Opinion of Advocate General
My Lords,
This case comes to the Court by way of a reference for a preliminary ruling under Article 177 of the EEC Treaty dated 21 October 1983, by the Vice-President of the Tribunal de commerce, Brussels, in summary proceedings for an injunction in an action pending before the Tribunal.
The principal facts found in the reference are as follows.
The plaintiff, Binon & Cie SA (Binon) carries on a business in Charleroi selling books, stationery, office equipment and educational toys. Until 29 January 1982 it held a franchise from Club SA, and since that date it has carried on its business under its own name without a franchise.
The defendant, Agences et messageries de la presse SA (AMP) is a public limited company with a share capital of BFR 300 million. 48.841% of its share capital is owned by Hachette SA, a French company. AMP and Hachette own respectively 9.35% and 24.55% of the share capital of a Belgian retailer of newspapers and periodicals Lecture générale SA, and AMP owns 98.03% of the shares in SA AMP Transports which is apparently a carrier.
AMP distributes within Belgium newspapers and periodicals. The Vice-President accepted that, leaving aside subscriptions, AMP or its affiliates distributed something like 70% of Belgian newspapers and periodicals, having almost a monopoly of the distribution of such foreign publications. These figures had been given in an opinion of the Belgian Conseil du contentieux économique (Council for economic disputes) of 10 May 1983.
Under an agreement dated 12 March 1976, AMP and publishers of newspapers and periodicals adopted a selective distribution system. Anyone who wished to open a retail outlet was required to apply to a regional consultative committee, consisting of representatives of the various sections of the industry, including AMP. Most publishers adopted the opinion of that committee as to whether approval should be granted for a new outlet and refused to supply anyone not so approved. The Tribunal de commerce of Brussels declared that arrangement as being contrary to the competition rules of both Belgian and Community law by judgments given on 8 July 1982 {Maria Danken v Drukkerij Het Volk & Consorts) and on 15 November 1982 (Club SA v AMP & Consorts, Journal des tribunaux, 5 February 1983, p. 100), the latter decision being confirmed as to its result by the Brussels Court of Appeal on 20 December 1983, though it seems not so much in regard to the structure as to the application of the system established.
The arrangement was also reviewed by the Conseil in its report of 10 May 1983 at the request of Club SA. The Conseil found that AMP and the publishers represented on the regional consultative committees abused the dominant economic power which they possessed in respect of the distribution and retailing of newspapers and periodicals. The Council recommended that: (1) the maintenance of the system introduced after the agreement of 12 March 1976 should be prohibited; (2) if a selective distribution system was introduced, (a) it should not be such as to prevent or seriously impede competition between publishers, (b) it should be based on qualitative criteria relating to the services offered and such criteria should be applied without discrimination and with adequate transparency to persons claiming the right to be supplied.
As a result of that opinion, the defendant and the undertakings engaged in the distribution of newspapers and periodicals concluded an agreement with the Minister for Economic Affairs on 24 June 1983 whereby those undertakings undertook to comply with the opinion of the Council for economic disputes; the terms of that agreement and the names of the signatories were published in the Moniteur belge of 17 August 1983, p. 10360.
The Tribunal found that AMP adopted new sets of conditions for individual rather than collective acceptance by publishers, wholesalers and retailers, and it is not, apparently, in issue that these were applied from February 1983.
The Court has been shown the Rules for the distribution of the press by retail sale and various standard forms of contract which are referred to briefly in the Order for Reference. There is no issue as to the terms of these, and the dispute centres on their effect and their method of application.
Under the Rules anyone wishing to open a new retail press outlet has to submit an application to AMP on a special form available from AMP on request; AMP delivers a reasoned opinion on the desirability of the application, which it submits to each of the publishers concerned; each publisher has to notify AMP of its agreement or refusal within 8 days, failing which the publisher is deemed to have followed AMP's opinion (Article VI). The criteria which AMP is to follow in examining such applications are laid down in Article III of the Rules. They are: (1) any new retail outlet must carry a permanent minimum assortment of 350 titles; (2) the premises must allow enough space to the press and permit display of the permanent assortment of titles; (3) under the heading professional capacity, it is required that the retailer be able to run his business well and stay open every day of the week and make certain arrangements for holidays; (4) there must be a minimum distance between the projected retail outlet and any existing one, of 250 metres in urban communes and 500 metres in rural communes; (5) under the heading potential, the maximum number of retail outlets is fixed, saving exceptions such as for sparsely populated areas, broadly at 1 per 1200 inhabitants, although there are two for communes between 1200 and 2400 inhabitants. Finally, Article V of the Rules provides that the retailer must only sell the newspapers and periodicals on a retail basis and not reassign, resell, hire or loan them; he must also sell them at the prices fixed by the publisher and indicated by AMP.
AMP's General Conditions for the supply of newspapers and periodicals to retailers provide that the retailer must sell the newspapers and periodicals at the prices fixed by the publisher and indicated by AMP (Article 5). Article 10 contains a prohibition on reassignment whereby the retailer undertakes to sell his supplies exclusively by retail from his premises and not to reassign, resell, hire or loan them, on pain of being refused all further supplies immediately and without notice.
The Court has been shown three different standard-form AMP contracts for publishers, one for Belgian publishers, one for foreign publishers of weeklies and one for foreign publishers of monthlies and other publications. Condition 5 of the contracts for foreign publishers gives AMP the exclusive right to sell their newspapers to bookshops and vendors in Belgium and clause 5 of the contract for Belgian publishers gives an exclusive right to sell to retailers, so that the publishers give up the right to supply Belgian retailers. A breach of that clause, the referring judge found, would be actionable in damages. In return AMP undertook with the publishers to terminate supplies to any retailer who dealt with the publications in any way other than by retail sale at the publisher's fixed price.
It was said at the hearing that foreign publishers do sign this kind of contract. Belgian publishers usually do not enter into a written agreement, but if they do so it is on the same terms mutatis mutandis as those contained in the foreign publishers' contract, giving AMP an exclusive right of sale.
From 8 March 1983 to the date of the reference, Binon had asked AMP to supply newspapers and periodicals distributed by the latter and had been refused. Binon had also failed to obtain supplies from individual publishers and from foreign press agencies. On 7 July 1983 Binon applied to the Tribunal for an order (a) that AMP was in breach of the Belgian rules of fair competition and that its conduct, in short, violated Articles 85 and 86 of the EEC Treaty; and (b) that it should cease refusing to supply the plaintiff.
Although he did not deal with all the issues which fall to be dealt with by the national court where Articles 85 and 86 are in issue, the judge made a number of findings which were obviously influential in its decision to make the reference, and on the basis of which it seems to me that the reference must proceed, even though some of the findings are challenged by AMP, which contends that the new practice and conditions adopted by AMP in no way violate the Treaty.
AMP relies on the fact (a) that in a decision of 7 December 1983, the President of the Tribunal de commerce recited an offer by AMP to supply Binon at kiosks at the Metro at Charleroi, and (b) that in a decision of 3 January 1984, the President accepted that AMP acted as a commissionnaire, that a selective distribution system for newspapers was compatible with Article 85 unless abused and that it was not obvious that qualitative criteria of selection were necessarily unlawful.
In reply it can be said that the Brussels Court of Appeal on some of these matters appears to have taken a very different view from the judgments on which AMP relies — it did not reverse the Commercial Court's finding on 15 November 1982 that AMP was an independent middleman, and not a mere sales agent deprived of any autonomy quoad the publishers.
The judge in the present case found that the refusal to supply by the publishers was, with one exception, not expressed, but the evasive tone and the biased attitude of most of the replies must be regarded as a refusal since no publications were supplied. AMP did not apply the criteria adopted for approving outlets in respect of Lecture générale SA, in which Hachette and AMP had an important interest — the plaintiff in fact has proved that in the centre of Charleroi, Lecture générale distribution outlets were created which did not comply with the minimum geographical criteria. Lecture générale could set up chains or outlets in derogation from the rules, which would make it impossible for independant retailers, to whom the rules would be applied, to obtain rights of sale. Lecture générale would be likely to get favourable treatment.
The court concluded that the defendant has a de facto monopoly which contradicts its claim that the newspaper publishers are free to supply directly whomsoever they wish. That freedom is wholly theoretical, since the publishers in question refuse to make use of it. In this case there is therefore concerted action which appears to be motivated by the existence of Article 5 of the general conditions for publishers reserving (to AMP) the exclusive right to sell to booksellers and newsagents in Belgium; any publisher connected with the defendant but wishing none the less to supply a distributor directly renders itself liable to an action for breach of contract by the defendant. It is clear that the defendant's position on the Belgian market is such that rupture with it would result in very serious disadvantages for the publisher in question and even perhaps in its disappearance from the Belgian market.
Satisfied on these findings that issues of Community law needed to be resolved the judge accordingly referred the following questions to the Court:
AMP and, particularly, the Federal Republic of Germany, which has intervened in respect of the third question, have stressed the importance of a free and autonomous press in a democracy. The widest range of newspapers should be available to the widest range of readers. As basic principles, these are not in issue.
Both again argue that there are special features about the press, and its distribution, which have to be taken into account. Thus, newspapers have a short shelf life. In the nature of things, substantial numbers of copies have to be available to meet potential demand, which frequently results in copies in the retailers' hands being unsold. As a practical reality, the publisher is bound to take these back, either not charging for them or crediting the retailer with their price on return. Both publisher and retailer incur expense in the transmission of these unsold copies, and the Federal Republic argues strongly that the necessary corollary of this is that the publisher should be allowed to fix both the quantities he distributes and the prices at which he sells. Both AMP and the Federal Republic stress the need for a permanent and stable system of distribution based on the calculation of likely demand.
The Commission accepts much of this but contends that these arguments do not establish that the system of distribution of the press is thereby excluded from the ambit of Article 85 or Article 86 of the Treaty, whatever weight they may have if an application were made, which so far has not been made, for exemption under Article 85 (3).
Binon's position, broadly, is that the termination of the 1976 agreement has not changed the real position. Either because AMP has a dominant position on the market in the distribution and retailing of the press, or because it has participated in agreements or concerted practices with others which have as their object or effect the prevention or restriction of competition, AMP has violated and continues to violate the Treaty. Alone or with others, it has prevented, and has the power to go on preventing, Binon from selling newspapers and periodicals in Belgium on the basis of terms which cannot be justified. On any view, AMP, or AMP as part of the Hachette group, has a large part of the market. The fact that some publishers may now be willing to appoint Binon as their retailer, or that AMP may be willing to make a discretionary exception for Binon in Charleroi, does not change the overall position.
To the extent that all the facts have not yet been found, the Court is not able to give as definitive an answer as it would be able to do, for example, if a Decision of the Commission were being challenged before it. The answers to the questions posed, therefore, in some respects have to be conditional on further investigation and findings of fact by the national court.
The first question
The first question asks whether it is possible to be consistent (a) with Article 85 and (b) with Article 86 of the Treaty for (i) a group of undertakings or (ii) a number of undertakings whose conduct is identical and who between them constitute an important part of the relevant market to maintain a practice under which a specialized undertaking can operate a selective distribution system under which only those retailers will be supplied who (1) make application and (2) satisfy both qualitative and quantitative criteria, thus limiting competition within the relevant market. The only two criteria specified are limitations by distance and by number of inhabitants.
Although the question seems in the first place to be directed to the conduct of the publishers, the publishers in fact are not parties to the proceedings before the national court. It is, as I see it, however, necessary to consider the arrangements in question as between the publishers, as between them and AMP, and as between AMP and the retailers.
The two Articles of the Treaty have to be considered separately. So far as Article 85 is concerned the relevant basic issues are whether there was (i) an agreement between undertakings (which all the dramatis personae appear clearly to be) or (ii) a concerted practice, which have respectively as their object or effect the prevention, restriction or distortion of competition within the common market and which may affect trade between the Member States. Under Article 86 the issue is whether one or more undertakings has a dominant position in a substantial part of the common market, whether that position is abused and if so, whether it affects trade between Member States.
For the purposes of Article 85, AMP contends that there is neither an agreement nor a concerted practice which affects competition within the common market.
It is said, first, that the previous arrangement by which the publishers and AMP acted through a regional committee has been abrogated, even if that arrangement fell foul of the article. This, however, is not a conclusive answer as to the previous agreement. It is possible for an agreement which has been terminated to continue to have effects which are contrary to the provisions of Article 85, and it is for the national court to consider whether that is the position here. (Case 51/75 EMI v CBS [1976] ECR 811).
AMP then contends that there is here no agreement of the kind prohibited, and indeed there is no general agreement between AMP and the publishers, there are merely specific agreements, either written or oral, for the publisher to provide specific titles to AMP for distribution. The retailers themselves merely sign acceptance of the general conditions.
Nor, it is argued, is there necessarily a concerted practice merely because a number of publishers entrust the sale of their papers to the same wholesaler on the same terms. Parallel conduct may be an indication of such a practice, seen in the light of the relevant product and the number of undertakings involved, if it produces conditions of competition which do not correspond to the normal conditions in the market. It is, however, no more than an indication. So long as there is no direct or indirect contact between undertakings, they may adapt their conduct intelligently to that of their competitors in order to meet the existing competition (e.g. Cases 48/69 ICI v Commission [1972] ECR 619; Joined Cases 40 et seq. /73 Suiker Unie v Commission [1975] ECR 1663; Case 172/80 Züchner v Bayerische Vereinsbank [1981] ECR 2021). All that happened here is that publishers entrusted their distribution to a wholesaler on terms justified by the perishable nature of the product, the need to avoid as far as possible, but to take back where necessary, unsold copies, to reduce costs and to ensure the optimum number of sales outlets. These are all justified objectives.
Thirdly, it is said that the Court has recognized that a selective distribution system may not violate Article 85. This is so not just in respect of complex technical or high-quality goods, or those requiring aftersales service (Case 26/76 Metro v Commission [1977] ECR 1875; and Case 31/80 L'Oréalv De Nieuwe AMCK [1980] ECR 3775) but also specifically for newspapers (Case 126/80 Salonia v Poidomani and Giglio [1981] ECR 1563). In the latter case the emphasis was not so much on the nature of the product as on the objective qualities of the retailer and his method of operation and on the demands imposed by the system of distribution needed. Moreover Salonia did not require that these objective criteria be qualitative; they may be quantitative in nature. All the present criteria are justified by the need to maintain an efficient and economical supply of newspapers.
Fourthly, it is said that there was no concerted practice between the publishers and AMP since AMP is merely the agent of the publisher, an integral part of the economic unit which constitutes its business, and is not an independent trader carrying financial risks of its own. AMP relies on the Commission's Notice of 24 December 1962, sometimes called the Christmas message, which agreed to treat a contract with a commercial agent therein defined as not being covered by Article 85. It is said that it is not to the point that several publishers appointed the same agent on the same terms (Suiker Unie), or that such an agent guarantees payment to the principal by the eventual purchaser. If the reality is that the principal sells to the client rather than to the agent, the agreement with the agent falls outside Article 85, and it is not significant that it is the agent who lays down the conditions of distribution. Only if the agreement with the client itself violates Article 85 will that Article come into play.
AMP is only such an agent and no agreement or arrangement between AMP and the publishers is capable of falling within Article 85.
Finally, since here Belgian newspapers are primarily concerned, and foreign publications are treated no differently, there is nothing capable of affecting trade between Member States which can harm the achievement of the objectives of a single market between the Member States (Joined Cases 56 and 58/64 Consten and Grundig v Commission [1966] ECR 299 and Case 13/77 Inno v ATAB [1977] ECR 2115 at p. 2148).
In my opinion, the conclusions which AMP seeks to draw from the jurisprudence it cites, to an extent beg the very questions raised.
The second question
The second question asks whether it is compatible (a) with Article 85 (b) with Article 86 for a single undertaking which is responsible for the distribution of more than 50% of foreign publications to impose conditions (i) on publishers and (ii) on retailers which enable that undertaking (1) to rescind the contract or refuse distribution if the publisher supplies non-approved retailers directly, or (2) to withdraw approval if the retailer deals with the publications other than by retail sale.
If AMP is not a commercial agent but is acting as an independent concern, then it seems to me that, subject to any exception being granted by the Commission under Article 85 (3), an agreement with a publisher in another Member State (or a concerted practice) by which AMP secures exclusive rights of sale and which provides that AMP may automatically withdraw supplies from any retailer who deals with the publication other than by retail sale at a fixed price is in breach of Article 85 of the Treaty. On the facts stated in the reference as to AMP's virtual monopoly of the market, it is difficult to see how it can be said that it does not restrain competition within the common market or affect trade between Member States. Whether such a restriction imposed on foreign publishers affects such trade is a matter to be investigated by the national court.
The terms of the agreement with the foreign publisher which prevent him from delivering direct to any retailer, and of the rules preventing the retailer from dealing with the newspapers other than by retail sale, and which thus prevent him from selling to other retailers, are on the face of it clearly capable of amounting to an abuse of a dominant position (Article 86 (b) and (c) of the Treaty). It is to be borne in mind that AMP has the right to refuse retailers who meet objective conditions laid down in the criteria and no sales may be made either to these or to other existing retailers. It is for the national court to decide whether the object and effect of these provisions is to increase the control, or to preserve the monopoly, which AMP has or whether they can be shown to be a necessary part of the distribution system without which it could not operate. In this regard AMP clearly is in a position to control the number of retail outlets and thereby access to the trade, which as the Commission has pointed out, the Belgian Government has not thought it necessary to regulate.
In this respect it is to be noted that, as in other aspects of the case where the question arises as to whether AMP is in a dominant position, AMP does not deny that it is but merely says that the question is an open one.
If again these rules were applied in a discriminatory way, with exemption being granted to Lecture générale, then there would be clear evidence of an abuse of a dominant position.
The third question
The third question asks, in substance, whether it is compatible for AMP to reserve the right to fix and maintain retail prices. This question may be based on a misunderstanding since it is apparently the publisher who fixes the prices and AMP which enforces their observance. That does not, however in my view, affect the question of principle. The fixing of selling prices is specifically referred to in paragraph 1 (a) of Article 85 as being a prohibited practice.
In the present case the lawfulness of this provision does not seem to be directly in issue between the parties since there is no suggestion that Binon wishes to sell at other than the fixed price. The Federal Republic of Germany has argued strongly in favour of a system of retail price maintenance for the newspaper and magazine industry. Whether those arguments are of equal force for both newspapers and magazines may be a question, since different considerations may apply to the distribution of the expensive, so-called glossy, magazines from those relevant to daily or weekly newspapers. The question in any event is an important and a delicate one. It seems to me, however, that many of the arguments advanced may have more relevance to an application for an exemption under Article 85 (3) than to the issue which arises under Article 85 (1).
If AMP is a commercial agent, then the question does not arise. If it is not, then it seems to me that the retail price maintenance clauses are prima facie not compatible with Article 85 if they may affect trade between Member States. If contrary to what is said by AMP, the prices are fixed by AMP then this is capable, if it is found that AMP occupies a dominant position, of amounting to an abuse of that position. Whether it is so it is for the national court to decide.
It is in any event to be noted that much of the Federal Republic's argument is based on national legislation which does not seem to come directly into play so far as this question is concerned. It is also to be noted that in Article 86 (a) the prices fixed, in order to violate the Article, must be unfair.
The fourth question
The fourth question asks, again in substance, whether it is compatible for AMP, in which Hachette holds an important part of the share capital, to apply less strict criteria to Lecture générale SA, a retailer in which both AMP and Hachette have a financial stake.
AMP accepts that a selective distribution system otherwise complying with Article 85 may be applied in a way which is incompatible with the Article on the basis of the Court's judgment in AEG. It argues, however, on the basis of that judgment that mere isolated exceptions do not amount to such an unlawful method of application. In any event it is said that the exemption referred to was granted before the present arrangements came into force, and at a time when the distance criteria were less precise than they are now.
In principle this seems to me to be right. The question remains, however, whether these were merely isolated exemptions (or there was one isolated exemption) in the past. If AMP does, or is shown to be intending to, apply less restrictive criteria to Lecture générale then that would constitute an abusive application of the system and be in breach of Article 85. It would also, in my view, constitute an abuse of a dominant position within Article 86. It is plainly no answer, as seems to be suggested, that Lecture générale can waive the protection which the distance provision gives it, unless others can do the same. Nor is it an answer that such relaxation can be made if it is solely in AMP's financial interest.
On the basis of these considerations in my opinion the questions referred should be answered on the following lines:
The costs of the parties to the main proceedings fall to be dealt with by the national court. No order should be made as to the costs of the Federal Republic of Germany and of the Commission.