Opinion of Mr Advocate General Lenz

Mr President,

Members of the Court,

I am giving my Opinion today on a case which raises the question to what extent restrictions on competition are compatible with Community law where they are laid down in agreements for the transfer of undertakings.

1. In order to explain the circumstances which led to the agreements of 1979 and 1980 containing the restrictions on competition, it is necessary to go back to events in 1974. In that year the Verenigde Bedrijven Nutricia NV (hereinafter referred to as Nutricia), a manufacturer of health foods and baby foods, purchased two undertakings:

2. By an agreement dated 31 August 1979, Remia was sold to Mr de Rooij. That agreement (hereinafter referred to as the sauce agreement) provided that on 1 October 1979, Nutricia was to transfer its shares in Remia to Mr de Rooij together with the exclusive right to sell consumer products manufactured by or on behalf of Remia and the exclusive right to sell sauces manufactured by or on behalf of Luycks on the Netherlands market. Luycks's compliance with that last clause was guaranteed by Nutricia. The sauces referred to were sauce for chips, mayonnaise, salad dressing, garnishing sauce, paprika sauce, saté sauce, tomato ketchup, curry sauce, fricadelle sauce, barbecue sauce and blends of those sauces. Under clause 5 of the sauce agreement Nutricia undertook to refrain from engaging directly or indirectly in the production or sale of sauces on the Netherlands market until 30 September 1989 and to ensure that Luycks also complied with that restriction. None the less Luycks retained the right, for a transitional period expiring on 1 July 1980, to manufacture and sell sauces for export and for the Netherlands market, provided they were not sold through Remia.

3. By an agreement dated 6 June 1980 (hereinafter referred to as the pickles agreement), Nutricia sold Luycks with effect from 4 July 1980 to Zuid-Hollandse Conservenfabriek BV (hereinafter referred to as Zuid), a subsidiary of the Campbell Group. By clause V (1) (f) of the pickles agreement, Zuid agreed to be bound by the obligations imposed on Luycks in the sauce agreement. Those obligations were set out in greater detail in Annex XXIII to the pickles agreement. Nevertheless it was provided that only Luycks and its subsidiaries and not other undertakings controlled by Zuid were subject to those obligations.

4. In June and July 1981, Nutricia notified the agreements of 31 August 1979 and 6 June 1980 to the Commission of the European Communities under Article 4 of Regulation No 17 and requested it to exempt them, pursuant to Article 85 (3) of the EEC Treaty, from the prohibition on agreements restricting competition contained in Article 85 (1).

5. (a) On 12 December 1983, the Commission adopted a decision, Articles 1 to 5 of which provide as follows: Article 1: The non-competition clause laid down in clause 5 of the Agreement of 31 August 1979 between NV Verenigde Bedrijven Nutricia and Drs F. A. de Rooij constitutes from 1 October 1983 an infringement of Article 85 (1) of the EEC Treaty. Article 2: The non-competition clause laid down in clauses IX1 and V1f of the Agreement of 6 June 1980 between NV Verenigde Bedrijven Nutricia and Zuid-Hollandse Conservenfabriek BV, constitutes from 4 July 1982 an infringement of Article 85 (1) of the EEC Treaty. The same clause constitutes from the date of its stipulation an infringement of Article 85 (1) of the EEC Treaty in so far as it applies to a geographical area larger than the Belgian, Dutch and German markets. Article 3: The applications for exemption under Article 85 (3) of the EEC Treaty in respect of the agreements referred to in Articles 1 and 2 are hereby refused. Article 4: NV Verenigde Bedrijven Nutricia, Drs F. A. de Rooij, Remia BV, Zuid-Hollandse Conservenfabriek BV and Luycks Producten BV shall cease forthwith to apply the clauses referred to in Articles 1 and 2. Article 5: This Decision is addressed to: NV Verenigde Bedrijven Nutricia, Zoetermeer, Drs F. A. de Rooij, Den Dolder, Remia BV, Den Dolder, Zuid-Hollandse Conservenfabriek BV, Zunden, and Luycks Producten BV, Diemen.’ (b) In the preamble to its decision, the Commission first sets out the facts regarding the markets involved, trade between Member States and the market positions of Remia and Luycks. I do not propose to repeat its statement of facts because the complete text thereof contains details which are business secrets and not for publication. Nevertheless I would refer to paragraphs 6 to 15 and 37 and 38 of the preamble to the decision, which have been made available in full to the Court and to the parties. In its legal assessment, the Commission begins by stating that Article 85 (1) prohibits as incompatible with the common market all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market. Nevertheless, in the Commission's view not every restriction on competition imposed in connection with the sale of an undertaking came within the scope of that prohibition. It had held once before, in its Decision No 76/43/EEC of 26 July 1976 (Reuter/BASF) that when the sale of a business involved the transfer not only of material assets but also of goodwill and clientèle, it might be necessary to impose contractual restrictions of competition on the seller. The contractual restriction upon competition by the seller was then a legitimate means of ensuring the performance of the seller's obligation to transfer the full commercial value of the business. However, the protection accorded to the purchaser could not be unlimited. It must be kept to the minimum that was objectively necessary for the purchaser to assume by active competitive behaviour the place in the market previously occupied by the seller. It was not possible to lay down a specific period as being a universally applicable period of protection. Relevant criteria for determining the time which might be said to be objectively necessary for such restrictions included: (a) the time it would take the purchaser of a business to build up a clientele; (b) how frequently consumers in the relevant market changed brands and type; (c) how long it took before new products entering the market or new trademarks were accepted by the consumer; (d) for how long after the sale of the business the seller would be able, in the absence of a restrictive clause, to make a successful comeback on the market and regain his old customers. The duration of accompanying arrangements such as the temporary right for the purchaser to use the seller's trademarks or sales forces might also constitute a useful pointer to the sort of period required for all the seller's goodwill and clientèle to be transferred to the purchaser. In the Commission's view, the geographical scope of a non-competition clause must in addition be limited to the extent which was objectively necessary to achieve the abovementioned goal. As a rule, it should therefore only cover the markets where the products concerned were manufactured or sold at the time of the agreements. In its assessment of the restrictions contained in the sauce agreement, the Commission states that it took account of the fact that the manufacture of the products concerned did not involve high technology. The parties evidently thought that two years would be a long enough period for Remia to use the Luycks trademark while introducing its own mark and gaining customer loyalty. Since, however, that new customer loyalty might readily be undermined if Nutricia (Luycks-Zuid) were able to reenter the market after an absence of only two years, using the Luycks mark, a further two-year period seemed objectively necessary to enable Remia to consolidate its hold on its new clientèle. In those circumstances it seemed that four years represented the maximum legally permissible period for the restriction of competition. It was certain that a 10 year period was not objectively necessary. In so far as part of the goodwill that was being transferred was represented by the trade connections of the sales staff who were not transferred to Remia, that part was renounced and protection could not be claimed for it. The extension to Luycks-Zuid of Nutricia's 10 year restriction could not stand if the restriction could not stand in regard to Nutricia. Although the extension of the clause could be said to protect a relatively small undertaking against the subsidiary of a large group (the Campbell group), that group did not have a predominant position anywhere in the relevant sauce market while Remia had the largest single share of the Netherlands market. The prohibitions of competition referred to above affected or at least were likely to affect trade between Member States within the meaning of Article 85 (1). The undertaking not to engage in the production of sauces in the Netherlands had an effect on intra-Community trade because it excluded Luycks-Zuid from the cross-border sauce trade with Germany from 1 July 1980. Furthermore, that restriction would prevent the Campbell group from using its subsidiary in the Netherlands as an importer for sauces made elsewhere in the EEC. The restriction was likely to affect trade between Member States at the latest when the trademark Luycks again became exclusively available to Luycks-Zuid as a trademark for sauces on 1 October 1981. By virtue of Article 85 (3) of the EEC Treaty the prohibition contained in Article 85 (1) might be declared inapplicable in the cases specified in Article 85 (3). However, if the restrictions on competition went beyond what was objectively necessary in order to transfer the full commercial value of the business sold, an exemption under Article 85 (3) of the EEC Treaty could only be considered in special circumstances. In particular it must be shown that the clauses were indispensable to guarantee the attainment of objectives other than the mere need of the purchaser further to consolidate his acquisition. In this case the parties had failed to make out a case for applying Article 85 (3) to the two notified agreements. Furthermore, the Commission failed to see what advantage the inclusion of the two clauses restricting competition for a term and/or geographical area in excess of the maximum necessary for the transfer of the full commercial value of the businesses sold could have in improving the production or distribution of goods or promoting technical or economic progress while allowing consumers a fair share of the resulting benefit. The contractual restrictions on competition described above provided no appreciable objective advantages to offset the serious disadvantages for competition in the relevant markets. For those reasons an exemption under Article 85 (3) could not be considered.

6. On 16 February 1984 Remia, Mr de Rooij and Nutricia brought an action against that decision of the Commission. The applicants claim that the Court should:

7. In reply to questions put to them by the Court of Justice, the applicants have provided further particulars of the basis of their conclusions. The Commission has cleared up a number of points with regard to the dates referred to in Article 2 of its decision.

My views on this application are as follows:

1. (a) Despite the clarifications offered by the parties with regard to the scope of the applicants' conclusions and the effect of the Commission's decision, I think it would be appropriate to make another attempt to define the precise subject-matter of the dispute in this case. The reason for this is, first, that the terms in which the applicants formulated their conclusions are not altogether clear, and, secondly, that Article 2 of the decision contains an unhappy conflation of two different non-competition clauses and is not in itself readily comprehensible despite the clarification supplied by the Commission. Article 2 of the decision refers to the noncompetition clause laid down in clauses IX. 1 and V.l.f of the Agreement of 6 June 1980. Those clauses do not in fact contain a single unitary restriction on competition; instead, clause V extends the terms of the sauce agreement prohibiting competition in the sauce sector to Zuid, while clause IX contains Nutricia's undertaking to Zuid to accept a restriction on its competition in the pickles market. Furthermore, it is unclear which of those restrictions on competition is meant in the second sentence of Article 2, which begins, without making any differentiation, with the words the same clause. That sentence states that a prohibition on competition is unlawful in so far as it relates to a geographical area larger than the Belgian, Netherlands and German markets. Paragraph 38 of the decision also refers to those three markets in connection with Nutricia's undertaking to Zuid to accept a prohibition on competition applying to the production and marketing of pickles. For that reason I take the view that that sentence must in fact be taken to refer to clause IX of the pickles agreement. On that interpretation, a revised version of Article 2 of the decision would read as follows : The non-competition clause laid down in clause VIf of the Agreement of 6 June 1980 constitutes an infringement of Article 85 (1) of the EEC Treaty from 1 October 1983. The non-competition clause laid down for the pickles sector by clause IX. 1 of the Agreement of 6 June 1980 constitutes an infringement of Article 85 (1) of the EEC Treaty from 4 July 1982 (that is to say, two years after the Agreement of 6 June 1980 came into effect on 4 July 1980). In so far as that clause applies to a geographical area larger than the Belgian, Netherlands and German markets, it constitutes an infringement of Article 85 (1) of the EEC Treaty as from the date on which it came into effect. In their conclusions in the application, the applicants seek on the one hand a declaration that the Commission decision is void but also on the other hand a declaration that the decision was wrongly addressed to Mr de Rooij and that the noncompetition clause referred to in the decision was not contrary to Article 85 (1) of the EEC Treaty as from 1 October 1983 or at least that the Commission wrongly failed to apply Article 85 (3). My understanding of the applicants' claims having regard to their written and oral contentions (including the clarifications they supplied in answer to questions put to them by the Court), and also having regard to their own interests, is that they ask for the following to be declared void: Article 1 of the decision with regard to the non-competition clause contained in the sauce agreement, in so far as it relates to the period after 1 October 1983; Article 2 of the decision, in so far as it relates to the extension of the noncompetition clause in the sauce agreement to Zuid for the period after 1 October 1983; Article 3 of the decision, in so far as it contains a refusal to apply Article 85 (3) to the non-competition clause in the sauce agreement and to its extension to Zuid for the period after 1 October 1983; Article 4 of the decision, in so far as it relates to the non-competition clause in the sauce agreement and to its extension to Zuid; Article 5, in so far as Mr de Rooij is referred to as an addressee of the decision. In my view this dispute does not concern the clause referred to in Article 2 of the decision, whereby Nutricia undertook not to compete with Zuid on the pickles market. In the first place, the applicants have not said anything which might be understood as meaning that their application is also directed against the part of the decision relating to that non-competition clause. Secondly, none of them, and particularly not Nutricia, would appear to have any interest in having that part of the Commission decision declared void, since it expands their freedom of activity in relation to clause IX of the pickles agreement. Only the intervener supporting the Commission, the Sluyck undertaking, would be likely to have an interest in maintaining that noncompetition clause in force; as an intervener on the defendant's side, however, it may not formulate conclusions to that effect because Article 37 of the Protocol on the Statute of the Court of Justice of the EEC limits it to supporting that party's conclusions. (b) Having circumscribed the object of this dispute I will now briefly indicate in what order I propose to examine the legal issues raised. After a remark on a procedural objection by the defendant I shall consider whether the non-competition clauses at issue in fact fall within the prohibition in Article 85 of the EEC Treaty. If the answer to that is positive the next question will be whether the particular features of the set of contractual arrangements with which this case is concerned — the non-competition clauses are all contained in agreements for the transfer of undertakings — nevertheless make it necessary to exclude the applicability of Article 85 (1) of the EEC Treaty at least for a limited period. It will then remain to be examined, in the last place, to what extent an exemption under Article 85 (3) from the prohibition of restrictive agreements falls to be considered.

2. Before I go into the substance of the parties' arguments, I must first deal briefly with the Commission's procedural objection that the applicants put forward their arguments about a misapplication of Article 85 of the EEC Treaty on the basis of a submission which related to an inadequate statement of the reasons on which the Commission decision was based. Because the submission as framed is inappropriate the arguments based on it are said to be inadmissible.

3. The question whether the facts of the case are covered by Article 85 (1) of the EEC Treaty may be dealt with fairly quickly. Article 85 of the EEC Treaty prohibits as being incompatible with the Common Market all agreements between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the Common Market.

4. Although the factual requirements of Article 85 (1) of the EEC Treaty are thus met, the Commission takes the view that the non-competition clause falls outside the scope of that provision of the EEC Treaty for a four-year period ending on 31 October 1983. Whilst the Commission based its view on a previous decision, it did not, however, grant an exemption under Article 85 (3) of the EEC Treaty from the prohibition of restrictive agreements.

5. If, then, the general competition rules of the EEC Treaty are applicable to the two non-competition clauses at issue from 1 October 1983, the applicability of Article 85 (3) of the EEC Treaty must also be considered. In this connection it is necessary to appraise the applicants' arguments relating not to the inherent necessity of a prohibition of competition in the case of the sale of an undertaking but to other considerations.

To sum up, these are my conclusions:

Article 1 of the Commission decision of 12 December 1983 is valid in law. The Commission cannot be criticized for having initially excepted the contractually agreed prohibition of competition from the scope of Article 85 (1) of the EEC Treaty for the period up to 1 October 1983 for reasons connected with the special nature of sales of undertakings and applying to it the general provisions of Article 85 only from that date.

Article 2 of the decision in the corrected version supplied by the Commission is also valid in law in so far as it was challenged. It amounts to no more than a consequence of Article 1 of the decision.

Article 3 of the decision should be declared void in so far as it relates to the prohibitions of competition contained in the sauce agreement and its extension in the pickles agreement.

Article 4 of the decision should therefore also be declared void in the same respects.

Article 5 is valid in law.

For the rest, the case should be referred to the Commission for reconsideration of the decision.

Finally, the decision as to costs should be governed by the first subparagraph of Article 69 (3) of the Rules of Procedure.

In conclusion I propose that:

1 Translated from the German.

2 OJ 1983, L 376, p. 22.

3 OJ 1976, L 254, p. 40.

4 Judgment of 15 December 1961 in Joined Cases 19/60, 21/60, 2/61 and 3/61, Société Fives Lille Cail and Others v High Authority of the ECSC, [1961] ECR 281 at p. 295.

5 Judgment of 17 October 1972 in Case 8/72, Vereeniging van Cementhandehren v Commission of the European Communities, [1972] ECR 977, at p. 991.

6 See judgment of 29 October 1980 in Joined Cases 209 to 215 and 218/78, Van Landewyck and Others v Commission, [1980] ECR 3125 at p. 3274.

7 Decision No 76/743/EEC (Reuter/BASF), OJ 1976, L 254, p. 40.

8 See Ch. Bail, Note 171 f. on Article 85 of the EEC Treaty, in Groeben, Boeckh, Thiesing and Ehlermann, Kommentar Zum EWGV; M. Waelbroeck, in Mégret et al, Le Droit de la Communauté Economique Européenne, vol. 4, Concurrence, p. 10 f. Doubted, N. Koch, Note 39 on Article 85, in Grabitz, Kommentar Zum EWGV.

9 See e.g. the judgment of the Bundesgerichtshof of 3 November 1981, Az KZR 33/80, reported in Neue Juristische Wochenschrift, 1982, p. 2011.

10 Judgment of 10 January 1985 in Case 229/83, Leclerc v Au Blé Vert, [1985] ECR 17, at paragraph 14.

11 See judgment of 12 July 1966 in Joined Cases 56 and 58/64, Consten Sàrl and Crundig-Verkaufs-GmbH v Commission, [1966] ECR 299, at p. 347.

12 Judgment of 30 November 1978 in Case 87/78, Welding and Co. v Hauptzoltamt Hamburg-Waltersbof, [1978] ECR 2457 at p. 2467.

13 Judgment of 29 October 1980 in Joined Cases 209 to 215 and 218/78, Van Landewyck and Others v Commission, [1980] ECR 3125 at p. 3244.

14 Judgment of 4 July 1963 in Case 24/62, Federal Republic of Germany v Commission, [1963] ECR 63 at p. 69.

15 See in this regard the comments of H. Schröter, Note 137 a on Article 85 (3), in Groeben, Boeckh, Thiesing and Ehlermann, Kommentar zum EWGV.

16 Judgment of 13 July 1966 in Joined Cases 56 and 58/64, Consten Sàrl and Grundig-Verkaufs-GmbH v Commission, [1966] ECR 299, at p. 347.

17 Judgment of 25 October 1977 in Case 26/76, Metro SB-Großmärkte GmbH & Co. KG v Commission, [1977] ECR 1875 at p. 1915.