Report for the Hearing delivered in Case 43/85

I — Facts and written procedure

1. The Italian market in dental products and the promotional activities

There are three associations of undertakings on the Italian dental products market (the expression dental products refers to products directly related to the professions of dentist and dental technician, to the exclusion of widely consumed products offered to a larger market such as toothpaste and toothbrushes).

The Associazione nazionale commercianti internazionali dentali e sanitari (Ancides), the applicant, is an association set up on 30 June 1958 with the purpose of furthering and coordinating the common interests of its members and any activities serving to promote its members. The members are either representatives of foreign firms or commercial subsidiaries in Italy of such firms, or both, which are registered with the Ministry of Foreign Trade and have engaged continuously and principally in the importation of dental products and instruments for more than one year. Undertakings which act as representatives or are agents for Italian manufacturers of dental equipment and which act on behalf of the latter with exclusive responsibility for the market at a level higher than that of a single region are also eligible for membership. At the date on which this application was brought, 37 wholesalers of dental equipment, distributing the products of some 250 Italian and foreign manufacturers of dental equipment over the entire national territory, were members of Ancides.

The Associazione nazionale commercianti articoli dentari (ANCAD) (National Association of Dealers in Dental Products) is an organization of undertakings which manage dental equipment depositories.

The Unione nazionale industrie dentarie italiane (UNIDI) (National Union of the Italian Dental Industry) is an association set up on 27 May 1969 which represents practically all the Italian undertakings manufacturing dental equipment. At the date on which the application was brought, 120 Italian manufacturers were members of UNIDI.

In the dental products sector there are three forms of promotional activity used to reach a large number of potential customers at the same time:

Among the initiatives taken in this domain was a committee set up by UNIDI for the purpose of organizing national exhibitions of dental equipment under the name Expo Dental, held every 12 to 18 months since 1969 in various Italian cities. Those exhibitions have established themselves as the most important in the dental equipment sector. Ancides and ANCAD joined forces with UNIDI in this regard but it is UNIDI alone which is really responsible for organizing the exhibitions in question and for laying down the general policy to be followed in that sector.

From its inception, Expo Dental was governed by rules laid down by Unidi which set out in very great detail:

Originally, Article 22 of the exhibition rules provided, in particular, that exhibitors could not take part in other similar exhibitions. However, that prohibition did not apply to open houses on condition that they did not take place in the framework of a professional congress or at exhibitions organized during meetings or congresses of specialists (dealing in particular with orthodontics and implantology). Undertakings which infringed that prohibition lost the right to take part in Expo Dental as well as the deposit they had put up to reserve their place. If the exhibition had already begun, the offender lost the right to take part in the following Expo Dental.

2. The Commission's first decision

In December 1973, UNIDI transmitted the Expo Dental rules to the Commission. Its purpose in so doing was principally to obtain the negative clearance provided for in Article 2 of Regulation No 17 of the Council of 6 February 1962 (Official Journal, English Special Edition 1959-62, p. 87). In the second place, that transmission was intended to constitute notification within the meaning of Article 4 of the said regulation for the purposes of obtaining the exemption provided for in Article 85 (3) of the EEC Treaty.

During the Commission's inquiry, Ancides, which the Commission consulted, was favourable to the acceptance of UNIDI's application. Following the submission of a complaint under Article 3 of Regulation No 17/62 by certain manufacturers of dental equipment and as a result of the Commission's intervention, UNIDI revised the original Expo Dental rules. In particular, the complete ban on participating in similar exhibitions was reduced to a ban on taking part in other exhibitions of dental equipment during the nine months preceding Expo Dental (that is to say, half the period which had elapsed since the previous Expo Dental). On 17 July 1975, the Commission adopted Decision 75/498 (Official Journal 1975, L 228, p. 17) (hereinafter referred to as the first decision) granting the second part of UNIDI's application. The Commission declared that pursuant to Article 85 (3) of the Treaty, the provisions of that article were not applicable to the Unidi decision setting out the rules governing Expo Dental exhibitions. However, the Commission required UNIDI to inform it of any refusal to admit an exhibitor to a Expo Dental exhibition. The decision in question remained valid until 31 December 1983.

In its decision, the Commission considered, inter alia, that the Expo Dental rules had a positive effect in regard to rationalizing the organization of and participation in fairs and exhibitions and in regard to the periodic concentration of supplies in a single Italian city, which is not always the same.

Between 1975 and 1983, relations between Ancides and Unidi grew progressively worse. According to documents produced by the applicant, a publicity campaign entitled sorridi italiano (smile in Italian) mounted by Unidi to promote dental equipment made in Italy seems to have been the actual cause of the deterioration in relations between the two associations.

UNIDI and Ancides concluded agreements on 7 March 1980 (which referred to another agreement concluded on 10 December 1979) which, however, were never applied. Later agreements, concluded on 15 December 1981, tried to redefine the respective positions of the parties and to permit them to operate on an equal basis. The latter agreements stated that Expo Dental exhibitions should be held annually and in a wider range of cities than had previously been the case. It was intended that the agreement of 15 December 1981 would remain valid until the 1984 Expo Dental. After the end of the 1983 Expo Dental, Ancides informed UNIDI that it considered that the aforementioned agreements had expired and that it was once again free to act as it saw fit. Ancides then began to organize its own exhibitions in competition with those of UNIDI.

3. The Commission's second decision

On 28 November 1983, UNIDI applied to the Commission for the renewal of the first decision. Following publication of the notice provided for in Article 19 (3) of Regulation No 17/62, Ancides, by letter of 7 June 1984, asked that the decision exempting the Expo Dental rules should not be renewed. Essentially, Ancides put forward the following arguments:

UNIDI had decided that in future Expo Dental exhibitions would be held annually, always in Milan in the month of June. Therefore, the reason set out in Section III, paragraph 3, of the decision of 1975 no longer held good.

UNIDI had decided to hold Expo Dental exhibitions every 12 months instead of every 18 months and, consequently, had reduced from about nine months to about six months the period of prohibition. The limitation of the period during which participation in other exhibitions is permitted to the six months following an Expo Dental must be regarded, taking account of the fact that the Expo Dental is held in June, as a fundamental modification of UNIDI's initial decision. In Italy, economic activities are paralysed during the summer and, in the dental sector, that paralysis is almost total during a period of six to eight weeks. The period during which other organizers could hold exhibitions in which all those who might be interested would be free to take part is thus limited in reality to less than three months, namely from about the middle of September to the beginning of December (when the period of prohibition begins again).

Today, Expo Dentai is undoubtedly the largest Italian exhibition of dental products but it is also true that during the last few years, other exhibitions, linked to congresses and scientific meetings of the profession, have established themselves. Those new exhibitions often offer the same measure of success, in terms of prestige, as does Expo Dental because they generate publicity at national level and provide an opportunity to become familiar with and compare the products available on the Italian market. They also have advantages over Expo Dental inasmuch as their better geographical distribution facilitates contacts with customers in the various regions and permits both exhibitors and customers to reduce their costs. Those factors have even led some of them to opt to take part in these new exhibitions and, therefore, not to take part in Expo Dental.

The advancement of science and dental techniques has brought about changes in the information requirements of dentists and dental technicians, giving rise to an everincreasing number of further training courses and seminars designed to make them familiar with new techniques, products and methods. The undertakings concerned frequently organize and sponsor such events. However, many of those functions fall under the prohibition contained in Article 22 (now Article 21) of the Expo Dental rules, which hinders the conduct and development of such functions.

UNIDI took advantage of the means which it acquired as a result of its privileged position in order to promote the sale of products originating in Italy to the detriment of imported products and it even conducted a publicity campaign on the theme sorridi italiano intended to promote dental equipment made in Italy.

In reply to enquiries from the Commission, UNIDI, in a letter of 26 July 1984, refuted the observations made by Ancides.

Since it considered that the arguments put forward by Ancides were not conclusive, the Commission adopted Decision 84/588 of 23 November 1984 (Official Journal 1984, L 322, p. 10) (hereinafter referred to as the second decision) renewing the previous decision until 31 December 1993 and maintaining in force UNIDI's obligation to inform the Commission of any refusal to admit an exhibitor to Expo Dental, stating the reasons for that refusal. In that regard, the Commission stated, in Section I, paragraph 4 (b) of the decision, that the Expo Dental rules had been changed to permit exhibitors refused admission to or expelled from an Expo Dental exhibition to lodge an appeal to an arbitration panel within eight days of being informed of the decision. In Section I, paragraph 4 (a), the Commission also stated that there had been another fundamental modification of the Expo Dental rules, namely that since 1983 Expo Dental exhibitions have been held every year instead of once in every 18 months and the period prior to Expo Dental exhibitions during which exhibitors are barred from participating directly or indirectly in other exhibitions has been reduced accordingly from nine to six months.

4. Procedure

By an application lodged at the Court Registry on 14 February 1985, Ancides brought the present action for a declaration that Decision 84/588 is void.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided on 18 June 1986 to assign the case to the Second Chamber pursuant to Article 95 (1) and (2) of the Rules of Procedure and to open the oral procedure without any preparatory inquiry. However, it asked Ancides to produce proof of its entitlement to bring legal proceedings in the name of its members.

II — Conclusions of the parties

The applicant claims that the Court should:

Declare void, pursuant to Article 174 of the EEC Treaty, Commission Decision 84/588/EEC of 23 November 1984 (Official Journal L 322 of 11. 12. 1984, p. 10).

In its reply, the applicant asks the Court to order the Commission to pay the costs if the latter fails in its submissions.

The Commission contends that the Court should :

III — Submissions and arguments of the parties

1. (a) Locus standi of Ancides and admissibility

The applicant claims that Decision 84/588 causes it (and its members) direct and immediate damage inasmuch as it affects its right to determine freely the dates and arrangements for the promotional activities organized by it. In essence, the Commission's decision placed Ancides in a situation in which it is not even possible to achieve the objectives of the association (see Article 3 of the Statutes). The Commission has protected the dominant position of Unidi in regard to exhibitions and other promotional activities in the dental sector in Italy without delimiting that position by appropriate corrective measures and while ignoring or failing to take account of the consequences for the common market of the absence of an equally appropriate protection of the representatives in Italy of foreign manufacturers. Moreover, the Commission merely took note of the wholly insignificant modifications made by UNIDI to its Expo Dental Rules of 1973 and overestimated the scope of those modifications, as if they could of themselves constitute a decisive move towards liberalization. The effects of that decision tend principally to affect Ancides even though UNIDI is formally designated as the person to whom the contested decision is addressed.

The Commission does not contest the admissibility of the action. It accepts that it cannot be denied that the decision at issue, even though it refers formally only to UNIDI, is also of direct and individual concern to Ancides. However, the Commission emphasizes that Ancides may validly act in its own right in order to defend its interests as an organizer of dental equipment exhibitions. On the other hand, it has no right to bring legal actions in the name or on behalf of other persons, and, in particular, in the place of its members, whose identity is unknown and which have given it no mandate so to act (as can be seen from the Statutes of the association). For that reason, the applicant's claims concerning, on the one hand, the alleged activity of UNIDI designed to favour consumption of Italian dental products and, on the other hand, the attitude of the Commission, which is alleged not to have accorded appropriate protection to the representatives in Italy of foreign manufacturers of dental equipment, are irrelevant. Since Ancides claimed that it was not enough that the Commission consult it and that its members ought also to have been heard separately, the applicant itself admits that it is not entitled to represent its members either in regard to the administrative procedure or in regard to the action before the Court.

(b) Infringement of the right to a fair hearing

The applicant also claims that the contested decision constitutes an infringement of the right to a fair hearing in so far as at the time that the administrative measure was adopted, Article 1 of Regulation No 99/63 of the Commission of 25 July 1963 on the hearings provided for in Article 19 (1) and (2) of Council Regulation No 17/62 (Official Journal, English Special Edition 1963-64, p. 47) was either infringed or wrongly applied, having regard to the failure to communicate the information and any documents which may have served as the basis for the decision. The Commission did not give any reasons for its conclusion but merely stated that it had received no comments which might justify any alteration of its assessment of the Expo Dental rules.

In regard to that point, the Commission contends first that since no one asked to be allowed to express a view, neither the members of Ancides nor the applicant are in a position to complain in that regard. The Commission was entitled (but not required) to obtain information from third parties but it was in this case exercising a discretionary power. Furthermore, since Ancides had submitted observations, it was considered superfluous to hear its members separately. With regard to a further consultation of Ancides, it is clear that it was not necessary once the applicant had submitted its own observations. The fact that the Commission decided not to accept the contentions of Ancides is part of the substance of the case and does not concern the protection of the right to a fair hearing. Finally, the Commission clearly indicated in the preamble to the contested decision the factors on which its assessment was based and there is therefore no justification for complaining of a failure to state the reasons on which the decision is based.

With regard to the procedural guarantees referred to in Article 19 (1) of Regulation No 17/62 of the Council and Regulation No 99/63, the Commission contends that the applicant had an opportunity of being heard, with the result that there can be no question of an infringement of the right to a fair hearing. Article 19 (1) refers to undertakings directly concerned and not to third parties and the position of any third parties who might be concerned is taken into account in the other two paragraphs of Article 19. Neither Ancides nor its members applied to be heard. The Commission complied with the provisions of Article 19 (3) concerning the publication of a notice in the Official Journal. With regard to the guarantees contained in Regulation No 99/63, Articles 1 and 5 of that regulation have not been infringed because Ancides had an opportunity of making known its views in its letter of 7 June 1984. Finally, neither Ancides nor its members ever requested the opportunity to put forward their arguments orally, as is provided for in Article 7 of the said regulation.

2. Infringement of the rules on free competition in the common market and abuse of a dominant position

The applicant claims that having regard to the provisions of Article 21 of the Expo Dental rules, importers and distributors of dental products, the latter category including both Italian and foreign undertakings, are obliged to work in association with UNIDI and must take part in the annual Expo Dental exhibition in order to be sure of a publicity programme, which is appropriate both from the commercial point of view and from that of reducing costs, in accordance with the Community rules on competition. There is no room left for other associations of undertakings concerned with promotional aims or activities or for individual undertakings wishing to organize their own exhibition independently since the participants in Expo Dental may not participate, with a few rare exceptions, in other exhibitions for a period of six months. Since Expo Dental takes place in June each year, the possibility of taking part in other exhibitions is limited to about three months. That is because in Italy, during the period between the beginning of June and the end of September, production slows down considerably with the result that exhibitions of this sort have very little chance of success.

The Commission has failed to take account of the new trends on the market which must necessarily lead to a change in exhibition policy in the dental sector. Meetings of a nontraditional kind, such as courses and specialized seminars, are taking place more frequently. Although the Commission stated in the contested decision that Expo Dental permitted a great deal of travelling to be avoided, the applicant claims that the problem of travel from place to place has never been raised by anyone wishing to implement an effective promotional policy. Similarly, the fact of holding a meeting of the various exhibitors on a single date each year amounts to laying down the law for the whole of the national territory in regard to promotional events in this sector.

The Commission assessed the advantages which the various traders obtain from participation in Expo Dental particularly from the point of view of the savings in costs compared with what those traders would have to pay if they took part in other, more frequent, promotional events. The Commission did not indicate the economic benefits for Unidi of its privileged position and the negative economic consequences for Ancides and the other associations wishing to organize competing exhibitions.

The contested decision distorts the common market, and thereby infringes the principle laid down in Article 3 (f) of the EEC Treaty, by virtue of the erroneous interpretation and application of Article 85 (1) (e) and (3) (a) and of the infringement of Article 86 (b) of the Treaty.

The applicant refers to the Court's previous decisions on the breach of the principles concerning the protection of free competition in the common market, in particular the judgments of 21 February 1973 (Case 6/72 Europemballage Corporation and Continental Can Company Incorporated v Commission [1973] ECR 215), of 16 June 1981 (Case 126/80 Salonia v Poidomani and Giglio [1981] ECR 1563) and of 7 June 1983 in Joined Cases 100 to 103/80 {Musique diffusion française [1983] ECR 1825).

The Commission observes that only the abuse of a dominant position is unlawful as such. UNIDI's activity as organizer of exhibitions of dental equipment cannot be assimilated to any of the kinds of abuse of a dominant position set out in Article 86. UNIDI has complied with the terms of an authorization obtained from the competent authorities for the purpose of carrying out a particular activity. The contention — which has not been established — that UNIDI was promoting the sale of Italian products, something which a private association of Italian producers is not prevented from doing and which is not as such related to the Expo Dental rules which are the subject of the contested decision, cannot constitute an abuse either. The fact that participation in Expo Dental (even if it is necessary for undertakings operating on the Italian market to participate in it) involves an obligation not to participate in other exhibitions during a certain period does not represent an abuse of a dominant position and, moreover, is justified by the major advantages which the exhibitors derive from participation; those advantages can only flow from the concentration of all that is on offer in a single place and, consequently, from the clause imposing the obligation in question. Finally, the Commission points out that private bodies may bring proceedings before the Court for the purpose of putting an end to alleged abuses of a dominant position only by way of an application under Article 175 of the Treaty for a declaration that an institution has infringed the Treaty by failing to act; in the Commission's view this action meets neither the formal nor the substantive requirements for such an application.

The Commission doubts whether UNIDI holds a dominant position. By its own admission, Ancides, through its members, represents about 50% of the dental products marketed in Italy. The applicant itself organizes exhibitions of dental products which compete with Expo Dental. In any event, the applicant's statement that exhibitions like Euro Dental have lost ground to other more flexible and more modern events shows that a foreign producer wishing to sell in Italy is not in practice required to join UNIDI and take part in Expo Dental. The Commission points out that it is not necessary to be a member of UNIDI in order to take part in Expo Dental.

Foreign manufacturers and importers could successfully carry out their own promotional activities through Expo Dental or through initiatives taking place at such times or of such a nature as to permit them to avoid the prohibition in the Expo Dental rules. Thus, the only damage which the persons concerned might suffer is a certain limitation of the promotional initiatives that they might take during a particular period.

The Commission draws attention to the amendments made to the Expo Dental rules. The Commission regarded the setting up of the arbitration panel, which hears appeals concerning any disputes arising out of exclusion from Expo Dental, as a useful and appropriate amendment but it was not the decisive reason for renewing the exemption, as can be seen from paragraph 10 of the recitals in the preamble to the 1984 decision. The Commission did not therefore overestimate the importance of that amendment.

With regard to the change in the length of time elapsing between Expo Dental exhibitions, the Commission contends that the exhibition rules do not specify that it must always take place in June. Although a proposal to that effect has been put forward, no decision has yet been adopted.

Although there are periods when economic activity in Italy slows down, the prohibition in the Expo Dental rules does not have the effect indicated by the applicant and, in any event, it is possible to obtain satisfactory results by holding exhibitions of dental equipment during the holiday period. The Commission did not therefore underestimate the importance of the amendment to the Expo Dental rules in that regard.

With regard to the fact that the factors on which the first decision was based have ceased to exist, the Commission states that at the time it adopted that decision, it attached little importance to the collaboration of Ancides with UNIDI, as is specified in that decision (Section I (1)). The Commission also did not regard as fundamental the existence of a period of at least nine months when no restrictions applied but, on the contrary, simply held the imposition of restrictions during half of the period separating two successive Expo Dental exhibitions to be reasonable having regard to the rate at which the relevant products developed and the exceptions allowed for open-house exhibitions. It even stated that the period during which restrictions were imposed was to be regarded as indispensable to the attainment of the objectives of the Expo Dental rules in regard to rationalization and reduction of costs.

The Commission observes that if, as the applicant claims, the economic interest and utility for the exhibitors and users of dental products of taking part in Expo Dental, was actually diminishing, the practical possibility and economic utility of organizing other, competing exhibitions is consequently increasing. As a result, the restrictive effect on competition which the Expo Dental rules are alleged to have is diminishing. However, the Commission points out that the usefulness of Expo Dental as a means of rationalizing promotional activities lies not so much in the fact that the location of the exhibition varies but flows essentially from the periodic concentration of all that is on offer in a single Italian city and, consequently, the general and exhaustive character of the exhibition, which thus makes it possible to receive a large number of customers and gives users an opportunity to obtain, during a single trip, comprehensive information concerning the new techniques and equipment on the market. The economic interest for the exhibitor lies in the possibility of reaping major promotional advantages by taking part in a single exhibition and that of the visitor lies in the fact that he is able to obtain all the information he wishes by making a single journey rather than by making several.

The Commission contests the proposition that the situation on the Italian market has radically changed in the way indicated by the applicant since the adoption of the first decision in 1975. Besides Expo Dental, there are the well-known open houses or certain exhibitions held in conjunction with congresses. The rationalization of promotional events in the dental sector remains necessary for the same reason for which Expo Dental was created. It is thus not true that the factual premises on which the 1975 decision was based have fundamentally changed.

In its reply, the applicant points out that it does not bear a specific burden of proof whereas it is for the Commission itself to carry out the necessary verification of the facts. In support of that view, the applicant relies on the judgment of the Court of 13 July 1966 (Joined Cases 56 and 58/64 Consten and Grundig v Commission [1966] ECR 299).

The applicant claims that of the two amendments made to the Expo Dental rules, the one concerning the setting up of an arbitration panel is of no consequence and hardly affects the question whether the conditions for the grant or renewal of the exemption are fulfilled because it refers to an abnormal application of the rules and not to the existence or absence, at the time of the Commission's decision, of the conditions laid down in Article 85 (3).

On the other hand, the reduction of the interval between two Expo Dental exhibitions concerns the substance of the problem and the Commission should have verified whether the new interval was not of such a nature as to give rise to unjustified restrictions. The applicant also claims that the Commission failed to take into account the fact that UNIDI had decided that Expo Dental exhibitions would always be held in Milan and not in different Italian cities and also Ancides is no longer associated with UNIDI in the organization of Expo Dental. The applicant produced certain documents concerning the split between Ancides and UNIDI and refers to the sorridi italiano campaign, which was a destabilizing factor in the relationship between the two associations.

In its rejoinder, the Commission contends that it regarded the cooperation between Ancides and UNIDI as a minor factor and considered that the split between them could not have any influence on the decision to renew the exemption. With regard to the sorridi italiano publicity campaign, the Commission observes that no evidence has been submitted that that campaign led to distortion of competition. Even if Unidi tried to promote national products through that campaign, Ancides does the same for imported products.

With regard to the criticisms made by Ancides concerning the assessment of market trends, the Commission points out that the principle laid down by the Court in its judgment of 13 July 1966, cited above, referred to an undertaking which was itself seeking a declaration of exemption and which, consequently, was seeking to have adopted an administrative measure in which it had an interest. However, in the case of Ancides, the situation is different. An administrative measure has already been adopted on the application of another person and the applicant is seeking the annulment of that measure.

The Commission considers that in such a situation, the principle that administrative measures are presumed to be lawful (which could not have been invoked in Grundig) should be applied. That principle is based on the fact that, unlike private persons, public institutions act not for their own purposes but in the public interest. It is a rebuttable presumption which may be overturned by proof to the contrary but the person seeking to rebut it bears a precise burden of proof in that regard. The principle onus probandi incumbit ei qui dich applies in this case.

When renewing the 1975 decision, it was sufficient to verify, on the one hand, whether the previous decision had given rise to particular problems and had negative effects and, on the other, whether the factual elements underlying the first decision had fundamentally altered so as to justify a change of attitude on the part of the Commission. Following the publication required by Article 19 (3) of Regulation No 17, no observations were submitted, other than those from Ancides, which shows that the great majority of traders concerned were in favour of renewal. Moreover, in its conclusions, Ancides was unable to produce evidence of its allegations. Finally, the Commission's assessment is subject to judicial review only in regard to any defect there may be in the statement of the reasons on which it is based.

IV — Reply to the question put by the Court

By letter of 21 July 1986, which was received at the Court Registry on 23 July 1986, the applicant replied to the question put by the Court. It stated that the application was brought by Ancides on its own behalf and not on behalf of one of its members. The action is based on the restriction of competition which occurred. The interests of the association were affected and the protection of those interests required no special mandate from its members. Furthermore, the defendant has recognized that Ancides has the capacity to act in its own name.

V — Oral procedure

At the sitting on 8 October 1986, the applicant put forward new facts and submitted documents concerning the attempts made to exclude Ancides from the 1985 and 1986 Expo Dental exhibitions and to exclude one of its members from the 1986 exhibition and concerning the litigation which ensued between the latter undertaking and UNIDI.

The Commission raised no objection to those new documents being examined by the Court. However, it contended that they were irrelevant to the decision on the question of whether the contested decision was vitiated by an error of assessment of the facts as they stood at the time the decision to grant the exemption was adopted.

The Court accepted the genuineness of those documents and permitted the applicant to place them on the file.

1 Language of the Case: Italian.