Judgment of the Court of 14 May 1975 Kali und Salz AG and Kali-Chemie AG v Commission of the European Communities
In Joined Cases 19 and 20/74
THE COURT composed of: R. Lecourt, President, J. Mertens de Wilmars and A. J. Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P. Pescatore, H. Kutscher, M. Sørensen and A. O'Keeffe (Rapporteur), Judges, Advocate-General: J. P. Warner Registrar: A.Van Houtte
gives the following
JUDGMENT
Facts
I — Facts
II — Procedure
III — Conclusions of the parties
IV — Submissions and arguments of the parties
(a) The defendant's argument that there are alternatives to the agreement of 6 July 1970.
1. The market for the products in question, the place of KC in this market and the sensitivity of potash to transport costs
2. The possibility of extending KC's range of products
3. The economic impossibility of stocking
4. The costs involved by a sales in salts of potash
(b) The applicability of Article 85 (1)
(c) The inapplicability of Article 85 (3)
V — Questions put by the Court to the parties
(a) Questions on the amendment of the Decision in question following the appearance of alkaline mud in the Ronnenberg mine.
(b) Questions put to K & S
(c) Questions put to KC
(d) Questions put to the defendant.
Law
Costs
I —. Facts
(i). KC shall sell to K&S … its production of potash in so far as this is not marketed independently by KC nor required for its own production of compound fertilizers.
(ii). K&S undertakes to buy annually from KC 280000 metric tonnes of K2O, less such quantities as KC itself requires under Article 1 thereof …
(iii). … The parties hereto shall agree in advance as from 1 January 1971, and on each occasion for a period of two years, a provisional programme of allocation having regard to Article 2. They shall agree on the conditions relating to the varieties and delivery periods.
(iv). The prices to be paid for the quantities delivered to K & S by KC shall be fixed annually. KC shall receive instalments on account of the prices payable for quantities sold.
(v). This article relates to the marketing of kieserite produced by KC.
(vi). This agreement … shall continue in force until 31 December 1980. The parties hereto shall enter into negotiations during the 1979/80 marketing year at the latest with a view to renewing this agreement.
(a). held that the agreement of 6 July 1970, concluded between K&S and KC concerning the distribution by K & S of the straight potash fertilizer of KC constituted an infringement of Article 85 (1) of the Treaty establishing the EEC;
(b). refused the application for an exemption under Article 85 (3);
(c). ordered the said undertakings to bring the infringement to an end.
II —. Procedure
III —. Conclusions of the parties
(a). annul the decision of the Commission of 21 December 1973;
(b). order the defendant to pay the costs of the proceedings.
(a). annul the decision of the Commission of 21 December 1973;
(b). order the defendant to pay the costs of the proceedings.
(a). Dismiss the application as unfounded;
(b). Order the applicants to pay the costs.
IV —. Submissions and arguments of the parties
(a). The defendant's argument that there are alternatives to the agreement of 6 July 1970.
1. The market for the products in question, the place of KC in this market and the sensitivity of potash to transport costs
2. The possibility of extending KC's range of products
3. The economic impossibility of stocking
4. The costs involved by a sales in salts of potash
(b). The applicability of Article 85 (1)
(a). that the effect of the agreement is to restrict competition within the Common Market;
(b). that it gives KC the right to sell to K & S on a long-term basis its entire potash production for the purpose of re-sale; although under the agreement KC is not literally bound to sell its potash exclusively through K & S, it in fact hands over the whole of its production to K & S with the exception of such quantities as it uses itself;
(c). that this is similar to the situation which existed previously with VDK;
(d). that the agreement practically concentrates in a single body the whole of the Federal Republic of Germany's available straight potash fertilizer and thus excludes all competition between the only two German producers of potash as regards the sale of their products to farmers and makers of compound fertilizers;
(e). that it covers all the production of a Member State and by its very nature affects trade between Member States in a way which would inhibit the objectives of a single market between Member States from being achieved;
(f). that in consequence it is covered by the prohibition in Article 85 (1).
(c). The inapplicability of Article 85 (3)
(a). K & S is a very important producer of potash and is able, even without the amounts delivered by KC, to adopt the said rationalization measures in its own company; further, KC is part of the important Solvay group which has interests in the potash sector; KC could sell its straight potash fertilizer independently;
(b). the agreement brings with it no advantages to balance the disadvantages to competition resulting from centralized marketing; it does not contribute to improving distribution while allowing consumers a fair share of the resulting benefit within the meaning of the first two conditions of Article 85 (3); exemption cannot be granted because the agreement affords the parties the possibility of eliminating competition in a substantial part of the products in question;
(c). the agreement enables K & S to improve on its strong position in the potash sector (87·5 % of German production) by becoming the sole supplier of straight potash fertilizer to the German market, a substantial part of the Common Market; as regards straight potash fertilizers used directly in agriculture, although the consumer theoretically has the choice between straight potash fertilizers and compound fertilizers containing potash, special factors appertaining to the mode of use and considerations of the nature of the soil, the availability of labour, atmospheric conditions and prices nevertheless point to the desirability of using straight potash fertilizers;
(d). the available statistics show that straight potash fertilizer continues to be in great demand;
(e). in the nine Member States a relatively constant increase in sales of straight potash fertilizers and of compound fertilizer containing potash is to be observed;
(f). the fact that a small number of farmers may in some years buy straight fertilizer and in others compound fertilizer does not alter the view that the relevant market to take as the basis for the decision in these proceedings is that of straight potash fertilizer;
(g). accordingly the agreement cannot be exempted under Article 85 (3).
V —. Questions put by the Court to the parties
(a). Questions on the amendment of the Decision in question following the appearance of alkaline mud in the Ronnenberg mine.
1. The Court requested the applicant to define its position on the defendant's invitation in the rejoinder to submit a formal application to amend the Decision in question following the situation created by the appearance of alkaline mud in the Ronnenberg mine.
2. The Court asked the defendant what answer it was intending to give to the applicant's request. In answer the Commission stated that the fact of the appearance of mud had been known for a long time and that although the sudden increase presented certain dangers, it did not appear from the expert opinions submitted that it was impossible to avoid the danger.
(b). Questions put to K & S
1. First of all the Court asked K & S in which regions it sold powdered potash and the powdered potash originating from KC.
2. How do German importers of straight potash sell their goods?
(c). Questions put to KC
1. What fraction of the consumption of straight potash in Ireland, France, Italy and Britain is of the crushed variety and what of the powdered variety?
2. Why is it not possible to sell straight potash by means of the organization which already sells RHE-KA-PHOS?
3. How do German importers of straight potash sell their goods?
(d). Questions put to the defendant.
1. What geological and atmospheric conditions justify the use of a straight potash?
2. Which are the regions in which straight potash is used to the exclusion of phosphate and nitrogen and how large are they?
1. By applications filed at the Court on 11 and 12 March 1974, the companies Kali- and -Salz and Kali Chemie (hereinafter called K & S and K) brought an action for annulment of the Decision of the Commission of 21 December 1973 (OJ L 19/22 of 23. 1. 1974) holding that an agreement of 6 July 1970, concluded between the applicants on the marketing by K & S of part of KC's production of potash, constituted an infringement of Article 85 (1) of the EEC Treaty and ordering them to bring the infringement to an end.
2. Since the two applications seek the same relief, it is fitting to join them for the purpose of the judgment.
3. The applicants are the only two producers of potash in the Federal Republic of Germany, K & S having produced more than 2250000 metric tonnes in 1973 while KC produced some 280000 tonnes. Potash is delivered as fertilizer, either directly with a view to its use as straight potash or to the producers of compound fertilizer for the purpose of processing. Under the terms of the agreement in question KC supplies K & S with that part of KC's production which KC does not market itself or which is not required for the manufacture of its compound fertilizer RHE-KA-PHOS, while K & S for its part undertakes to purchase the surplus, the parties agreeing moreover to draw up, on each occasion for a period of two years, a provisional programme of allocation of this production.
4. According to the Decision challenged, this agreement has the effect of concentrating practically the whole supply of straight potash fertilizer in the Federal Republic of Germany and thus restricting competition in the market of this product and affecting trade between Member States.
5. In order to find a restriction on competition the Decision challenged states
6. The arguments on which the Commission has, in the last recitals of its Decision, based its case, show that there is competition between the two products which is effected by their prices and their intrinsic advantages for the consumer. The figures mentioned in the Decision show a considerable increase in consumption of compound potash fertilizers which however has not eliminated straight potash. The Decision challenged stated, it is true, that such considerations as the state of the soil, the availability of labour and the weather, point in certain cases to the desirability of using straight potash, but it is not shown that the two types of fertilizers constitute different markets. The Decision itself makes a point of the fact that a small number of farmers may in some years buy straight fertilizer and in others compound fertilizer.
7. In these circumstances the conclusion of the Decision that the declaration of inapplicability of Article 85 (1) must in any case be refused because the agreement affords the undertakings the possibility of eliminating competition in respect of a substantial part of the products in question is not valid.
8. The applicants contest moreover the finding in the Decision challenged that the agreement infringes Article 85 (1) in that, although it does not expressly require KC to deliver the whole of its production of potash to K & S, its spirit and the practice followed by the two companies achieve the same result. According to the applicants KC remains free to supply K & S with whatever quantities KC itself decides. This is moreover amply shown by the fact that the part of KC's production supplied to K & S is diminishing and has gone down from 173500 metric tonnes in 1973 to 129400 metric tonnes in 1973, whereas that used in the processing of its compound fertilizer RHE-KA-PHOS has increased form 119700 metric tonnes in 1971 to 150800 metric tonnes in 1973.
9. The fact that KC delivers its surplus production of straight potash to K & S is due to KC not possessing any sales organization making it possible to market it. Before 1970 it sold this production via the sales agency which then operated between all the German producers of potash for the supply of straight potash fertilizers. The agreement in question is intended to allow KC to concentrate its efforts on the manufacture and sale of the compound product RHE-KA-PHOS and leaves KC to decide what part of its total production should be sold in this form and consequently the amount of the surplus available for sale to K & S.
10. According to the Decision challenged, the agreement covers the entire production of a Member State and by its very nature affects trade between Member States.
11. The applicants allege that the defendant has not given reasons for its Decision on this point, as is required by Article 190 of the EEC Treaty. In this respect (they claim) neither during the administrative stage nor during the course of the proceedings has it sufficiently taken into account KC's actual position on the market,
12. First, the quantities of straight potash sold by KC to K & S are constantly diminishing. According to the Decision challenged, KC was in a position to set up an independent sales organization. The applicants have claimed that the cost of such an organization would be prohibitive for KC having regard to its turnover in straight potash. The examples which the defendant quotes of a possible joint marketing of straight potash and compound fertilizer cannot be related to the position of KC, whose surplus production of straight potash is constantly diminishing.
13. It has therefore not been shown that straight potash can be distributed by an organization which markets the compound product RHE-KA-PHOS which competes with it.
14. It follows from the combination of these circumstances that the continual reduction in the quantities of straight potash which KC has available after manufacturing RHE-KA-PHOS, and further the concomitant decline in the requirement of straight potash fertilizer in favour of compound fertilizers could prevent KC from setting up an onerous marketing apparatus for the sale simply of its surplus production which decreases each year. This position could lead to allowing exceptional measures to be taken for the sale of this surplus production within the context of an agreement which, if analysed, amounts for KC not to an obligation but to an option to sell to K & S.
15. Accordingly, insufficient reasons appear to have been given for the Decision challenged, at least as regards the rejection of the application for exemption.
16. Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs. Since the defendant has been unsuccessful, it is proper to order it to pay the costs.
On those grounds, THE COURT hereby:
1 Annuls the Decision of the Commission of 21 December 1973 (IV/795).
2 Orders the Commission to bear the whole of the costs.
1 Language of the Case: German.