Opinion of Mr Advocate General Reischl
Mr President,
Members of the Court
The proceedings in which I am today delivering my opinion concern a decision adopted by the Commission on 8 December 1977 in application of Article 86 of the EEC Treaty against Hugin Kassaregister AB (hereinafter referred to as Hugin AB) and its British subsidiary company Hugin Cash Registers Ltd. (hereinafter referred to as Hugin UK) concerning the abuse of a dominant position on the market.
Hugin AB, an undertaking founded in Stockholm in 1928 and wholly owned by the Federation of Swedish Consumers, Köoperativa Forbundet, manufactures cash registers and similar equipment. In the common market the undertaking has a market share of 12 % and in the United Kingdom, which is of particular relevance in the present case, it has a market share of 13 % whilst the market shares of other manufacturers are 36, 15 and 13 % in the common market and 34, 18 and 16 % in the United Kingdom. The machines are marketed in some parts of the Community, namely in the United Kingdom, Belgium, Denmark, France and the Federal Republic of Germany, by subsidiary companies of Hugin AB and for the rest, in Ireland, Italy and the Netherlands, by general agents or main distributors with whom corresponding agreements were concluded for the years 1971 to 1976. The commercial policy of Hugin AB is characterized by the fact that maintenance and repair of Hugin cash registers is exclusively carried out by technicians in the service of Hugin AB or its subsidiaries and main distributors and thus independent maintenance and repair undertakings are excluded from this field of activity.
Until 1968 there were in the United Kingdom two companies with exclusive sales rights for Hugin cash registers in which Hugin AB had no interest: one, Cash Machines Ltd, a subsidiary of the English Co-operative Wholesale Society, was responsible for marketing to cooperative shops; the other, the Gledhill undertaking, was responsible for sales to other outlets. In 1969 the contractual relationship with Gledhill came to an end and Cash Machines took over the corresponding marketing activities, altering its trade name to Hugin Great Britian Ltd (hereinefter referred to as Hugin GB). Apparently because Hugin GB had fallen into financial difficulties, in 1972 Hugin AB founded the above-mentioned British subsidiary Hugin Cash Registers Ltd. (Hugin UK). Following an agreement between Hugin GB and its parent company, on the one hand, and Hugin AB and Hugin UK on the other, in March 1972 Hugin UK assumed part of the rights and obligations of Hugin GB. The latter then changed its trading name to Century Cash Registers Ltd. and became a non-trading company.
In the United Kingdom there also exists the company Liptons Cash Registers and Business Equipment Ltd (hereinafter referred to as Liptons) which was established some 25 years ago in London and which is engaged in the maintenance, refurbishing, sale and renting out of cash registers of most makes. From the end of the fifties until 1969 it obtained from Cash Machines, as the importer of Hugin cash registers, spare parts for those machines. Pursuant to an agreement concluded with Hugin GB in 1969 for a period of five years Liptons, in view of the introduction of the decimal system in the United Kingdom in 1971, became general agent for the marketing of Hugin cash registers in England, Scotland and Wales. That agreement was terminated by Hugin GB in April 1972; in any event, as is clear from a letter of the chairman of Hugin GB of 10 January 1973, it was not taken over by Hugin UK in the context of the above-mentioned agreement of March 1972. During the period when Liptons was general agent for Hugin GB the latter apparently retained responsibility for after sales service for Hugin cash registers. From 1969 to 1971 however Liptons technicians were also apparently involved in servicing new Hugin cash registers which had been sold. In addition, Liptons continued to provide after-sales service in the context of its own business, the refurbishing and sale of used cash registers and, as from 1970, also the renting out of cash registers, and, we have been informed, obtained the necessary spare parts therefor from Hugin GB without difficulty. After the establishment of Hugin UK and the building-up of a new sales organization in the United Kingdom including 13 main distributors each responsible for a certain territory but not having to provide after-sales service Liptons, which allegedly had been informed as from December 1971 of the negotiations with Hugin GB and the likely consequences, was offered by Hugin UK in April 1972 a contract whereby Liptons was to be the authorized dealer for the London region. While the negotiations were under way Liptons continued to be supplied by Hugin UK with cash registers and spare parts. After Liptons had refused the contract offered by Hugin UK in October 1972 on the grounds that the sales territory assigned to it and the trade profit margins stipulated were too small Hugin UK refused to supply cash registers at wholesale prices and refused to supply spare parts for Hugin cash registers.
For that reason in October 1975 Liptons applied to the Commission of the European Communities asking it to initiate a procedure against Hugin under Article 3 of Regulation No 17. The procedure was formally commenced by a Commission decision of 22 April 1977. After the Commission had sent various requests for information to those concerned and had heard their oral observations in June 1977 the procedure was concluded with a decision on 8 December 1977 (published in the Official Journal, L 22 of 27 January 1978, p. 23).
Article 1 of that decision declared that Hugin AB and Hugin UK had infringed Article 86 of the EEC Treaty by refusing to supply spare parts for Hugin cash registers to Liptons from 1 January 1973 and that Hugin AB had also infringed Article 86 of the Treaty by prohibiting its subsidiaries and distributors within the common market from selling such spare parts outside its distribution network. Article 2 imposed a fine on the two said undertakings of 50000 units of account, that is 20833 pounds sterling, to be paid within three months of the date of the notification of the decision to the undertakings. Article 3 laid down that the undertakings were to bring the infringement to an end without delay and that Hugin AB was to submit for the approval of the Commission, within one month of the notification of the decision, proposals relating to the resumption of supplies of spare parts for Hugin cash registers to Liptons. Finally, Article 4 provided that if Hugin UK failed to comply with the obligation set out in Article 3 within the period fixed, a periodic penalty payment of 1000 units of account for each day of delay would be payable.
The applicants lodged an application with the Court of Justice claiming that the Court should annul the decision or, alternatively, cancel or reduce the fine imposed.
None the less, Hugin UK complied with the obligation imposed on it. On 3 January 1978 it informed the Commission that it was prepared to supply spare pans to Liptons and at the same time it asked that a list of Lipton's urgent requirements and an estimate of its probable requirements for five months should be sent to it. In the subsequent months, however, it received only very small orders from Liptons, which had also been informed of the Commission's decision.
I —. In examining this case it is necessary first to examine whether the assumption that the applicants hold a dominant position on the market within the meaning of Article 86 of the EEC Treaty was correct.
1. In this dispute it can hardly be denied that the supply of spare parts and the servicing of cash registers are elements of competition on the market in cash registers which naturally are of importance for customers when they acquire cash registers. As the applicants have correctly emphasized they are part of the conditions of sale in that for a period of one year, which is apparently the general practice, a guarantee is given free of charge and in addition customers are informed, in the course of the sales negotiations, of the details of the after-sales service for which they may conclude contracts at a fixed rate which ensure regular servicing including the supply of spare parts. It is therefore certainly possible to describe after-sales service in a certain sense as an activity which is accessory to the sale of cash registers.
2. If the market is defined in that way the fact, which has not been contested, that spare parts are not interchangeable between the different makes but are adapted to the respective mechanisms, which in some cases differ considerably from one to another, is important in assessing Hugin's position on the market for spare parts for Hugin machines. It can therefore in fact be said that Hugin has a monopoly for the supply of Hugin spare parts and therefore holds a dominant position within the meaning of Article 86, as was also the case in the General Motors Case (judgment of 13 November 1975, Case 26/75 General Motors Continental NV v Commission [1975] 2 ECR 1367); in that case a particular market for the provision of certain services, namely the issue of documents necessary for the approval of vehicles, was found to exist, and General Motors was deemed to have a monopoly as its Belgian subsidiary alone could issue the said documents for General Motors vehicles imported from other Member States.
3. However, it is not enough to draw that conclusion, in view of what the applicants have stated with regard to the relationship between after-sales service and competition on the market in cash registers and taking account also of the decided cases (for example the judgment of 25 October 1977 in Case 26/76 Metro SB-Großimärkte GmbH & Co. v Commission [1977] 2 ECR 1875) according to which a dominant position on the market exists when completely independent conduct is possible permitting a trader to operate without regard to competitors, customers and consumers. It is necessary rather to examine whether this condition for a dominant position on the market is satisfied in the present case. In this respect reference should be made to the relationship between Hugin and ordinary cash register customers who acquire cash registers for use in their own business. The question further arises as to whether a particular category of customers for spare parts may be constituted who, like Liptons, need spare parts in order to service their own rented machines or machines of others and to refurbish old cash registers and to what extent such a class of customers is dependent on Hugin.
4. For the sake of completeness it is necessary to consider whether two further arguments put forward by the applicants affect that conclusion. On the one hand, it is argued that the fact that Liptons is not dependent on Hugin is clear from the fact that in 1978, after the adoption of the Commission's decision, Liptons submitted only a very small order to Hugin which, moreover, concerned for the most part cash register accessories which are used only for servicing and which Hugin has always been prepared to deliver. Secondly, reference is made to Hugin's actual conduct on the market which, as its prices for servicing are extremely low, and are even run at a loss, is certainly no evidence of a dominant position on the market.
II —. As therefore, there is nothing to invalidate the statement in the contested decision that Hugin holds a dominant position on the market for Hugin spare parts and, as that opens the way to a monopoly of the after-sales service market for Hugin machines, also on the latter market, it is now necessary to examine Hugin's alleged abuse of its dominant position.
1. In answer to that allegation the applicants claim, first, that the policy pursued by them which was criticized by the Commission does not lead to any substantial restriction of competition as the market for spare parts and servicing of cash registers, in which hardly any independent undertakings are active, is not an important market. In so far as a restriction of competition does exist the fact must be borne in mind that it has the effect of intensifying competition on the cash register market, which is already fierce. With regard to Liptons in particular, in September 1972 Hugin was prepared to supply certain spare parts for cash registers which were to be refurbished but Liptons did not take up that offer. In addition, Liptons is only an insignificant customer and in fact, because it serves a different circle of customers, it does not compete with Hugin. Finally, Liptons has moreover not disappeared from the market nor has it suffered detrimental effects to its business activities. Liptons was in fan able to obtain spare parts from used cash registers and, as its turnover figures show, to continue its business of renting out Hugin cash registers. In so far as a slight falling-off in its business is visible it is merely within the limits of what was normal following the tailing-off of the boom of 1971 and 1972.
2. The applicants also argue that their conduct is not covered by Article 86 by relying on other objective grounds of justification. They argue that for modern cash registers, being a highly technical product, exacting and exclusive service is important, primarily as a weapon in competition for small expansion-orientated undertakings. Accordingly, in restricting after-sales service to its own mechanics Hugin is, in principle, only following a policy which, on a number of occasions, has been declared to be unobjectionable in competition law in the context of selective marketing systems. In particular, no objection can be raised against the exclusion of Liptons from after-sales service. In this respect not only must the fact be taken into account that at the time of the termination of business relations (Autumn 1972) Article 86 was not yet applicable in the United Kingdom; it is also relevant that Liptons was from the beginning certain that it could engage in providing servicing only on a temporary basis. Liptons is not in a position to provide first-class after-sales service, as even during the years 1969 to 1971 it never provided real after-sales service and in addition was not abreast of the new, rapidly advancing developments.
3. That does not, however, conclude the examination as to whether Article 86 was correctly applied in the present case. As the Court is aware, proof of a dominant position in a substantial part of the common market and an abuse thereof are not sufficient for that purpose; such a situation is covered by Article 86 only in so far as the abuse may affect trade between Member States. We now come to what in my opinion is the particularly critical question of the delineation of the sphere of application of Community law as against national law which, as in Cases 56 and 58/64 (Consten and Grundig v Commission, judgment of 13 July 1966 [1966] ECR 299) and in Cases 6 and 7/73, is to be undertaken with regard to the aforesaid expression. It will then become evident whether the Commission was right to deal with a case such as this or whether, as in the case decided by the Bundesgerichtshof, the application of measures under national law would be more appropriate.
III —. Consequently, the statement contained in Article 1 of the Commission decision to the effect that Article 86 has been infringed cannot be upheld and therefore the application for the annulment thereof should be upheld. It is thus evident that there is no legal basis for the fine laid down in Article 2 or for the order contained in Article 3, the enforcement of which is ensured by the periodic penalty payment provided for in Article 4. In accordance with the application the whole of the contested decision should consequently be annulled.
IV —. It is my opinion, therefore, that the Commission decision challenged by Hugin AB and Hugin UK should be annulled and that the Commission should bear the costs of the proceedings.
1 Translated from the German.