Opinion of Mr Advocate General

Mr President,

Members of the Court,

1. Introduction

1.1. At first sight the second Metro case, which I am to consider today, seems unoriginal. It concerns an application brought by Metro requesting the Court to declare void the Commission's decision of 21 December 1983 (Official Journal 1983, L 376, p. 41), extending the decision of 15 December 1975 which was at issue in the first Metro case (Case 26/76 Metro v Commission [1977] ECR 1875). It is common ground between the parties that the distribution system at issue here is slightly less restrictive than the system accepted by the Commission in 1975. At first sight it would therefore appear that the Court may dismiss the application in this second case on grounds similar to those on which the first Metro case was dismissed.

1.2. That appearance is, however, deceptive. The main criticism levied against the Commission in this case is that it failed to take adequate account of a series of statements made by the Court in the first Metro case containing guidelines for the Commission's future policy. Those guidelines are all connected with the structure of the market in consumer electronic equipment in general. In particular, they seem to provide that a selective distribution system operated by an individual manufacturer will only be acceptable if different kinds of distribution channels are operated by other manufacturers and the market structure is prevented from becoming too rigid by the existence of a large number of selective distribution networks for the product concerned. On that point I refer to the third and fourth subparagraphs of paragraph 20, the fifth subparagraph of paragraph 21, the first three subparagraphs of paragraph 22 and the third subparagraph of paragraph 50 of the judgment. The fact that those parts of the Court's judgment are directed largely to the future policy of the Commission is made clear in the third subparagraph of paragraph 22 of the judgment. It seems to me, however, that that is apparent also from the fact that there is no indication, either in the opinion of Mr Advocate General Reischl or in any part of the judgment, that the parties to the first Metro case submitted to the Court any actual figures concerning the general market structure. Thus in that case the parties concentrated entirely on the contested distribution system, without referring to the general market structure.

1.3. As I wish to concentrate in my opinion on this, the only really new and moreover fundamental aspect of the case, I do not consider that any purpose would be served by my giving a complete summary of the facts concerning Metro's commercial activities, the SABA selective distribution system or the content of the contested decision. In that connection I would merely state that the summary of the facts in the published decision does not contain any information on the structure of the market (in particular, the number of selective distribution systems, their market shares and the evolution of prices). In the grounds of its decision the Commission considers that aspect only when examining whether the SABA system fulfils the condition laid down in Article 85 (3) (b) and even then does so only very briefly, without providing any supporting figures. That provision states that the restrictions imposed must not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products in question (in that connection see Part II, B.4, fourth and fifth paragraphs of the decision). In my assessment of the substance of the case I shall examine in detail the abovementioned paragraphs of the judgment in the first Metro case and the Commission's decision in this case.

1.4. In my summary of the written submissions and arguments of the parties in Section 2 of this Opinion, I shall for the same reason consider only the procedural submissions and arguments and the substantive submissions and arguments which are connected with the new and fundamental aspect of the case to which I have referred. I shall consider the applicant's submissions concerning the SABA system as such only in so far as is necessary at the end of my Opinion. Moreover, in Section 2 I shall give only a very brief summary of the submissions and arguments of the parties. I shall assume that the account of the facts and issues contained in the judgment of the Court will provide a more detailed summary of the facts and procedure and the written and oral submissions and arguments of the parties and that that part of the judgment will also be published — as is usual in competition cases. In my Opinion I shall therefore endeavour to avoid repeating those aspects of the case and thus making twice as much work for the language service and the printer. In my assessment of the case I will naturally, however, consider the arguments of the parties in greater detail.

1.5. In Section 3 of my opinion I shall deal with the procedural submissions arid in Section 4 with the substantive submissions and arguments. At the same time I shall also consider the explanations provided by the parties at the hearing. In Section 5 I shall then as usual — after summarizing my findings and making certain final remarks — set out my conclusion.

2. The written submissions and arguments of the parties

2.1. The admissibility of this action is expressly acknowledged by the Commission, and it is contested solely by SABA. SABA contends, first, that Metro has no interest in bringing proceedings because it does not carry on the business of a wholesaler but is engaged in the retail trade and does not fulfil the formal requirements for admission to the SABA distribution system. Secondly, it claims that Metro is not directly and individually concerned by the contested decision because the decision was not adopted upon application by Metro under Article 3 (2) (b) of Regulation No 17. It is not sufficient, SABA maintains, that Metro may be regarded as a party which is potentially interested in the purchase of SABA's products. I shall consider the arguments in favour of admissibility put forward in writing and at the hearing by the Commission in particular in Section 3 of this Opinion.

2.2. Metro's first submission is that the Commission misused its powers by failing to take into account in its application of Article 85 (1) the conditions laid down by the Court of Justice in the first Metro case. In that regard, it refers in particular to paragraph 22 of the Court's judgment. In its reply, Metro states that even a simple selective distribution system will only accord with Article 85 (1) where workable competition exists in the market place. The Commission in its view failed to apply the conditions laid down by the Court in that connection in the first Metro case, and it also failed to take into account the Court's judgments of 10 July 1980 in Case 99/79 (SA Lancôme and Cosparfrance Nederland BV v Etos BV and Albert Heyn Supermart.SF [1980] ECR 2511) and of 11 December 1980 in Case 31/80 (L'Oréal NV and ĽOréal SA v De Nieuwe AMCK PvBA [1980] ECR 3775).

2.3. In its second submission, Metro claims that the Commission misused its power to grant an exemption under Article 85 (3) of the Treaty. Referring to the Mackintosh Report submitted by the Commission, it argues in particular with regard to the chief problem which I have identified that selective distribution systems are in fact used to exclude outlets whose low-price marketing methods would in the manufacturers' view be likely to affect the brand image of their product and that this is detrimental to the consumer. In this regard Metro also refers, in connection with the criterion of consumer benefit, to the representations of the Bureau européen des unions de consommateurs (BEUC) made on 25 June 1980 to the Commission under Article 3 of Regulation No 17, in which it expressed its concern about the grant of a new exemption to SABA and the proliferation of selective distribution systems in this sector. The other arguments in support of this submission relate to the SABA agreements in particular. The arguments put forward by the United Kingdom in its observations particularly concern the SABA distribution system, though it has also produced a report on the market structure. It does not consider the market structure in detail, however, until it deals with the fourth submission.

2.4. In its third submission Metro contends that the Commission misused its power by failing to take account of the way in which the SABA agreements are actually implemented, and it gives details in support of that contention.

2.5. In its fourth submission Metro contends that the Commission misused its power by basing the contested decision on limited, incomplete and dated information. In support of that submission it denies that the Mackintosh Report can provide an appropriate basis for the contested decision on the ground that it was not completed until two months after the decision was adopted and does not deal with the matters relevant to this case. The report is nevertheless the only evidence which the Commission has put forward in order to justify its decision. A survey conducted by Metro in August 1984 on the profit margins of retailers on the colour television market in Germany and the United Kingdom gave entirely different results.

2.6. In its fifth submission Metro contends that by granting an exemption under Article 85 (3) for the SABA system the Commission has in fact authorized an abuse of a dominant position by SABA and the Thomson-Brandt group on the market in consumer electronic products in generał and colour television sets and video-recorders in particular. Following the acquisitions made by the Thomson-Brandt group, the undertakings in that group constitute a single economic unit which, in view of the criteria laid down by the Court in its judgments of 13 February 1979 in Case 85/76 (Hoffinann-La Roche v Commission [1979] ECR 461) and 14 July 1972 in Case 48/69 (ICI v Commission [1972] ECR 619) now occupies a dominant position on each of the separate markets of the market in durable consumer electronic goods. By setting up its anti-competitive system and in particular by refusing to supply Metro, SABA has abused that position in the way defined in the recent judgments of the Court (judgment of 21 February 1984 in Case 86/82 Hasselblad v Commission [1984] ECR 883 and of 14 February 1978 in Case 27/76 United Brands v Commission [1978] ECR 207).

2.7. In its sixth submission Metro contends that in view of the important amendments made by SABA to its original system the contested decision does not simply renew the original exemption but contains a fresh exemption. In the absence of a new formal notification of the amended SABA system pursuant to Article 4 (1) of Regulation No 17, the Commission had no power to grant it an exemption under Article 85 (3) of the EEC Treaty. In any event, the way in which the SABA system is actually being implemented differs significantly from the terms of the documents originally notified and from the terms of the new form agreements.

2.8. Summary

The fundamental new question which I outlined at the beginning of my opinion, namely whether the Commission took adequate account — as required in particular by the Court's judgment in the first Metro case — of the general structure of the market in consumer electronic products, is dealt with particularly in the first submission (in connection with the application of Article 85 (1)), the second submission (in connection with the application of Article 85 (3)) and the fourth submission (the facts on which the decision is based). A more limited aspect of the main question (the alleged abuse of a dominant position) is considered in the fifth submission. The sixth submission is of a procedural nature and will therefore be considered in the following section of this Opinion, together with the question of admissibility.

3. The submissions of a procedural nature

3.1. Preliminary remark

The question of admissibility raised by SABA and Metro's sixth submission are clearly connected. SABA bases its contention that the application is inadmissible partly on the procedure adopted by the Commission in this case whereby it extended the exemption already granted (without applying Article 3 (2) (b) of Regulation No 17), a procedure which the applicant considers to be contrary to Regulation No 17. I shall therefore consider both of those procedural arguments in this part of my opinion.

3.2. The admissibility of the application

The clearest account of the Commission's position on admissibility was provided at the hearing. It explained its view that the application was admissible by reference to the wider context of actions by which third parties challenge exemptions granted under Article 85 (3) of the Treaty. The Commission considers that Metro fulfils the requirement that it should be directly and individually concerned by the decision at issue. The decision is of direct concern to the applicant because it declares the provisions of Article 85 (1) inapplicable to SABA's selective distribution system. Individual exemptions of this kind and decisions under Article 9 of Regulation No 17 favour one person and burden another person, as in the Commission's submission was correctly pointed out by Mr Advocate General Roemer in Case 25/62 (Plaumann v Commission [1963] ECR 110 at p. 113). The prejudicial effect in the case of such decisions is the direct result of the decision itself. No further implementing measure is required. Moreover, that effect relates not only to mere business opportunities or to expectations on the market, but also to legally protected rights of the undertakings concerned. The legal protection flows directly from the directly applicable prohibition laid down in Article 85 (1). The Court has not only expressly confirmed the direct applicability of Article 85 (1) in a long line of cases, but has also repeatedly held that that prohibition creates rights between individuals which may be enforced in the civil courts. In that connection the Commission refers to paragraph 16 of the judgment of the Court of 30 January 1974 in Case 127/73 (BRT v Sabam [1974] ECR 51).

If the prohibition contained in Article 85 (1) creates individual rights in favour of the persons who are concerned by the operation of a cartel, a decision which declares that prohibition inapplicable deprives the person concerned of those rights. The Commission illustrates the significance of that conclusion by reference to the present case. If the exemption had not been granted, SABA and its appointed dealers would not have been obliged, but would nevertheless have been free, to make supplies to any customer, whether appointed or not, and the applicant would normally have been able to obtain supplies of SABA products in some way or other. If the applicant had been refused supplies as a result of the coordination of the sale policies of SABA and its dealers, it would have been entitled to bring a civil action for an injunction or for damages.

The Commission considers that the contested decision is also of individual concern to the applicant. The Commission applies the requirements laid down in the judgments of the Court and states that the applicant can be distinguished from other undertakings, equally concerned by the contested decision, by the fact that it presented written comments to the Commission, both before and after the latter's publication, pursuant to Article 19 (3) of Regulation No 17, of its intention to renew the exemption granted in respect of SABA's selective distribution system. It is the comments submitted by, amongst others, the applicant which are expressly referred to in Part I C of the decision and subsequently rejected in Part II. The Commission considers that the submission of such comments identifies the applicant as being individually concerned in the same way as the lodging of a complaint under Article 3 of Regulation No 17, as referred to in the Court's judgment in the first Metro case. It even regards a request to be heard or the submission of written comments following a notice pursuant to Article 19 (2) of the regulation as the normal way of expressing an objection to a possible exemption. On the basis of the information thus obtained the Commission may, where appropriate, refuse the exemption applied for. For the reasons stated above, there is no reason for undertakings concerned to take further action against the cartel in addition to submitting their comments. If an exemption is refused on the basis of those comments, it must be assumed from the fact that the undertakings concerned notified their agreements that they will abide by the rules of the Treaty and will no longer operate the cartel, even without being ordered to cease doing so. Lastly, the Commission states that it would be wrong to regard as admissible only those actions that are brought by undertakings which have established a particular relationship with the Commission. An undertaking may, for example, be regarded as sufficiently identified for the purposes of admissibility if it is a party to civil litigation commenced before a national court against one or more members of the cartel in question, provided that such litigation was pending at the time when the contested decision was adopted.

I shall confine myself to those parts of the Commission's argument which concern the admissibility of an action brought by third parties against a decision to grant an exemption. On this question I find the Commission's view convincing. I therefore agree that the present application is admissible on the ground that it fulfils the general requirements, which are well set out in the Commission's argument. The Commission clearly considered it important to set out its position in full so that it may also be applied in cases other than the present case. I have therefore taken the view that it will be useful for legal practitioners if I reproduce its entire arguments. As SABA's case for the inadmissibility of the action is implicitly refuted by the Commission's argument, I do not propose to consider that case separately.

3.3. The applicant's sixth submission

As I have already stated, the applicant considers that the contested decision is not simply a renewal of the original exemption but contains a fresh exemption. A fresh exemption should, according to the applicant, only have been given after a new formal notification of the amended SABA system in accordance with Article 4 (1) of Regulation No 17. For the reasons given by the Commission to which I have already referred, I nevertheless consider that this case concerned an application for the renewal of an exemption, for which Article 8 (2) of Regulation No 17 merely requires an application to be made by the undertaking, after it has simply communicated any amendments made to the system. As SABA and the German Government have also argued, to repeat the notification using Form A/B each time the text was amended would be a pointless formality. The applicant's sixth submission must therefore in my view be rejected.

4. Assessment of the principal substantive submissions

4.1. Preliminary remarks

4.2. The relevant paragraphs of the judgment in the first Metro case

The importance attributed by the Court in the first Metro case to the general structure of the market, for purposes of assessing the applicability of Article 85 to selective distribution systems, is clear first from the third subparagraph of paragraph 20 of that judgment. The Court states that for high-quality and technically-advanced consumer durables, such as those concerned here, the structure of the market does not preclude the existence of a variety of channels of distribution adapted to the peculiar characteristics of the various producers and to the requirements of the various categories of consumers (emphasis added). In the fourth subparagraph the Court concludes from that that on this view the Commission was justified in recognizing that selective distribution systems constituted, together with others, an aspect of competition which accords with Article 85 (1), provided that resellers are chosen on the basis of objective criteria of a qualitative nature... . In referring here to other aspects of competition, the Court in my view clearly means distribution channels of other kinds as mentioned in the preceding subparagraph.

In the fifth subparagraph of paragraph 21, the Court states as follows:

For specialist wholesalers and retailers the desire to maintain a certain price level, which corresponds to the desire to preserve, in the interests of consumers, the possibility of the continued existence of this channel of distribution in conjunction with new methods of distribution based on a different type of competition policy, forms one of the objectives which may be pursued without necessarily falling under the prohibition contained in Article 85 (1), and, if it does fall thereunder, either wholly or in part, coming within the framework of Article 85 (3).

Those statements are then summarized and amplified in the first, second and third subparagraphs of paragraph 22, which read as follows:

Although the figures submitted by both sides concerning the existence of price competition amongst SABA distributors ultimately indicate that the price structure is somewhat rigid, they do not, especially in view of the existence at the same time of competition between products of the same brand (intra-brand competition) and the existence of effective competition between different brands, permit the conclusion that competition has been restricted or eliminated on the market in electronic equipment for leisure purposes. Nevertheless, the Commission must ensure that this structural rigidity is not reinforced, as might happen if there were an increase in the number of selective distribution networks for marketing the same product. Since the Commission granted the desired exemption only for a period expiring on 21 July 1980 it retains the possibility of reconsidering within a reasonable time the consequences of this aspect of its decision.

From my earlier statement that the Commission confined its investigation in the first SABA decision to the system operated by SABA — as indeed it did in all but one part of the second SABA decision, at issue here — I infer that in the paragraphs cited above the Court was stating its view that, for purposes of the assessment of an individual selective distribution system such as that concerned here, on the basis of Article 85 (1) and (3), it is of decisive importance whether, in addition to the distribution system at issue, there are adequate alternative channels of distribution (paragraph 20) or new methods of distribution (for example, supermarkets and discount stores) available (paragraph 21) in order to provide for the requirements of the various categories of consumers (paragraph 20). That accords with the previous judgments of the Court, in particular the judgment in Case 23/67 (Brasserie de Haecht v Wiikin [1967] ECR 407) which has also been cited in these proceedings; in that judgment the Court stated at page 415, with regard to the brewery agreement at issue in that case, that:

In order to examine whether it is caught by Article 85 (1) an agreement cannot be examined in isolation from the above context, that is, from the factual or legal circumstances causing it to prevent, restrict or distort competition. The existence of similar contracts may be taken into consideration for this objective to the extent to which the general body of contracts of this type is capable of restricting the freedom of trade.

As I have already remarked in Section 3.3. of my Opinion of 19 June 1985 in Case 161/84 (Pronuptia) it is clear from paragraph 5 of the judgment of the Court in Case 43/69 (Bilger v Jebie [1970] ECR 127) that the Court was referring, inter alia, to distribution systems operated by other producers which had the same effect of excluding third parties (in that case, other producers).

For the purposes of this case, it is important to note that it is clear from those two judgments that account must be taken of the parallel restrictions on competition resulting from several exclusive distribution systems (in those cases, brewery contracts and in this case, selective distribution systems) not only in applying Article 85 (3) but also in applying Article 85 (1).

Moreover, as I pointed out in my Opinion in Pronuptia, since the 1977 Syhania judgment on vertical restrictions of competition (exclusivity rules) with regard to trade, the American courts have also generally considered it necessary to examine whether or not there is effective competition with other products. In that connection account will obviously also have to be taken of the existence of different kinds of distribution systems. As I also stated in that Opinion, at the time of the Sylvania judgment no distinction was drawn in American law between the different types of exclusive distribution systems, such as sole distributor agreements, selective distribution systems and franchise agreements. It is clear from the academic writings to which I referred in that Opinion that such a distinction was not drawn until later. In any event, the principle set out in Sylvania and the corresponding principle which was laid down in the judgments of this Court in Haecht, Bilger v Jehle and the first Metro case are in my view consistent with the requirement that there should be an economically realistic conception of the effective competition to be maintained through competition policy. It is not realistic to take account solely of the effects of one distribution system or one vertical agreement, without considering the parallel effects of other distribution systems or vertical agreements. As I further stated in my opinion in Pronuptia, individual vertical price maintenance is another clear example that the restrictive effect which vertical agreements have on competition frequently results not from each individual agreement but primarily from the combined effect of similar distribution practices adopted by a number of producers.

With regard to selective distribution systems in particular, it seems to me clear that in assessing an individual system it is sufficient to require, in accordance with the fourth subparagraph of paragraph 20 of the judgment in the first Metro case, that resellers are chosen on the basis of objective criteria of a qualitative nature relating to the technical qualifications of the 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. Provided that there is a sufficient number of other manufacturers and a sufficient variety of distribution systems, as assured in the previous subparagraph, competition with other distribution systems (including the new methods of distribution referred to in paragraph 21) will ensure that the Objective criteria of a qualitative nature' are not fixed at too high a level. That safeguard ceases to operate, however, if the major competitors apply a similar system whereby certain sales methods (such as cash-and-carry stores which have no trained staff and to which the related obligation to provide pre-sales and after-sales service does not apply) are excluded. The history of the development of the Netherlands legislation on the establishment of retail businesses, which dates from the 1930's (but continued to be applied for many years after the war) and which applied exclusively objective criteria of a qualitative nature is a clear example of the way in which such objective criteria of a qualitative nature can restrict competition if they are of general application. Such restrictions on access to the market by the application of strict requirements of a qualitative nature were originally expressly intended and the fact that they were effective (as evidenced by the regular reduction in the number of retailers), was initially, even after the war, regarded as proof of the legislation's success. At a later stage, however, the legislation was completely re-drafted as a result of the restrictive effects which it had on new methods of distribution and in particular as regards retailers not specializing in particular products, in order to provide for such new methods of distribution.

4.3. The fourth submission

As I have already stated, in this submission Metro argues that the Commission misused its power by basing the contested decision on limited, incomplete and dated information.

Both the applicant and the United Kingdom consider in particular that the Commission did not base its decision on a general investigation of the market, as referred to in the judgment in the first Metro case.

I consider that submission well founded. It is clear from a reading of the contested decision that neither the account of the facts nor the legal assessment therein contains any information on the general structure of the market. That omission must be regarded as particularly serious since Part I C of the decision expressly refers to the following objection raised by third parties to the exemption of SABA's distribution system: Its effects would be all the more damaging in view of the precedent which exemption of the SABA system would set for the similar distribution arrangements established by many other manufacturers in this business.

It is true that in the legal assessment of the SABA system with regard to Article 85 (3) (b), the decision states as follows: Nor has the Commission found that as a result of the spread of selective distribution systems ... particular types of outlet such as cash-and-carry stores or self-service wholesale and retail supermarkets are systematically excluded from selling such products. As I have stated, however, there is no indication in the decision that that important conclusion was based on any factual investigation. As regards the Mackintosh Report, to which the Commission has referred in the course of the proceedings before the Court, the Commission itself admitted at the hearing that that report was not drawn up until two months after the decision was adopted. This confirms that the decision was not based on any general investigation of the market and makes the Commission's statement (Nor has the Commission found that... ) appear somewhat odd. I shall return to other objections to that statement when I consider the applicant's second submission. What it is in fact saying is that if new methods of distribution are prepared to concede competitive advantages which enable prices to be lowered, there is nothing to prevent their being authorized.

At the hearing the United Kingdom in particular gave a clear statement, in answer to a question asked by the Judge-Rapporteur, of the sort of information concerning the market structure which ought to have been regarded as important in this connection but which the Commission does not consider in its decision:

(a) The spread of selective distribution systems (whether or not they have been notified, whether or not they are restricted to the imposition of objective criteria as referred to in the first Metro case and whether or not they contain excessive additional obligations in relation to trade such as are contained in the SABA system); (b) The true economic significance of the fact that SABA belongs to the Thomson-Brandt group; (c) The practical effects of selective distribution in the relevant market: for example, it is important to ascertain how far the stocking and purchasing obligations have the effect of tying a distributor to a particular producer; in addition, the effects which the costs arising out of these and other requirements (for example, free servicing) have on trading margins and prices (the effects on the rigidity of the price structure); the extent to which existing distribution systems are responsible for differences in price levels in the various Member States; and the question of how far admission conditions for retail distribution should also be applied to wholesale distribution; (d) The question whether the dealer qualifications required by a number of producers are in fact justified with regard to all the products concerned.

On those questions, which I also consider relevant, I would merely note that both the Commission's decision and the subsequent Mackintosh Report fail to provide any clear answers to those questions. In fact the Mackintosh Report contains only three pages and three tables on distribution structure and provides only very general information therein.

4.4. The first submission

As I have already stated, Metro's first submission is that the Commission misused its power by applying Article 85 (1) without taking into account the conditions laid down by the Court in the first Metro case. For an analysis of those conditions I refer to Section 4.2. of this Opinion.

I regard that submission as well founded for the same reasons as I gave in relation to the more general fourth submission. However, as regards the importance of the aforesaid lacuna in the decision for purposes of the application of Article 85 (1), I wish to add the following remarks.

It is clear from my analysis of the cases decided by the Court that, in assessing the compatibility with Article 85 (1) of a distribution system laid down by a number of agreements account must be taken of whether or not there are other distribution systems which also exclude certain groups of suppliers or customers. That is particularly important if excluded undertakings complain to the Commission during the administrative procedure about the proliferation of similar systems. As I have already noted, the decision itself states that such complaints were received in this instance. In the case of a distribution system which, by the application of a collection of selective criteria and the imposition of various requirements, provides that only specialized dealers or dealers with special departments may be supplied, it is in my view necessary to take account of all other distribution systems which also exclude the non-specialized trade. It is in my view irrelevant, for purposes of the applicability of Article 85 (1), whether the distribution system provides solely for the application of simple objective criteria of a qualitative nature concerning the expertise of the staff or whether there are also requirements in relation to equipment, stocking and purchasing obligations, turnover requirements with respect to the products concerned and requirements to provide pre-sales and after-sales service. Where there is a large number of simple selective distribution systems existing side by side which together dominate the market, such a collection of simple systems may also lead to the exclusion of, for example, discount houses and supermarkets without specialized departments, and may thus exclude certain types of dealer from competition. Therefore for purposes of the application of Article 85 (1), account must also be taken of the existence of simple selective distribution systems of that kind. However, it is in fact clear from Part II A of the decision that, in determining whether Article 85 (1) was applicable, the Commission did not take account of the existence of other more sophisticated selective distribution systems, or other simple selective distribution systems. So far as other simple systems are concerned, that is clear in particular from Part II A (6) of the decision. The Commission also stated at the hearing that simple selective distribution systems can never, even if they are of general application, be considered to restrict competition within the meaning of Article 85 (1). It considers that there is no obligation to notify simple systems of this kind, and from that it must be concluded that at the date of the decision the Commission did not even have at its disposal a complete picture of such systems.

As I have already stated, the view expressed by the Commission at the hearing that paragraphs 22 and 50 of the judgment in the first Metro case are relevant only in relation to the application of Article 85 (3) (b) also seems to me, on the basis of my analysis of the cases decided by this Court, incorrect. As I pointed out, the Commission also wrongly rested its argument on paragraph 21 of the aforesaid judgment.

At the end of the hearing, the Commission's representative added, in answer to questions which I asked on this aspect of the case, that the Commission's position on simple selective distribution systems means that it gives preference to the interests of manufacturers, who are in its view free to organize the distribution of their products as they want it organized and in so doing may disregard the interests of non-specialized dealers. The Commission stated that the interests of such dealers are not disregarded because they cannot successfully sell the products in question, but because the manufacturer does not wish to leave it to the dealer to decide whether or not to render services to customers and whether or not to maintain quality standards. The Commission concedes that a manufacturer's decision might be influenced by the existence of a large number of simple selective distribution systems. The manufacturer might then be forced, owing to the unwillingness of the specialized trade to buy his products on any other basis, himself to operate a selective distribution system. The Commission does not regard the interests of unqualified dealers (that is to say, dealers who cannot or will not meet the requirements laid down) as an object of protection (under Article 85). The primary object of protection is in its view the consumer. As long as manufacturers are anxious to maximize profits through selective distribution and as long as workable competition prevails, the interests of consumers seem to be sufficiently safeguarded. If consumers do not wish to take advantage of such selective distribution systems, they are free to move their custom to unqualified dealers and will thereby eventually force manufacturers to abandon selective distribution. Consequently, as long as the majority of consumers are satisfied with selective distribution, the Commission will have no reason to depart from the first Metro case. The Commission's answer to my questions serves to illuminate its position in various respects.

First of all, the complete text of the Commission's reply confirms that the Commission bases its policy in this area solely on Article 85 (3). In its opinion, no account need be taken, for purposes of the application of Article 85 (1), of the existence of a large number of selective distribution systems. As I have already pointed out, I do not consider that position to be compatible with the judgments of the Court. Before considering the positive effects which selective distribution systems may have, on the basis of Article 85 (3), it is necessary first to determine whether they restrict competition under Article 85 (1). In that connection, account must be taken of the parallel effects of parallel systems such as I have defined above. For purposes of the application of the first requirement laid down in Article 85 (3), an economic balance must be drawn between restrictions on competition and the positive effects of such restrictions.

Secondly, it is clear from my detailed summary of the Commission's reply to my questions that the Commission recognizes that where specialized dealers have a large share of the market manufacturers may be forced to operate a selective distribution system, since otherwise they would be threatened with a boycott by such dealers. In reality there is then no freedom of choice on the part of the manufacturer, as postulated by the Commission, nor under those circumstances does the consumer have the ultimate casting vote. On the contrary, it is the specialized dealers who will ultimately determine what form of distribution system is to be operated. In another part of its argument the Commission acknowledges that specialized dealers have a very large share of the German market. According to the Mackintosh Report, discount houses and supermarkets in the Federal Republic of Germany have only 5% of the market (compared with 15% in France and 16% in the United Kingdom). On the other hand, according to the Mackintosh Report, independent specialist dealers have a market share of 55%, specialist rental firms a market share of 4% and multiples and department stores a combined share of 27%. It may be assumed that at least some of the two last-mentioned groups also have specialized departments, but the report does not contain any further information on that important point. The Commission stated at the hearing that the largest German mail-order house (which belongs to the residuary group with a market share of 9%) meets the requirements of SABA's system.

Thus in Germany at least there seems to be a very real danger of a threatened boycott on the part of specialized dealers.

Lastly I must consider the Commission's express statement that it does not regard the interests of non-specialized dealers as worthy of protection. France (with its long-established prohibition of refusals to sell) and the Netherlands (as appears from the amendments of the legislation on the establishment of businesses, referred to above, and the repeated action taken by means of competition law against the boycott, by manufacturers of brand goods, of new distribution systems such as those referred to in the first Metro case even if that boycott was the result of pressure exerted by specialized dealers), as well as the United Kingdom, clearly take a different view on that point, and one which seems to me to be more correct as far as competition policy and in particular the interpretation of Article 85 are concerned. There are various arguments in favour of such a different view. It is fundamental to Netherlands policy that the boycott of particular types of business constitutes a breach of the principle of freedom to set up and operate a business. Perhaps, however, the age-old Netherlands concern for efficient trade as a source of prosperity has also played a part here. The Commission in its reply to my questions and also the German Government in its intervention seem entirely to overlook the fact that the independent role played by trade and a multiplicity of independent forms of distribution are important elements in competition. Indeed, the organization of distribution is in principle regarded as the manufacturers' responsibility. In France, apart from the prohibition on refus de vente, it is certainly relevant that in the 1950's the post-war legislation on competition — regarded as part of legislation on prices — was regarded at first as an instrument to counteract price rises in the context of the fight against inflation and to promote lower prices (inter alia by means of new and cheaper methods of distribution). The United Kingdom's views on competition policy seem to be influenced more by pragmatic considerations, detailed analyses of the market and perhaps by the English and American academic writings on workable competition, in which free access to a market is regarded as a very important, if not the most important, requirement for workable competition. That requirement does not permit a collective boycott of certain forms of business, whether or not it is deliberately coordinated. I can find no clear explanation for the position adopted by Germany in its intervention in support of the Commission in the present case, since Germany is in general known to have a more rigorous competition policy than the other three Member States referred to above. Perhaps historical traditions, dating back to before the last World War, are also relevant here. The long-standing prohibition in Germany on the integration of wholesalers and retailers could point in that direction. In many other countries such a prohibition is regarded as an undesirable impediment to the reduction of costs. With regard to the application of Article 85 (1), however, I would repeat that it seems to me clear — also on the basis of the judgments of the Court — that the position put forward by the Commission is untenable. Indeed, it seems to be clear from the wording of Article 85 (1) that the exclusion of particular forms of business (in this case, non-specialized dealers who offer no pre-sales or after-sales service but instead charge lower prices) in principle constitutes a restriction of competition. There is nothing in the text of that provision to indicate that Article 85 only safeguards competition between manufacturers and not competition between dealers. On the basis of the rule of reason developed by the Court in the first Metro case and in previous cases, that in any event applies where either the producer concerned alone, or a large number of the producers concerned (even without any concerted action) together, operate such an exclusion policy and those producers together (and indeed some individually) have a market share which far exceeds the limit applied by the Commission as regards agreements of minor importance and accepted in principle in the judgments of the Court. At least for the purposes of Article 85 (1), the interests of new forms of business in trade must therefore certainly be regarded as worthy of protection. How far that also applies to Article 85 (3) I shall now consider.

4.5. The second submission

The fourth paragraph of Part II B 4 states that the consumer electronics market is intensely competitive, largely due to the large number of manufacturers, the fast pace of technological advance and the varied distribution structure. That statement is first of all once again vitiated by the decision's general defect, namely that it is not based on any investigation (since the report referred to by the Commission before the Court was not available until two months later). Thus there is no clear factual foundation for the second sentence in that paragraph, which states that although a number of other major consumer electronics manufacturers also have EEC-wide systems of dealership agreements, some of which, however, only involve simple selective distribution, the Commission was unable to find any evidence that the widespread use of such systems leads to rigidity in the price structure. Without any investigation of the market it is obvious that the Commission would be unable to find any evidence of such effects. Moreover, in that sentence the EEC as a whole is regarded as the only relevant market, whereas I have already stated that the Commission ought also to have investigated the German market as a separate relevant market. Lastly, that sentence overlooks the fact that rigidity in the price structure can also be manifested by a uniform rise in prices, resulting from obligations imposed on traders in relation to stocking, sales, equipment, staff and the provision of services. Since allowance must be made for the resultant distribution costs, such rigidity of prices can be compensated for only to a limited extent by price competition at the expense of trading margins. It is also precisely this rigidity in prices which may induce the consumer to opt for other, less expensive forms of distribution. However, where there is a proliferation of selective distribution systems (including simple selective distribution systems), such consumer preference cannot be expressed, or can be expressed only to a limited extent. As the Court rightly observed in the first Metro case, the effects on prices are not the only effects which should be considered in assessing selective distribution systems. The availability of alternative channels of distribution is also relevant here. At the hearing the Commission did not dispute Metro's assertion that none of the large manufacturers which it mentioned, who together have a market share of 82% in the Federal Republic of Germany, is prepared to supply it. Moreover, as is clear from the information supplied by the Commission itself, to that market share must be added the market share of the Japanese manufacturer, Sony, which also operates a selective distribution system. The manufacturers referred to by Metro are Grundig, Philips, the three undertakings in the Thomson-Brandt group, ITT, Blaupunkt and Loewe-Opta. Metro can obtain certain products manufactured by Philips, but can only obtain them indirectly from Italy and under a different brand name. As the Commission's general view is that simple selective systems need not be notified, it was unable, since no report on the market was available to it when it adopted the decision, to ascertain how many such simple systems are operated on the German market or to what extent manufacturers, under pressure from specialized dealers — as it considers possible according to its reply to my question — will supply exclusively to the specialized trade. Furthermore, the Mackintosh Report, which the Commission subsequently received, contains no information on that point. I have already observed that according to that report the specialized trade in the Federal Republic of Germany (unlike that in France and the United Kingdom) has a market share of 55%, to which must be added the market shares of other distribution outlets with specialized departments.

Lastly, the fifth paragraph of Part II B 4 of the decision contains a statement characteristic of the Commission's view that dealers not subject to any requirements to provide services or other requirements imposed by the manufacturers, such as cash-and-carry stores or self-service wholesale and retail supermarkets (which have a market share of 5% in the Federal Republic of Germany), do not merit protection. That paragraph states as follows: Nor has the Commission found that as a result of the spread of selective distribution systems those types of outlet are systematically excluded from selling such products. The selection criteria for SABA dealerships are not such as to be incapable in principle of fulfilment by such types of outlet, although this might involve some changes in their selling methods. As the applicant rightly remarked at the hearing, that statement confirms that the Commission does not consider it necessary to protect the competition provided by the types of outlet referred to in that paragraph unless those outlets first abandon their specific advantages as regards costs. Only on that basis was the Commission able to confine itself to a finding that those outlets were not excluded from selling SABA products in principle without also considering whether that was the case in practice. I consider that such a position, on the basis of which (in spite of the ultimate right referred to by the Commission at the hearing of groups of consumers to opt for distribution outlets with lower costs and prices) even the complete elimination of non-specialized dealers might be justified, is not compatible with the wording and purpose of Article 85.

For the foregoing reasons I consider that the applicant's second submission is also well founded.

4.6. The other submissions on the substance

As sufficient grounds for declaring the contested decision void are in my view furnished by the applicant's first, second and fourth submissions, which I have stated to be well founded, I do not consider it necessary to look in detail at the remaining third and fifth submissions of the applicant.

In its third submission, the applicant claims that the Commission misused its power by failing to take account of the way in which the SABA agreements are actually implemented. Since I have found the applicant's central complaint, as elaborated in the first, second and fourth submissions, to be justified, I regard it as superfluous to go into the complicated questions of fact which would have to be considered in an examination of the third submission. The relevance and also the complexity of the questions raised by that submission are illustrated by the Court's other judgments on selective distribution systems (see for example Case 107/82 AEG-Telefunken v Commission [1983] ECR 3151).

The applicant's fifth submission displays some connection with the central complaint levelled against the Commission. In it the applicant complains that the Commission, by granting an exemption in respect of the SABA system under Article 85 (3), permitted SABA and the Thomson-Brandt group to abuse a dominant position on the consumer electronics market in general and the market in colour televisions in particular. In support of its contention it refers to the judgments which I have already cited in my summary of the submissions.

On the basis of the Court's definition of a dominant position in paragraphs 26 and 30 of its judgment of 11 December 1980 in Case 31/80 (L'Oréat), where the Court repeated the definition which it gave earlier in Hoffinann-La Roche, I consider it possible that SABA or the Thomson-Brandt group, in spite of having a limited share of the market, should be regarded as occupying a dominant position within the meaning of Article 86. In particular SABA's apparent ability to plan its production and sales for four months and a year respectively might, in my view, indicate that it enjoys the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of the consumers. Manufacturers with a comparable system might then also be in a dominant position. Indeed, under Netherlands competition policy action has repeatedly been taken against parallel dominant positions of that kind where manufacturers abuse their position by boycotting certain forms of distribution. However, I do not consider it possible to reach a definitive conclusion on that submission on the basis of the arguments which have been put forward in these proceedings, and in any event that is unnecessary for the reasons which I have already stated.

5. Summary, final remarks and conclusion

5.1. Summary.

In my foregoing analysis I have reached the following conclusions:

5.2. Final remarks

5.3. Conclusion

In conclusion, I propose that the Court should:

1 Translated from the Dutch.