for thinking that Article 2 (1) of Regulation No 26 does not apply and Part IV its reasons for thinking that Article 85 (3) does not apply either. In the operative part, the Commission declares that the provisions of Article 9 of the Agreement constitute an infringement of Article 85 (1) of the Treaty; refuses the declaration claimed by the applicants that those provisions are within Article 85 (3) of the Treaty; orders the applicants and their members to bring to an end the infringements of the Treaty thus evinced; and declares that the Decision is addressed to the applicants and to their respective members, who are listed in an Annex to the Decision.
By application to this Court dated 22 September 1974 the applicants claimed that that Decision should be declared void. On 15 October 1974, my Lord the President ordered, on an application for interim relief made by the applicants, that the operation of the Commission's Decision should be suspended pending the Court's Judgment in the action but that, nonetheless, no penalty should in the meantime be imposed under the Agreement on any of the applicants' members; and he reserved the costs of the application for interim relief. On 23 October 1974 the Court ordered that the Vereniging de Fruitunie, a newly formed association of some 24 Dutch wholesalers of fruit who are opposed to the outstanding restriction in the Agreement, should be at liberty to intervene in the action in support of the Commission.
As I have said, the applicants challenge the Commission's Decision on 12 grounds. These are conveniently lettered from A to L in the Application and also in the Report for the Hearing. Your Lordships will remember that, at the hearing, Counsel for the applicants picked four of them for further discussion, saying that he would rest on the applicants' pleadings as regards the other eight. It so happened that Counsel for the Commission also thought those four grounds to be the most pertinent. I will say at once that, in my opinion, not a single one of those 12 grounds is sound. I must nonetheless advert to them seriatim.
The first five are procedural. They are these.
I am therefore of the opinion that this action should be dismissed with costs, such costs to include those of the application for interim relief.