JUDGMENT OF 11. 10. 1983 — CASE 210/81 DEMO-STUDIO SCHMIDT v COMMISSION

In Case 210/81

THE COURT composed of: J. Mertens de Wilmars, President, T. Koopmans, K. Bahlmann and Y. Galmot (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco, O. Due, U. Everling and C. Kakouris, Judges, Advocate General: S. Rozès Registrar: P. Heim

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

1. The applicant's intended business activity and the product in question

2. The applicant's business activity: his relations with Revox

3. Procedure

II — Conclusions of the parties

III — Summary of the submissions and arguments of the parties

A — The admissibility of the action

B — Whether the application is well founded

IV — Oral procedure

Decision

Admissibility

Substance

Costs

I —. Facts and written procedure

1. The applicant's intended business activity and the product in question

2. The applicant's business activity: his relations with Revox

3. Procedure

II —. Conclusions of the parties

1. Declare that the notice (Bescheid) of 11 May 1981 (Reference No SG (81) D/6536) from the Commission of the European Communities concerning Case IV/29495 is void;

2. Order the Commission of the European Communities to adopt a fresh decision in relation to the applicant, taking account of the view expressed by the Court in its judgment;

3. Order the defendant to pay the costs.

III —. Summary of the submissions and arguments of the parties

A —. The admissibility of the action

1. The Commission of the European Communities, the defendant, considers the application to be partially inadmissible.

2. Oswald Schmidt, the applicant, considers his application to be admissible.

3. Revox, the intervener in support of the Commission, adheres to the latter's submissions regarding admissibility.

B —. Whether the application is well founded

1. Oswald Schmidt considers his action to be well founded.

(a). His sales premises satisfy the criteria regarding presentation and accessibility for customers. In particular, he disputes Revox's description of his premises. According to the applicant, his shop is properly equipped to ensure quality presentation and shows a significant installation effort. He emphasizes in that regard that if Revox were to supply him that would be sufficient to ensure that his premises fulfilled the requirements for classification as a specialist shop. As regards the opening times of his establishment, the applicant claims that in September 1977 he undertook to obtain the services of a salesman in order to extend his opening hours and that it was only following Revox's refusal to approve him that he was obliged to withdraw that undertaking. He points out in that respect that he has always been willing, and still is today, to take on a specialist assistant provided that he is given an assurance that he will be approved as a specialist retailer.

(b). Moreover, he is in a position to satisfy the requirements as to skill in advising customers and in checking, presentation and installation of Revox equipment and also after-sales service.

(c). Finally, he has always kept at the disposal of customers a stock of Revox equipment which was representative of the Revox sales range.

2. The Commission of the European Communities considers that the applicant's claims should be rejected, contending that his application is unfounded. The Commission states as follows :

3. Revox, intervening in support of the Commission, states on the one hand that the applicant does not satisfy the objective qualitative selection criteria for a specialist Revox dealer and, on the other hand, that its selective distribution system, as defined in the EEC Dealership Agreement, infringes neither Article 85 (1) nor Article 86 of the Treaty, and finally that it considers the action unfounded.

(a). Revox states that the smallness of the premises and the restricted and disparate nature of the of the equipment offered for sale by Mr Schmidt prevent him from satisfying the conditions regarding presentation and promotion of Revox equipment. In that regard, Revox states that, since customers wish to be able to compare the products available on the market when making a purchase, it was necessary for the applicant to display for sale a representative selection of electronic leisure products and the conditions under which they are presented must be good. In this instance that was not the case and for that reason Revox considers that Mr Schmidt's shop cannot be regarded as a specialist retail shop, in view of the fact that the applicant displayed absolutely no leisure electronic equipment with the exception of a few individual items and gramophone records.

(b). As regards to opening of the applicant's shop during normal business hours, Revox states that it was and continues to be undisputed that the applicant's shop is not open during normal business hours and that consumers who go there before 3.45 p.m. from Monday to Friday find the shop closed.

(c). Finally, Revox expresses serious reservations regarding the technical capacity of the applicant to carry out a check of the equipment from the factory before it is put on sale, to provide specialized advice to customers and to install and adjust the equipment sold on customers' premises. It emphasizes in that regard that Mr Schmidt has received no relevant specialist training, that is to say neither training as a radio and television technician nor training as a retailer in the audiovisual sector, and that doubts may be entertained as to whether his employment as a technical draftsman or designer has enabled him to acquire the necessary skills in that field. Finally, it states that because the applicant does not employ any outside staff and is himself an employee during the day, he is incapable of personally ensuring during normal hours delivery, installation and after-sales servicing of the equipment which he markets on customers' premises (adjustment of cables, aerials and so forth). Capability of this kind is important, from a commercial standpoint, in view of the fact that customers wish those operations to be carried out during the day and not late in the evening or on Saturdays or Sundays.

(a). The intervener states that it applies its system of dealership agreements objectively and without discrimination and its only effect on trade is to allow the distribution and resale of its equipment only through approved resellers or between approved resellers. This system does not therefore affect competition within the meaning of Article 85 (1) of the Treaty and it cannot be maintained that Revox's failure to enter into an agreement with the applicant by reason of factual circumstances peculiar to the case is such as to hinder trade in a manner prejudicial to attainment of the objective of a single market between States.

(b). Likewise, Revox considers that it cannot be accused of abusing a dominant position by refusing to approve the applicant.

IV —. Oral procedure

1. By application lodged at the Court Registry on 13 July 1981, Oswald Schmidt, trading as Demo-Studio Schmidt, Wiesbaden, Federal Republic of Germany, brought an action under the second paragraph of Article 173 of the EEC Treaty for a declaration of the nullity of the measure dated 11 May 1981 concerning a proceeding for the application of Articles 85 (1) and 86 of the EEC Treaty, in which the Commission, expressing its final decision, notified the applicant that it considered that there were no grounds for upholding his complaint seeking a declaration that Willi Studer Revox GmbH (hereinafter referred to as Revox) had infringed the competition rules laid down in Articles 85 and 86 of the EEC Treaty by refusing to approve him as a specialist reseller or to supply him with its products.

2. Revox distributes within Community territory the audiovisual products of the company Revox International whose registered office is at Regensdorf bei Zürich (Swiss Confederation). It distributes so-called A Series Revox products for the delivery of which no special conditions are applied and also so-called B Series Revox products; the latter are distributed under a selective distribution system whereby distributors of Revox products are selected according to objective qualitative criteria such as the quality of presentation, the accessibility of the premises or the sales department during normal business hours, the competence of the sales staff and the capacity to carry out pre-sales checks, to advise customers and to provide after-sales service. This distribution system is embodied in a contract known as the EEC Dealership Agreement.

3. The applicant, who is employed as a design engineer in an engineering factory, decided during 1975 to set up, in addition to his employment, a business in the leisure electronics sector. For that purpose he notified Revox of his plan and opened a shop in Wiesbaden under the name Demo-Studio Schmidt, which was open to the public on Saturday morning and on the other working days from 4 to 6 p.m. He was then supplied with Revox equipment which was not subject to selective distribution conditions. However, it soon became apparent to Mr Schmidt that he could not cover his business expenses except by selling B Series Revox products, which were subject to selective distribution conditions.

4. After numerous negotiations with Revox, the applicant was informed by Revox on 19 September 1977 that he would not be allowed to accede to the EEC Dealership Agreement and consequently he would be unable to deal in B Series products; that decision was confirmed to him, on the last occasion, by letter of 27 December 1979. The reason for the refusals was stated to be the fact that Demo-Studio Schmidt did not satisfy the qualitative criteria imposed by Revox on its distributors, in particular the condition that the sales premises must be open during normal business hours.

5. In those circumstances the applicant lodged the aforementioned complaint with the Commission on 7 June 1980, expressly requesting that Revox should be compelled to supply him with B Series products.

6. By letter of 18 September 1980, the Commission, acting in accordance with Article 6 of Regulation No 99/63 of the Commission of 25 July 1963 (Official Journal, English Special Edition 1963-1964, p. 47), notified the applicant of its intention, at that stage of its inquiries, not to follow up his complaint and asked him to submit his comments on that assessment of the situation within a period of one month.

7. By letter of 12 October 1980 the applicant confirmed that he adhered to his complaint and stated that he did not dispute the propriety of Revox's EEC Dealership Agreement but sought, on the contrary, to be made a party thereto.

8. By a letter of 11 May 1981 stating the reasons on which it was based, the Commission notified the applicant of its definitive decision on the matter. The essential reasons on which that final decision was based were, first, that in the Commission's opinion there was no basis for concluding that, by refusing to supply the applicant, Revox had abused a dominant position within the meaning of Article 86 of the EEC Treaty and, secondly, that Mr Schmidt's shop did not satisfy the condition imposed by the selective distribution system applied by Revox that it had to be open at the usual times and that consequently Revox's attitude towards him did not constitute an infringement of Article 85 (1) of the Treaty.

9. In those circumstances the applicant brought this action before the Court seeking on the one hand that the Commission's communication of 11 May 1981 should be declared void and, on the other, that the Commission should be required to give a fresh decision on the complaint lodged with it, taking account of this judgment.

10. According to the wording of Article 3 of Regulation No. 17, which concerns the termination of infringements :

11. Although the formal complaint lodged by the applicant on 7 June 1980 sought an order that Revox should supply him immediately, it must be interpreted — as indeed it was interpreted by the Commission during the phase prior to these proceedings and as is apparent from an analysis of the pleadings submitted to the Court — as a request for the Commission to establish an infringement of the provisions of Articles 85 and 86 of the Treaty, in accordance with Article 3 (1) and (2) (b) of Regulation No 17 and, by decision, to require Revox to bring the infringement to an end.

12. The Commission does not dispute the fact that its decision on the applicant's complaint does constitute a measure which the Court may be called upon to declare void, since a notice or communication of that kind is definitive.

13. However, the Commission states that it leaves it to the Court to assess to what extent the applicant really has an interest in taking legal proceedings, regard being had in particular to the fact that, in the Commission's opinion, the powers vested in it by Article 85 do not include the power to compel a company to approve a dealer as a specialized distributor or to supply him with products.

14. As the Court held in its judgment of 25 October 1977 in Case 26/76 (Metro v Commission [1977] ECR 1875) It is in the interests of the satisfactory administration of justice and of the proper application of Articles 85 and 86 that natural or legal persons who are entitled, pursuant to Article 3 (2) (b) of Regulation No 17, to request the Commission to find an infringement of Articles 85 and 86 should be able, if their request is not complied with either wholly or in part, to institute proceedings in order to protect their legitimate interests.

15. The Court considers that the refusal to grant Mr Schmidt a dealership for Revox products, which was regarded by him as constituting an infringement of Articles 85 and 86 of the Treaty, was capable of affecting his legitimate interests. Moreover, at the Court held in its judgment of 6 March 1974 (Joined Cases 6 and 7/73 Istituto Chemioterapico Italiano SpA [1974] ECR 223) and in its order of 17 January 1980 (Case 792/79 R Camera Care Limited v Commission [1980] ECR 119), where the Commission has found an attitude on the part of a producer which constitutes an infringement of Articles 85 and 86, it has the power to order the undertaking in question to take any measures necessary to bring the infringement to an end.

16. The application must therefore be regarded as admissible.

17. The applicant does not deny that Revox's selective distribution system is compatible with Community law. On the other hand, he claims that the system has been applied to him in a discriminatory manner and that Revox's conduct constitutes an infringement of Article 85 (1) and possibly of Article 86 of the Treaty. In support of that submission, he maintains essentially that he satisfied all the conditions laid down in the Revox EEC Dealership Agreement, in particular the requirement that the shop be open during normal business hours.

18. In reply, the Commission states in the first place that Revox has not applied its selective distribution system in a discriminatory manner to the detriment of Mr Schmidt since, in particular, Mr Schmidt has never satisfied the essential condition regarding opening hours. In this case therefore there is no infringement of Article 85 (1) for which it could have imposed a penalty. Moreover, the Commission emphasizes that only if Revox abused a dominant position within the meaning of Article 86 of the Treaty would it have the power to take decisions compelling Revox to accord equal treatment to traders in the market in question. It points out, however, that Revox cannot be stated to have committed any infringement of Article 86 of the Treaty.

19. As regards the alleged infringement of the competition rules of the Treaty, the Court considers that the Commission, having received the applicant's complaint, was under a duty to examine the facts put forward by the applicant in order to decide whether Revox's application of its selective distribution system was capable of distorting competition within the common market and of affecting trade between Member States.

20. As regards the alleged infringement of Article 85 (1) of the Treaty, it appears that the finding made by the Commission in the contested decision, to the effect that Mr Schmidt's shop did not satisfy the condition of Revox's EEC Dealership Agreement whereby the shop must be open during normal business hours, is not based on a materially incorrect appreciation of the facts and is not vitiated by any manifest error of assessment. Moreover, nothing in the documents before the Court allows the inference that, by refusing to enter into a contract with Mr Schmidt until he had satisfied the conditions of the EEC Dealership Agreement, Revox had any other purpose than the legitimate one of ensuring that Demo-Studio Schmidt satisfied the qualitative criteria imposed by Revox on all its distributors. The Commission was thus entitled to conclude that Mr Schmidt had not been the victim of any discriminatory application of Revox's selective distribution system such as to constitute an infringement of Article 85 (1) of the Treaty.

21. As regards the alleged infringement of Article 86 of the Treaty, the Court considers that the documents before it show that the Commission correctly assessed the facts of the case in evaluating Revox's share of the market in question as 1% and deducing therefrom that that share cannot be regarded as constituting a dominant position. It was therefore right, particularly since no discriminatory application of the selective distribution system had been found to exist, for the Commission to conclude that there was no basis for the view that Revox was abusing a dominant position within the common market or in a substantial part thereof within the meaning of Article 86 of the Treaty.

22. It follows from the foregoing that Mr Schmidt's complaint contains no factor capable of supporting the view that the application to the applicant by Revox of the rules of its distribution system infringes the competition rules of the Community or that the Commission has failed in the duty of vigilance imposed upon it by the Treaty and by Regulation No 17. The action must therefore be dismissed.

23. Pursuant to Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party's pleading. Since the applicant has failed in his submissions, he must be ordered to pay the costs, including those of the party intervening in support of the defendant.

On those grounds THE COURT hereby:

1 Dismisses the action;

2 Orders the applicant to pay the costs, including those of the intervener.