Opinion of Mr Advocate General Reischl

Mr President,

Members of the Court

The applicant in the proceedings in which I deliver my opinion today together with its subsidiary company Telefunken-Fernseh- und Rundfunk-GmbH (hereinafter referred to as TFR) which since 1 June 1979 has formed an independent business sector of AEG, is involved in the market in consumer electronic products for the leisure market, manufacturing and selling television, radio, tape-recorder, audio and audio-visual equipment.

In 1973 it was decided for marketing purposes to make selective arrangements in respect of a part of the production, namely the so-called five-point programme, the marketing of which was entrusted only to selected dealers. That distribution restriction was notified to the Commission on 6 November 1973 under Article 4 of Regulation No 17. As a result of discussions on the matter certain changes were made to the marketing system at the Commission's request. Finally, the Director General for competition stated in a letter of 17 May 1976 that he had no objections under Article 85 (1) of the EEC Treaty to the wording of the European Community Agreement which he had received on 16 March 1976.

The distribution system was operated in such a way that agreements were entered into with specialist wholesalers and retailers satisfying certain conditions under which AEG-Telefunken undertook to deliver contract goods only to dealers within the meaning of the selective distribution agreement and dealers undertook to pass on the contract products within the contractual territory — the European Community — only to resellers who gave prior proof of having signed the distribution agreement. Until the end of 1978 those contracts were entered into by AEG acting at the same time for TFR; thereafter AEG Telefunken Konsumgüter Aktiengesellschaft appeared in the standard contracts as the contractual partner of the dealers, acting in the name and on behalf of AEG and also acting at the same time for TFR. Marketing is carried out in the Federal Republic of Germany through the AEG marketing offices or branches, and in other EEC States through the AEG subsidiary companies responsible for marketing, thus for example through ÁEG Telefunken France SA (hereinafter referred to as ATF) and through AEG Telefunken SA Belge (hereinafter referred to as ATBG).

In the course of the time the Commission received complaints from various dealers who felt themselves aggrieved by the way in which the AEG distribution system was being operated. This prompted the Commission in June 1979 to carry out investigations in respect of TFR, ATBG and ATF as they were moreover also doing at that time with regard to other undertakings operating selective distribution systems in the field of leisure electronics. On the basis of the evidence collected, the Commission, by decision of 29 May 1980, initiated a procedure against the applicant pursuant to Article 9 of Regulation No 17. The Commission formulated its complaints concerning the operating of the selective distribution system in a statement of objections dated 2 June 1980. The applicant responded to that statement in a reply dated 5 August 1980, at a hearing held on 19 August 1980 and in further documents.

On 6 January 1982 the Commission adopted its definitive decision. After a detailed statement of the reasons on which the decision is based, in which the actual operation of the selective distribution system in Germany, France and Belgium is critically examined and assessed in the light of Article 85, the decision states in Article 1 that the selective distribution system introduced by the applicant in respect of Telefunken branded goods contravenes Article 85 (1) of the EEC Treaty in the way in which it is operated inasmuch as (a) dealers, although satisfying the conditions for authorization, were denied access to the contract goods, and (b) the selling prices charged by the contracted dealers were directly or indirectly determined by AEG. By Article 2 AEG is required to terminate without delay the infringements mentioned in Article 1. Article 3 imposes a fine of 1000000 European currency units or DM 2445780 to be paid within three months of notification of the decision to an account of the Commission.

On 24 March 1982 AEG-Telefunken brought proceedings against that decision before the Court of Justice seeking a declaration that it was void.

By a separate document application was made at the same time to suspend enforcement of the contested decision. After the applicant, as the Commission had requested, had furnished on 17 March 1982 a bank guarantee, a decision was adopted on 6 May 1982 suspending the operation of Article 3 of the decision subject to the maintenance of the security in favour of the Commission.

My opinion on this case is as follows.

To begin with, the content of AEG-Telefunken's European Community Agreement to which the Commission had no objections, must be briefly examined, and a succinct summary will serve to show to what extent the Commission considers the practical operation of the selective distribution system to be open to criticism.

1. The aforesaid agreement lays down the requirements which specialist retailers and wholesalers must satisfy in order to be authorized to sell Telefunken branded products.

2. The Commission takes the view that in practice the applicant did not adhere strictly to those conditions and that it may therefore be alleged that in operating the distribution system it infringed Article 85 (1) of the EEC Treaty.

Before I examine whether the allegations made by the Commission or the arguments put forward by the applicant in its defence are justified I thinprevious decisions of the Court of Justice concerning selective distribution systems.

1. Thus, in the judgment in Case 26/76 it was stated that selective distribution systems may be compatible with Article 85 (1) of the EEC Treaty provided that resellers are chosen on the basis of objective criteria of a qualitative nature relating to the technical qualifications of reseller and his staff and the suitability of his trading premises and that such conditions are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion (paragraph 20 of the decision).

2. Those decisions enable certain important findings to be made in respect of the present case.

1. Non-approval of dealers in Germany

Following these introductory remarks I shall now turn first to that part of the case which relates to the problem of discrimination in authorizing dealers including the grant of territorial protection in certain cases. I shall begin by examining the individual cases set out in the decision and shall then examine the critical findings of a general nature relating to this question appearing in the decision under the heading The introductory phase and General distribution policy as regards Germany and general distribution policy in France.

1. Non-approval of dealers in Germany

Two cases must be considered here: the refusal to supply the Ratio store opened in Kassel in May 1976 belonging to a chain of retail shops (discount stores) belonging to Terfloth & Snoek GmbH and the ban on supplies to the approved wholesaler Harder in Villingen imposed in December 1976 and the events which are of importance in connection with the attempt to have the ban lifted.

(a) Ratio store in Kassel

I need not set out all the details of this case; for that I refer to the Report for the Hearing and the pleadings. The applicant takes the view that a refusal to admit a dealer may be regarded as discriminatory only if it is established that a dealer satisfied the criteria for admission to the distribution system. In Ratio's case the specialist trade criteria were not satisfied and the applicant therefore was unable to admit the Ratio store into its distribution system and it had an obligation to its approved dealers not to do so. On the other hand the Commission considers that it is clear from a memorandum dated 6 April 1976 concerning talks on a first visit to Ratio (Annex 7 to the defence) that the applicant's representatives themselves were of the opinion that the Ratio store did broadly satisfy the specialist trade criteria. But in the last resort it does not depend on that factor since there is also discrimination where another factor, namely the apprehended conduct as regards prices, was the decisive reason for non-approval. That is the assumption that must be made in Ratio's case since the decisive factor leading to a refusal to supply Ratio was the fact that it is a discount store and that, as is clear from the memorandum of talks mentioned above, no agreement had been reached on market prices. Furthermore, the applicant must in any case be criticized for not wishing to admit Ratio since it did not specify those admission criteria which were allegedly not satisfied even after Ratio, in a letter of 22 December 1976, repeated its request to be supplied and, at the same time, expressly offered to satisfy every condition imposed by the applicant.

In my view, the criteria for admission to the distribution system may be said to have been applied in a discriminatory manner only where supplies are refused in spite of the fact that all the criteria for admission are satisfied, that is to say, where in respect of a buyer additional considerations are conclusive. The question whether the criteria for admission are satisfied can therefore certainly not be left unresolved by reference to the fact that, in any event, other reasons for the refusal to supply were decisive. Otherwise in certain circumstances we should be faced with imposing a sanction for a purely subjective attitude in the absence of any objective proof of a breach of the conditions of competition.

As regards Ratio's store in Kassel it can certainly not be inferred from the memorandum of 6 April 1976 that the applicant itself was of the opinion that Ratio broadly satisfied the specialist trade criteria which, moreover, does not amount to satisfaction of all such criteria. It is clear from the wording used at the end of the second paragraph of the above-mentioned memorandum, where the word soil [is alleged] is used, that it is only statements by Ratio which are being reported. It was therefore not an assessment by representatives of the applicant which in any event was not definitively possible at that time because the store had not been opened and, for a proper assessment, the current management of the business (background noise, available sales staff) must be taken into consideration. That assessment by the applicant was to be carried out at the end of May as is also apparent from the memorandum.

On the other hand there arc certain factors which indicate that the assessment then carried out had a negative result for good reasons. Thus it is stated in a letter from Ratio's lawyer dated 22 December 1976 (Annex 40 to the application) that a complaint had been made at the end of May that there was no self-contained specialist department on its premises and that too many products in their original packing were stored in the salesrooms; that is contrary to the requirements laid down in the European Community Agreement under Clause II — 1 ( c) that there should be facilities for appropriate display and that there must be a high-standard salesroom. As much is also admitted in a letter from Ratio's lawyer to the Commission of 2 October 1980 (Annex 7 to the defence). Moreover not only is it significant that Ratio did not attempt to obtain supplies by means of a court order and that it did not lodge any appeals against court decisions which the applicant obtained in 1978 because Ratio had obtained contract goods in breach of the distribution restrictions. It is also significant that similar complaints the justification of which was not disputed by Ratio are to be found in a report of a visit of 30 October 1980 (Annex 53 to the application) and that the applicant — as is already mentioned by reference to specific findings in its observations on the statement of objections — was in a position to criticize Ratio for not having sufficient qualified staff because evidence of a specialist training was available only in the case of one of three salesmen responsible for a large sales area.

Furthermore in my view it cannot be said that it has been sufficiently shown that, for the applicant, a decisive reason for refusing to supply Ratio was the fact that it was a discount store and that no agreement had been reached on market prices. As regards the point mentioned first there is nothing to indicate that in the documents submitted in the Ratio case. As regards the second point the Commission was indeed able to point to the last paragraph of the memorandum of 6 April 1976 where it is stated: Market pricing was discussed, although no agreement was reached. Market pricing will depend on the discussions in Kassel. But it cannot be ignored that the first of the sentences quoted relates to the non-contract goods regarding Ratio-listing for 1976 which is mentioned in the previous sentence. Secondly it was also not shown that significant importance was in fact attached to market pricing. This could easily have been established by questioning Ratio as was in fact done. It is striking however that there is no mention of that in the detailed observations which Ratio sent to the Commission in October 1980.

When the Commission finally criticizes the fact that Ratio was not given the opportunity, in answer to its letter of 22 December 1976 accepting all the conditions, of satisfying all the criteria for admission by means of a statement of the criteria which were not met, it seems to me extremely doubtful whether that could justify the description of its application of the distribution system as improper. Quite irrespective of the fact that, as appears from the letter from Ratio of 22 December 1976, specific complaints were made, one would at least have to concede that this is a completely new type of consideration for the assessment of the operation of a selective distribution system and that therefore an accusation of blame may scarcely be made particularly since under German law — and in that connection the applicant has referred to the judgment in Case 14/68 the willingness to satisfy specialist trade criteria is not sufficient but they must be actually satisfied where a right to receive supplies is invoked (cf. the judgment of the Bundesgerichtshof [Federal Supreme Court] of 30 June 1981, KZR 11/80).

The Ratio Store case is therefore not capable of proving that the applicant operated a discriminatory practice with regard to authorization. In assessing the applicant's operation of the distribution system it must therefore be left out of consideration.

(b) Harder (Villingen)

This case does not involve the critical admission of a dealer as a specialist wholesaler but the manner in which the applicant treated an authorized dealer after banning him at the beginning of December 1976 from the distribution system on account of infringements of the system — repeated supply of considerable quantities of goods to non-contracted retailers (see the letter from the Freiburg sales office dated 15 December 1976 — Annex 55 to the application). In view of the fact that it is also explained in that letter that Mr Harder is prepared, in addition to undertaking to observe the distribution agreement, expressly to enter into the following commitments:

The Commission reached the conclusion that this was also a case of discriminatory application of the distribution system because the applicant was not content with the fulfilment of the specialist criteria mentioned in the European Community Agreement which Harder evidently satisfied.

In my view the Commission was wrong to use this case as evidence of a discriminatory practice with regard to authorization just as it was wrong in the case of the Ratio Store in Kassel.

It is important to note at the outset that it is presumably beyond doubt that the applicant was justified in imposing a

It is also significant that in relation to the conversation about a possible continuation of business relations, to which the letter of 15 December refers, it was only recorded that Harder was prepared to undertake additional commitments; it is not apparent however that that was demanded by the applicant's sales office in Freiburg as a precondition for a resumption of supplies. Even if the assumption were made that the sales office in Freiburg took such an initiative that is in the last resort irrelevant because the final decision as to how the Harder case was to be dealt with, as appears from the final sentence of the letter of 15 December 1976, was to be a matter for TFR. It has however become clear in the course of the proceedings that the definitive termination of business relations by TFR took place for other reasons. It may be seen from the correspondence before the Court that Harder was required to give an explanation of the infringements, a declaration that such infringements would cease and, as provided for by the European Community Agreement, to pay the costs incurred as a result of its infringements. In lawyer's letters of 29 August and 7 September 1977 that alone was named as the condition for the lifting of the ban on supplies. Despite various warnings those conditions were not satisfied. Instead further improper deliveries were made, incorrect information was given about the channels of supply and unjustified subterfuges were established. It is common ground that thereupon relations were finally broken off in September 1977 and Harder never sought to obtain a resumption of supplies.

The Harder case cannot therefore be regarded as evidence of a discriminatory application of the distribution system since it was merely a case of a proper exclusion on account of infringements committed and an unwillingness to give a guarantee that the distribution agreement would be properly applied.

2. Non-approval of a dealer hi Belgium

This case concerns the wholesaler Diederichs whose business activities had long since come to notice as a result of his bypassing the respective national agencies and selling Telefunken equipment below ATBG's selling prices. In September 1977 negotiations took place to regularize his activities (see note of 29 September 1977 in Annex 16 to the defence). It was noted there that Diederichs had practically no administration, that 11 lorry drivers served the whole of Belgium on fixed itineraries and that there was no external sales organization. In a telex message dating from mid-October 1977 (Annex 64 to the application) it was emphasized, in connection with this case, that admission into the distribution system, in so far as the criteria for admission to the distribution system are satisfied, could take place only if undertakings to desist in future from infringements of the competition rules were given in writing. In a report by ATBG to TFR dated 24 October 1977 (Annex 16 to the defence) there is further reference to the effect that Diederichs had entered into a distribution contract with Grundig and a statement that such an agreement would also be possible for Telefunken. It was added however that: The talks indicate, however, that Diederichs is unwilling to accept a pricing arrangement that would make his activities compatible with ours. Finally it was stated in a note of 28 October 1977 (Annex 65 to the application) in connection with the Diederichs case that, since it had become clear in further discussions that Mr Diederichs was not prepared to adhere to any of the price levels recommended by ATBG for Belgian retailers and erwise no legal objections to refusing to enter into a distribution agreement with Diederichs had been raised — the previous infringements constituting sufficient reason — there was no ground for continuing the discussions initiated with Mr Diederichs.

As far as this case is concerned, I have gained the impression from everything that has been stated in the proceedings that the Commission was right to rely on it as proof of the improper operation of the distribution system and that the applicant's argument in its defence, primarily that Diederichs did not in fact satisfy the qualitative criteria for admission, seems unconvincing.

In so far as the applicant relies on Diederichs's earlier conduct contrary to the rules on competition it is important to note on the one hand that according to the last-mentioned note dated 28 October 1977 the alleged infringement of rules on competition by Diederichs manifestly was not the decisive reason for breaking off discussions with Diederichs. Although on the other hand it must be conceded that under the European Community Agreement dealers are required to observe the rules of competition law that quite clearly can only apply to the time subsequent to admission into the distribution system. Infringements committed earlier may therefore at the most be relevant only if, owing to their number and importance, they give rise to justifiable fears that they will be continued after admission into the distribution system. However, the Diederichs case does not provide any sufficient ground for such fears. In fact the applicant's references — and no other argument was put forward — to the fact that in 1975 the Belgian Ministry of Economic Affairs dealt with an allegation of unfair competition against Diederichs which clearly was not pursued, and to the fact that Diederichs was found guilty of misleading advertising in a decision of the Commercial Court at Tongeren of 8 January 1976, which was then affirmed by a judgment of the Court of Appeal Antwerp on 27 June 1977 are hardly sufficient evidence.

The applicant further emphatically maintains that Diederichs did not in fact satisfy the specialist trade criteria of the European Community Agreement and refers to Diederichs's financial position about which enquiries were made as early as September 1977 and about which it was stated in a letter of 19 October 1977 (Annex 66 to the application) that Diederichs's situation was precarious but that argument is not convincing. As has already been stated, the applicant is wrong to suppose that, in accordance with the case-law applicable, the financial capacity of a dealer is to be regarded as a relevant qualitative criterion for authorization. The same applies to its reference to the fact that Diederichs was unable to deal with guarantee and after-sale services, to which the Commission correctly stated that under the European Community Agreement that obligation is imposed not on wholesalers but on retailers; the position is the same, again, with regard to the argument that Diederichs was not prepared to give essential information since, in that connection, it is stated in the note dated 29 September 1977 only that Diederichs was not prepared to make its list of customers available for the purpose of agreeing which customers should not be supplied by him, which can hardly be regarded as a refusal to give any information. Although the applicant's statements in the proceedings might give rise to the impression that a strict examination might have aroused justified doubts as to whether Diederichs satisfied the specialist trade criteria, particularly in view of his small staff and the absence of an external servicing organization, all of which rendered impossible regulaex post facto reasons. It is material that in none of the documents quoted were those considerations described as decisive whereas, on the other hand, in the letter dated 24 October 1977 it is stated that Diederichs had entered into an apparently similar distribution contract with Grundig. The letter then continues as follows: Such an agreement would also be possible for Telefunken.

Finally as regards the applicant's arguments relating to the pricing discussions (to the effect that it was not a question of retail prices which Diederichs did not know but his purchase prices and, in the Diederichs case, it was important to avoid a breach of Belgian law pursuant to which ATBG is required to submit to the Ministry the basic net prices to the specialist trade and to grant only certain maximum rebates on those prices and not a particular spread as requested by Diederichs), it should be noted that in one of the documents presented is the last-mentioned reason mentioned as an obstacle to authorization. It is also quite clear from the note of 28 October 1977 in which the breakdown of discussions with Diederichs is mentioned but none of the questions relating to the specialist trade criteria is further enlarged upon, that the important factor was solely the fact that Diederichs was not prepared to observe any price level recommended by ATBG for Belgian retailers, which gave rise to fears that there might be considerable price unrest throughout the Belgian market.

In fact, therefore, it cannot be disputed that in the treatment of the Belgian wholesaler Diederichs the Commission was right to discern a case of discriminatory exclusion from the distribution system, since the decisive factor in that exclusion was not the specialist trade criteria but another factor relating to price structuring which cannot therefore be taken into account.

3. Discrimination in the admission of dealers in France

In this connection there are three cases in which, it is alleged, admission to the applicant's distribution system was agreed only after the receipt of certain assurances relating to price structure.

I now come to the cases which, in the Commission's decision, are gathered under the heading: Territorial protection. In that connection it is stated in general terms in the decision that certain dealers in France had been allocated a specified sales area territory, that they would face no competition as regards Telefunken products within the area allocated and that therefore the admission of other dealers who had applied had been rejected. If that were to be proven that would also be a case of an unlawful operation of the distribution system because that would entail a quantitative selection restricting competition in a given area which, under the case-law of the court, cannot be permitted. On the other hand such cases do not, in my opinion, include those in which a manufacturer because, in the context of his sales strategy he comes to the conclusion that an area is adequately supplied, refuses on his own initiative and without any obligation to do so to consider application from other dealers, which may be termed a factual or moral exclusivity of approved dealers.

Since an examination of the individual cases mentioned in the decision has shown that only as regards a part of them is it correct to speak of an improper operation of the distribution system, I shall now turn my attention to those sections of the preamble to the decision in which the applicant's general policy is discussed and the attempt is made on the basis of documents of general scope to point to factors indicating an improper implementation of the distribution contract. As in the decision, a distinction will be made between the introductory phase, general distribution policy in Germany and general distribution policy in France.

IV — Influence brought to bear on prices in the case of approved dealers

I now come in this further section of my investigation to the criticisms relating to the application of the distribution system with a view to exerting an influence on market prices.

The Commission's point of departure is quite clear: in its opinion selective distribution systems are at the limit of what is lawful from the point of view of competition law since trade competition with a brand (intra-brand competition) is restricted by the fact that not every distributor is admitted to the distribution system. From that it deduces — should there be no objections to the application of such distribution systems under Article 85 — an absolute rule that approved dealers must in no way be influenced in their pricing arrangements. In the operation of the Telefunken distribution agreement it considers that freedom to have been prejudiced in many ways: by agreements, both vertical and horizontal, by concerted conduct, by gentlemen's agreements, but also by unilateral campaigns by the applicant ranging from price recommendations and intensive price discussions to instructions, accompanied by hidden pressure, with regard to pricin the light of the precept laid down in the judgment in Case 26/76 to ensure that the rigidity of the price structure is not reinforced, it believed that it must express its emphatic disapproval of the effects of price structuring in the case of Telefunken products because, in that way, price competition, which in any event had been restricted by the exclusion of certain particularly aggressive distributors, had been reduced.

Since the decision on the one hand sets out a series of individual cases in this connection too and on the other hand attempts, by means of documents of general scope, to prove the existence of a general policy of ensuring a high level of prices and high dealer margins, it seems appropriate again to divide the investigation, as in the first section, in such a way as to inquire first into the individual cases mentioned from the various countries and then the general distribution policy in the countries concerned.

1. Influence brought to bear on prices in France

(a) The individual cases mentioned

(aa) The Auchan case

It has already become clear in another context that the admission of Auchan into the distribution system was made conditional on the assurance that it would adhere to the prices recommended by ATF and would apply prices no lower than those charged in the town in question (cf. memorandum of 20 October 1978). We are therefore here concerned with a clear agreement which is closely connected with the distribution system which, as a result, was rightly criticized also from the point of view of its influence on price competition, particularly since it could not be shown that it was concerned only with the exclusion of prices contrary to the rules on competition.

On the other hand the applicant's argument that Auchan never subsequently adhered to its assurance is, in the first place, irrelevant since it is sufficient for the purposes of Article 85 if a restriction on competition is intended, which is surely true in the case of an agreement. Its references to the fact that Auchan always advertised lowest prices and cut prices (p. 86 of the observations on the statement of objections), and that the prices advertised were so slightly above the net purchase prices that with the remaining margin the additional services advertised (time allowed for payment and guarantee) could not have been covered and that other manufacturers as well, as is demonstrated by a letter from Thomson-Brandt dated April 1980, had criticized loss-leader offers by Auchan, may at the most be of relevance in assessing the extent of the infringement of the rules on competition whereby it is also important to note that business relations, as stated on page 85 of the observations on the statement of objections, developed normally only as from the end of 1979.

(bb) The Mammouth case

This case is similar. Here as well the decisive factor is the promise mentioned in the memorandum of 20 October 1978 to adhere to prices charged in Toulouse, which points to an agreement to desist from price competition. That was also rightly criticized as influence brought to bear on prices in connection with the distribution system. Although the applicant stated (on page 33 of the application) that the pricing policy of Mammouth, following its admission to the distribution system — although it had not been criticized by ATF — had been very aggressive, that can be of importance merely in assessing the effects of the agreement entered into.

(cc) The Iffli case (Metz)

In the Commission's view three factors are of importance in this case: first, on admission into the distribution system Iffli undertook to adhere to the retail sale prices laid down by ATF (see memorandum of 30 June 1978); furthermore, the applicant was instrumental in bringing about an agreement on a policy of fixed prices between Iffli and two other dealers in Metz (Le Roi de la Télé and Darty); finally Iffli explained on 12 August 1978 that representatives of ATF had stated that re-sellers in the Paris region and in other regions of France had agreed to refrain from price competition in Telefunken products.

On the first point it must be recognized that the Commission is right to criticize that application of the distribution agreement amounting to a restriction of price competition.

With regard to the two other points on the other hand, it became apparent in the course of the proceedings that there are good reasons for not following the Commission's argument.

Admittedly, as regards the first point, it must be conceded that it is stated in the memorandum of 30 June 1978: We thought it would be better to arrange a fixed-price policy agreement for Metz between Le Roi de la Télé, Iffli and Darty and that Iffli stated in his letter of 12 August 1980 that, according to the statements of ATF's representatives, Darty and Le Roi de la Télé had agreed not to indulge in price competition with Telefunken products. In that connection however not only did the applicant state emphatically that the proposal mentioned in the letter of 30 June 1978 had not been taken up and that it therefore had not been instrumental in bringing about any agreement on prices between the three aforementioned dealers. It also pointed to the fact that Darty, a company with a very high turnover and aggressive pricing policy, could clearly not have been interested in any such agreement, which would in any case have been pointless since there were two other retail dealers in Metz to ensure price competition. It would accordingly have been appropriate to examine these facts more closely, for instance by questioning the dealers involved. In any event, on the basis of the available evidence and in view of the application made by the applicant in the administrative procedure, on the ground that Iffli lacked credibility, to address a formal request for information to Iffli, which was not done, it cannot be assumed that the allegation that the applicant encouraged a horizontal agreement on prices has been satisfactorily proven.

With regard to the third point the applicant stated emphatically that Iffli's statement was pure invention and that evidence of Iffli's lack of credibility had been shown (see the letter dated 7 November 1980 addressed to the Commission). Therefore, Iffli's explanations, which were given without any formal request for information, and on account of which the confrontation requested by the applicant (cf. its letter of 18 September 1980) did not take place, can hardly be regarded as a sufficient basis for the allegation made by the Commission.

With regard to Iffli therefor, only the criticism of the first fact referred to is justified. When moreover the applicant points to the very modest turnover achieved by Iffli in Telefunken products in 1978 and 1979 and to the absence of orders as from 1980 (page 89 of the observations on the statement of objections, and page 98 of the application) and also claims that Iffli did not in fact adhere to the agreement mentioned in the letter of 30 June 1978, which is borne out by official findings of loss-leader offers made with very low Telefunken prices (cf. memorandum of 26 March 1979, Annex 60 to the application), that is at best only of significance in assessing the effects of the infringement which has been established against the provisions of competition law.

(dd) Other French cases

Whilst the cases of the three re-sellers, which I have just dealt with, concerned agreements reached essentially at the same time as admission into the distribution system the six other cases still to be discussed in this context relate to campaigns influencing prices subsequent to admission into the distribution system.

(b) Documents of general scope relating to the distribution policy pursued in France

Following the finding that in a series of cases unlawful influence was brought to bear on prices on the French market in the context of the distribution system, thus jeopardizing price competition, it remains to examine what may be gleaned in this connection from additional general documents which were adduced by the Commission as evidence to show that ATF had pursued a policy of high prices.

In this connection four documents are of importance :

In my view these documents reveal no further independent arguments on the question of improper influence brought to bear on prices.

The first-mentioned circular was presumably intended to give field salesmen a sales argument; apart from the fact that a certain minimum margin is perfectly legitimate on account of the specialist trade services associated with costs, where a marge correcte [correct profit margin] is mentioned, that serves merely to demonstrate the fundamentally restrictive admission policy towards discount stores, which has already been taken into account in another context.

The same applies to the second document, where it speaks of a marge convenable [appropriate profit margin]. Where the latter document however goes on to speak about the maintenance of retail prices and generally about the pricing policy of ATF that is probably worded in too general a way for conclusions to be drawn in respect of given methods of bringing influence to bear on prices.

As regards the third and fourth-mentioned documents it must admittedly be conceded that they appear to support a high-price policy on the part of ATF. They do not however produce any new evidence of any particular measures in the sphere of pricing arrangements.

2. Influence brought to bear on prices in Belgium

In this connection the decision sets out only a single relevant case and for the rest reference is made to a document of general scope.

3. Influence brought to bear on prices in Germany

I come finally to some cases of allegedly improper influence on pricing arrangements which the Commission believed it had found in Germany. Here a distinction is made in the decision between direct influence (paragraphs 40 and 41) and indirect influence on prices (paragraphs 48 to 52).

V — The application of Article 85 (1) of the EEC Treaty to the improper application of the distribution agreement

1. The examination of the case so far has shown that the allegations made by the Commission against the applicant are certainly justified only in part.

2. It is thus important to state that those infringements against competition law in the application of the distribution agreement which may be regarded as proven are relevant under Article 85 (1) — assuming that the restriction on competition was appreciable — only if it is shown that they were capable of affecting trade between Member States and what more, as has been repeatedly affirmed by decisions of the Court, to an appreciable extent (see judgments in Cases 19/77, 209 to 215 and 218/78 and 126/80).

3. Thus it is necessary to state not merely that the Commission's findings as to the extent of the unlawful application of the distribution agreement must to a considerable extent be regarded as unsound. In so far as the operation of the distribution agreement was rightly criticized, in my view it has not been satisfactorily shown that it was capable of appreciably affecting trade between the Member States.

The application is therefore well founded on the basis of the considerations set out thus far.

VI — The other submissions

Therefore none of the other questions raised in the proceedings

1. Article 85 (3)

In that connection it is stated in the decision that the implementation of the distribution agreement which was criticized by the Commission was not notified so that that alone is sufficient reason for not exempting it. Moreover it was emphasized that no exemption could be granted for a distribution system which discriminates as to admission and brings influence to bear on prices because those restrictions are not indispensable to the orderly marketing of the products in question and there are no apparent advantages for consumers. Against that the applicant points to the fact that it expressly applied for an exemption on notification and the Commission cannot therefore impose a fine without making a determination on it. With reference to the judgment in Case 26/76 it takes the view also that the concern to ensure a certain level of prices is inherent in a selective distribution agreement and actions designed to bring about that end therefore fall within the general application of the distribution system and therefore no special notification is necessary.

If, contrary to my opinion, Article 85 should be held to apply, I would agree with the Commission on this point.

As a general rule an exemption presupposes notification to the Commission. It is also certain that, when the application to the Commission was made, it was explained that every dealer satisfying the specialist trade criteria was admitted to the distribution system. On the other hand it was never clearly stated and thus did not form part of the subject-matter of the notification that certain borderline cases were to be treated with reserve, that under certain circumstances additional conditions were to be satisfied, that on admission areas of activity might be demarcated in which other dealers were not to operate and that during the existence of business relations with approved dealers there would be price agreements or influence would be brought to bear on pricing arrangements going beyond mere guidance. Therefore, in regard to the distortions of competition alleged by the Commission, in so far as the criticism may be regarded as justified, in fact for formal reasons alone a decision granting exemption is inconceivable.

Moreover, no other assessment is possible in reliance on the fact that the judgment in Case 26/76 1 mentions the basically legitimate desire to maintain a certain level of prices for the specialist wholesale and retail trade. Apart from the fact that the wording is naturally not capable of covering discriminatory measures on admission to the distribution system its meaning must in principle be understood to mean that it appears unobjectionable to maintain a level of prices which in itself results from the restriction of marketing to dealers who have to support certain special charges which are reflected in pricing arrangements. There is nothing however to support the supposition that that is intended to refer to special price campaigns going beyond guidelines with no binding effect, which, by regular interference with the freedom to fix prices, impair price competition.

2. The fact that the decision was addressed to AEG- Telefunken

In that connection the applicant emphasized in its observations on the statement of objections that TFR — whose marketing policies alone are at issue — is a legally independent branch of the AEG undertaking and its management has wide powers of decision-making. It also claimed that the decision to apply the distribution agreement was taken without any instruction from the management of AEG-Telefunken and that the determination of marketing policy and the practical operation of the distribution agreement was a matter for TFR alone. Thus certain methods of applying the distribution agreement could not be attributed to the parent company AEG and therefore the decision ought not to have been addressed to it in the absence of any involvement by AEG itself.

In the Commission's view, on the other hand, the decisive factor is that the distribution system was notified by AEG, that AEG also appears as a party in the agreements entered into with dealers and that marketing is carried on by AEG's marketing organization. It considers moreover that even if the application of the distribution agreement was a matter for TFR alone it is significant that TFR is under the control of AEG and has to follow the latter's instructions which were in fact given in individual cases. It is therefore possible to speak of a single economic unit with the result that the parent company must be regarded as responsible for the practical operation of the distribution system.

Similar problems have come before the Court on a number of occasions. For instance in the judgment in Case 48/69 a parent company and legally independent subsidiary company were treated as one economic unit on the supposition that the subsidiary company the majority of whose shares were held by the parent company did not independently determine its market behaviour but essentially followed the instructions of the parent company. In such a case, where there was a possibility of decisively influencing the policy of the undertaking and where use was in fact made of the power to give instructions it was considered appropriate to attribute the anti-competitive behaviour of a subsidiary to the parent company (see also judgments in Cases 6/72 and 6 and 7/73).

These proceedings involve the application of a distribution agreement which is open to criticism in view of the discriminatory exclusion of a dealer, of the laying down of supplementary criteria for admission and the determination of the areas of activity of approved dealers as well as of measures to influence the pricing arrangements of approved dealers during the existence of business relations. To attribute all that without further consideration to the parent company because it signed the distribution agreements and made available its sales organization appears in fact to be questionable on the basis of the case-law mentioned. Even if it were considered reasonable to attribute to the parent company as a signatory the events which occurred on conclusion of the contracts, that would be difficult without specific evidence of influence being brought to bear, which the Commission has not adduced, in so far as the exclusion of dealers or the mechanism based on the pricing arangements after admission to the distribution system are concerned.

The decision is therefore surely rightly challenged by the applicant to the extent to which all allegations as to the improper application of the distribution system are directed at the parent company.

3. The imposition and determination of the fines

If the Court should find that the improper application of the distribution agreement, in so far as it may be regarded as being proven, constitutes an infringement of Article 85, no objection can be raised in principle against the imposition of a fine. I say that because at any rate following the judgment in Case 26/76 (in October 1977) — and the great majority of the infringements which I regard as proven falls within that period — an allegation of liability seems justified and, contrary to the applicant's view, there cannot be any question of unavoidable errors in the context of a distribution agreement which in principle is directed centrally.

But a considerable reduction of the fine would certainly be appropriate. In that connection it is material that a substantial part of the Commission's allegations cannot be upheld and that the Commission did not obtain a reliable picture of the actual effects of certain infringements on the market and consumers. I leave the exact fixing of the fine to the discretion of the Court.

Finally I must say a few words about the question whether the applicant, if a fine remains payable, must pay interest on this amount until actual payment.

In this connection I must remind the Court that the Commission on serving the contested decision stated that on expiry of the period for payment (21 April 1982) it would enforce the claim in spite of the fact that an action had been brought; but so long as the matter was pending before the Court it would adopt no measures of enforcement if the applicant agreed that the claim should bear interest amounting to 1 % above the discount rate of the Bundesbank with effect from the expiry of the period for payment and provided the Commission was given a bank guarantee covering the debt together with interest. The applicant agreed to this proposal in so far as on 17 March 1982 its bank gave the guarantee required by the Commission. Furthermore the applicant in a letter of 28 April 1982 agreed that the claim for the fine should bear interest as from expiry of the period for payment and this it confirmed at the hearing of its application for a suspension of the decision.

Subsequently, on 6 May 1982 the President made the order mentioned at the outset suspending the operation of Article 3 of the decision subject to a maintenance of the guarantee given to the Commission. Since the applicant's agreement was subject to the reservation that the Court should examine the question whether interest might be demanded, the order contained a corresponding reservation. Therefore in dealing with the main issue I must say something about the duty to pay interest although the contested decision itself contains nothing about it.

The applicant claims that there is no legal basis in Community law for such an obligation. The Commission points to Article 185 of the EEC Treaty and relies on the fact that the applicant's agreement was a precondition of the Commission's agreement to a suspension of its decision and therefore forms the legal basis for the claim to interest. Furthermore it claims that only in that way is the purpose of the decision imposing a fine achieved or unnecessary court proceedings with the objective of economizing the interest obviated. If the Court should find that there is no duty to pay interest the Commission in the alternative proposes that the fine should be increased by a corresponding amount so as to prevent any economic advantage accruing from the suspension of operation of the decision.

On this point I would again agree with the Commission. Where it finds that there has been an infringement of Article 85 (1) and considers a fine appropriate then that fine is immediately enforceable in the period provided; under the system of the Treaty, financial sanctions must in principle have immediate effect because the bringing of an action has in principle no suspensory effect. If certain conditions are satisfied other arrangements may be made by means of an order under Article 85 of the Rules of Procedure. Some time ago an intermediate solution was found which was also applied in the present case and that seems to me not only to be entirely sensible because it tempers the harshness of immediate enforcement, gives security to the Commission and makes it no longer attractive to defer fulfilling an obligation to pay by bringing an action. Nor is a legal basis lacking, since the fundamental concept on which such a step is based is contained in Article 86 (2) of the Rules of Procedure.

Should the Court therefore, contrary to my opinion, take the view that the applicant's conduct justifies the imposition of a fine the order made by the President should be confirmed in such a way that the relevant amount should bear interest with effect from the due date laid down in the decision in the manner mentioned unless it is preferred — as would be possible in the event of reduction of the fine — to fix the amount of the fine in such a way that at the same time account is taken of the duty to pay interest.

In conclusion:

In my view the proceedings have shown that the Commission's finding that the distribution agreement introduced by AEG-Telefunken with effect from 1 November 1973 constituted an infringement of Article'85 (1) in the way in which it was applied is not satisfactorily proven. The Commission's decision should therefore be set aside in its entirety and it should be ordered to bear the costs of the proceedings including the costs incurred in proceedings for the adoption of interim measures.

1 Translated from the German.

2 Judgment of 25 October 1977 in Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875.

3 Judgment of 10 July 1980 in Case 99/79 Lancôme v Etos BV [1980] ECR 2511.

4 Judgment of 11 December 1980 in Case 31/80 NV L'Oréal v PVBA De nieuwe AMCK [1980] ECR 3775.

5 Judgment of 16 June 1981 in Case 126/80 Maria Salonia v Giorgio Poidomani and Franca Baglieri [1981] ECR 1563.

6 Judgment of 16 June 1981 in Case 126/80 Maria Salonia v Giorgio Poidomani and Franca Baglieri [1981] ECR 1563.

7 Judgment o f 25 October 1977 in Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875.

8 Judgment of 16 June 1981 in Case 126/80 Maria Salonia v Giorgio Poidomani and Franca Baglieri [1981] ECR 1563.

9 Judgment of 13 February 1969 in Case 14/68 Walt Wilhelm v Bundeskartellamt [1969] ECR 1.

10 Judgment of 15 June 1970 in Case 41/69 Chemiejarma NVv Commission [1970] ECR 661.

11 Judgment of 14 July 1972 in Case 51/69 Bayer AG V Commission [1972] ECR 745.

12 Judgment of 14 July 1972 in Case 54/69 Francolor v Commission [1972] ECR 851.

13 Judgment of 14 July 1972 in Case 51/69 Bayer AG V Commission [1972] ECR 745.

14 Judgment of 25 October 1977 in Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875.

15 Judgment of 25 October 1977 in Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875.

16 Judgment of 25 October 1977 in Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875.

17 Judgment of 1 February 1978 in Case 19/77 Miller International Sckallplatten GmbH v Commission [1978] ECR 131.

18 Judgment of 29 October 1980 in Joined Cases 209 to 215 and 218/78 van Landewyck v Commission [1980] ECR 3125.

19 Judgment of 16 June 1981 in Case 126/80 Maria Salonia v Giorgio Poidomani and Franca Baglieri [1981] ECR 1563.

20 Judgment of 6 March 1974 in Joined Cases 6 and 7/73 Commercial Solvents Corporation v Commission [1974] ECR 223.

21 Judgment of 31 May 1979 in Case 22/78 Hugin Cash Registers Ltd v Commission [1979] ECR 1869.

22 Judgment of 26 November 1975 in Case 73/74 Papiers Peints v Commission [1975] ECR 1491.

23 Judgment of 1 February 1978 in Case 19/77 Miller International Schallplatten GmbH v Commission [1978] ECR 131.

24 Judgment of 29 October 1980 in Joined Cases 209 to 215 and 218/78 van Landewyck v Commission [1980] ECR 3125.

25 Judgment of 1 February 1978 in Case 19/77 Miller International Schallplatten GmbH v Commission [1978] ECR 131.

26 Judgment of 31 May 1979 in Case 22/78 Hugin Cash Registers Ltd v Commission [1979] ECR 1869.

27 Judgment of 25 October 1977 in Case 26/76 Metro SB-Großmärkte v Commission [1977] ECR 1875.

28 Judgment of 14 July 1972 in Case 48/69 Imperial Chemical Industries Ltd v Commission [1972] ECU. 619.

29 Judgment of 21 February 1973 in Case 6/72 Continental Can Co. Inc. v Commission [1973] ECR 215.

30 Judgment of 6 March 1974 in Joined Cases 6 and 7/73 Commercial Solvents Corporation v Commission [1974] ECR 223.

31 Judgment of 25 October 1977 in Case 26/76 Metro SB-Großmärktev Commission [1977] ECR 1875.