C-42/58

3. Application for annulment — Objection of illegality — Review of the principles es­ tablished by an internal staff notice (cf. paragraph 4, summary, Judgment in Joined Cases 32 and 33/58 of 6 July 1959)

4. Financial arrangements — Equalization levy on bought ferrous scrap — Definition of the expressions 'own resources' and 'bought ferrous scrap' — Supply of ferrous scrap within a group of undertakings (concentration) — Legality of assessing such supply scrap to equalization levy — Legality of the exemption of 'own resources' (cf. paragraph 6, sum­ mary, Judgment in Joined Cases 32 and 33/58 of 6 July 1959)

5. Discrimination — Definition — Measures and interventions liable to distort competition (cf. Summary in Joined Cases 32 and 33/58 of 6 July 1959, No 7)

6. Productivity — Definition — Interventions of the High Authority — Cartels and con­ centrations — Competition (cf. paragraph 8, summary, Judgment in Joined Cases 32 and 33/58 of 6 July 1959)

In Case 42/58

SOCIÉTÉ DES ACIERS FINS DE L'EST (SAFE), limited company whose registered office is in Paris, represented by its Managing Director Eugène de Sèze, assisted by P. O. Lapie and Jean de Richemont, both Advocates at the Cour d'Appel, Paris, 1— Language of the Case: French. 2— Cf., however, paragraph 1, summary, Judgment in Joined Cases 32 and 33/58 of 6 July 1959.

Application for annulment and an action for failure to act and objections of il­ legality in respect of the letter from the Market Division of the High Authority of 31 July 1958, notified to the applicant, against the implied decision of refusal allegedly resulting from the absence of a reply from the administration to a request for exemption submitted by the applicant, and against the letters of the High Authority of 18 December 1957 and 17 April 1958 (JO of 1. 2. 1958, p. 45 et seq., and of 13. 5. 1958, p. 30 et seq.),

THE COURT

composed of: A. M. Donner, President, 0. Riese (Rapporteur) and J. Rueff, Presi­ dents of Chambers, L. Delvaux, Ch. L. Hammes, R. Rossi and N. Catalano, Judges,

Advocate-General: M. Lagrange Registrar: A. Van Houtte

gives the following

JUDGMENT

Authority; Regie Renault is the owner of 99-5% of the 3. On the ground that it is illegal, the shares in the applicant company. Moreover, general decision constituted by the letter the applicant company and Regie Renault of 18 December 1957 addressed by the are united by close links as regards manage­ High Authority to the Office Commun ment and technical personnel and from the des Consommateurs de Ferraille (OCCF) economic and financial point of view. (Joint Bureau of Ferrous Scrap Con­ 2. The applicant, considering that the sumers) on the definition of the concept ferrous scrap received from the workshops of "ferrous scrap from own resources" of Regie Renault was not 'bought' from a for the purposes of Decisions Nos 22/54, third party, but constituted 'own resources', 14/55 and 2/57; did not declare it to the Caisse de Péréqua­ Order the High Authority to bear the costs.' tion des Ferrailles Importees (CPFI) (Im­ ported Ferrous Scrap Equalization Fund), The defendant contends that the Court should: which was informed thereof by its inspec­ tors. 1. ... The High Authority took the view that the 2. As regards the alleged implied decision of said ferrous scrap did not constitute 'own refusal resulting from the absence of a resources' for the purposes of the scheme for reply from the High Authority to the the equalization of imported ferrous scrap, letter of 23 July 1958, rule that the High and in particular for the purposes of Deci­ Authority was not required to grant the sion No 2/57, but did indeed constitute exemption requested and did not commit 'bought ferrous scrap'. It referred generally a misuse of powers in not granting that to this point of view in its letter of 18 exemption, and accordingly dismiss the December 1957, addressed to the OCCF application; and published in the Journal Officiel of 1 3. Dismiss the application brought against February 1958, p. 45 et seq. In particular it the letter of 31 July 1958 as inadmissi­ stated that an undertaking is defined by its ble, since it does not constitute a decision company name and that it is only ferrous against which an application may be scrap recovered by itself in its own establish­ brought; ments, bearing the same company name, 4. In addition, reject the objection of il­ that can be considered as 'own resources'. legality raised against the letter of 18 On the basis of this definition, the CPFI in­ December 1957 and the claim for annul­ formed the applicant that the ferrous scrap ment, in so far as necessary, of the letter coming from Regie Renault should be of 17 April 1958; assessed to the equalization levy. However, With all consequences at law, in particular no levy was charged to the applicant as regards payment of fees, costs and all because the applicant had omitted to deduct other expenses.' certain tonnages which the CPFI itself con­ sidered as own resources.

S.p.A. of Sesto San Giovanni (Italy) and Authority's register of outgoing mail. Koninklijke Nederlandse Hoogovens en Therefore, in order to accept that the Staalfabrieken NV of IJmuiden (the application was made in due time, it is Netherlands). In a letter addressed to OCCF necessary to suppose that the post was ab­ on 17 April 1958 and published in the Jour­ normally slow. nal Officiel of 13 May 1958, p. 30 et seq., it The applicant declares that it is unable to explained that those exemptions had been verify the date on which the letter arrived granted because the works of the undertak­ and merely replies that 'on general princi­ ings concerned 'are integrated locally with ples' it is up to the administration from . . . works not belonging to them, in which which the decision has emanated to prove the ferrous scrap is recovered. That local in­ that the time-limit has not been observed. tegration results from the fact that the B — Does the letter of 31 July 1958 con­ works (in question) form ... a single in­ stitute a decision? dustrial group'. However, it added: 'Although organic ties exist between the un­ According to the defendant, such is not the dertakings owning the works at Sesto San case, as the letter does not create an obliga­ Giovanni and IJmuiden, the granting of the tion for the applicant. Hence the applicant exemptions has been based exclusively on cannot raise the objection of illegality the criterion of local integration'. against the letters of 18 December 1957 and 4. By letter of 23 July 1958 addressed to the 17 April 1958. High Authority, the applicant submitted a The applicant replies that the said letter request for exemption in respect of the does indeed constitute a decision to postpone ferrous scrap which it received from Regie adopting a decision and, therefore, a deci­ Renault. It received no answer other than a sion to maintain the levy. It thus involves an letter from the Director of the Market Divi­ obligation for the undertaking. sion of the High Authority, dated 31 July 1958, stating that the said request was 2. Substance

SAFE v HIGH AUTHORITY

contested in the present application emanate 2. The restrictive interpretation which the directly from the High Authority. There is defendant gives to the concept of company no analogy between them and the measures name in its letter of 18 December 1957 is annulled by the said judgments, the latter contrary to the aims of the Treaty which measures having originated in a delegation refers primarily to economic market con­ of powers granted to the Brussels agencies. cepts and does not intend to hamper in­ dustrial groups. The trend of modern law is (b) Failure to state reasons towards an improved adaption of legal con­ The applicant argues that the letter of 31 cepts to concrete realities. Where there is an July 1958 is vitiated for the same lack of economic integration such that, just as in reasons as the Court found in the aforesaid the present case, the prices fixed between judgments in Cases 9/56 and 10/56. The the members do not have any repercussion letter at issue does no more than confirm on the market prices, one has 'an economic earlier letters, which included a formal phenomenon' in the scientific sense of the assessment to the levy. Yet the latter were term. The defendant has indeed realized not accompanied by the essential data, as that the criterion of the company name was the CPFI had not told the applicant what too narrow, for in its letter of 17 April 1958 tonnage was assessable and at what rate. it abandoned that criterion in favour of the

JUDGMENT OF 17. 7. 1959 — CASE 42/58

criterion of'local integration'. That decision criteria the defendant was influenced by the does not involve a mere tidying up of the desire to facilitate and to reduce its inspec­ rule laid down in the letter of 18 December tions, a purpose which is not in the public 1957, but it is an addition to it in that it interest.

That in improved productivity. It would therefore terpretation arises from the fact that the un be contrary to the purposes of the Treaty to dertakings to which the exemptions were oblige the interested parties to proceed to a granted, Breda and Hoogovens, form merger. economic entities with the undertakings For all these reasons, the contested decisions with which, in addition, they are locally in create discrimination between undertakings tegrated. Such a difference in treatment, placed in equivalent conditions and infringe which excludes integrations so clear-cut as the principle of free competition laid down the one which exists between the applicant by the second paragraph of Article 2 and and Regie Renault, is arbitrary and dis Articles 3 (b) and 5 of the Treaty.

The interpreta the same place and whether or not they tion of the concept of 'own resources' should come under the control of the same under have regard to that purpose in order that taking, but whether the material, having each undertaking shall bear a fair share of started from a point A in the state of the levy imposed. The definition chosen is arisings—in the present case the Renault beyond criticism. For in legal language, factories—comes back to the same point A as 'own' things are described as those which a finished product after manufacturing and belong to the 'owner'. It follows that an un

undertakings. ings which are not entirely scrupulous and 1. The applicant and Regie Renault are two to encourage the practices prohibited by Ar different legal persons. Therefore, move ticle 67. ments of goods occurring between them re It also seems that in adopting the contested quire contracts which contain all the ele-

ments of a contract of purchase. They are For all these reasons, the letter of 18 made at a given price. If this were only a December 1957 is justified. 'price of convenience' the productivity of The same is true of the letter of 17 April the applicant's factory could not be es­ 1958. The applicant is wrong in interpreting tablished on a realistic basis, although to do it as a 'rectification' which substitutes for or so was, as the applicant has itself admitted, adds to the criterion of the company name one of the very reasons for its legal separa­ that of the 'industrial group'. The purpose tion from Regie Renault. of the letter was simply to state the reasons One cannot talk in the present case of a which justified the exemptions granted to mere exchange of finished products against Breda and Hoogovens, namely the fact of ferrous scrap. It is not entirely true to say local integration. It even takes the care to that the applicant only receives ferrous state that it is not economic integration as scrap from Regie Renault and it does not such which is decisive. Although the expres­ sell its products exclusively to the latter. sion 'industrial group' was used, this was ex­ However, exchange, like sale, is a contract clusively in the geographical sense. There is involving an obligation. In fiscal law, an ex­ no contradiction between the two letters, for change is treated at one and the same time the second constitutes an exception which as a purchase and a sale. confirms the rule adopted in the first. 2. The criteria suggested by the applicant, Furthermore, this exception is perfectly namely 'technico-economic integration' and justified. Unity of plant location is a 'group ferrous scrap' are much too vague. criterion which is easy to test and easy to Furthermore, they are in contradiction with apply. The criterion also accords entirely Article 2 of the decisions instituting the with common sense, because the works in financial arrangements. According to those question form a compact block without its decisions 'the undertakings defined in Arti­ being possible to distinguish where the cle 80 of the Treaty' shall be subject to the property of one owner begins and that of contribution. The fact that the material another finishes. The danger mentioned by returns to the point of departure cannot be the applicant, namely that unscrupulous un­ decisive, for that would lead to unacceptable dertakings could artificially achieve local in­ consequences. In particular, own arisings tegration in order to evade equalization, is recovered by manufacturers and re-sold to extremely hypothetical. the steel industry would be exempt from the The defendant opposes the assertion that it levy, even in the absence of any integration adopted the contested definition for reasons between the undertakings concerned. of administrative convenience.

It is only 'in so far as necessary' that the applicant contests that letter, which it describes as a 'decision to postpone taking a decision'.

If the letter of 31 July 1958 constitutes a decision, that fact must affect the decision of the Court on the action for failure to act because the applicant could not then substantiate the argument that the defendant did not adopt any decision within the period of two months subsequent to the applicant's letter of 23 July 1958. Therefore the admissibility of this application should be examined.

The defendant raises the submission of inadmissibility on the ground that the application against the letter of 31 July 1958 was not lodged within the prescribed period. The registered office of the applicant is in Paris, that is, in Metropolitan France. Therefore, under the third paragraph of Article 33 of the ECSC Treaty and Article 85 (1) and (2) of the Rules of Procedure of the Court of Justice of the ECSC, the period within which the applicant had to contest the said letter expired one month and three days from the day following notification thereof.

The application was lodged at the Court Registry on 20 October 1958. Accordingly, it was only made within the prescribed period if the letter of 31 July 1958 only reached the applicant on 17 September 1958 at the earliest.

The applicant, upon being asked questions about this by the Court, did not supply any explanation. However, the defendant formally declared that the said letter was entered in its register of outgoing mail under the date of 1 August 1958. That state­ ment has not been contested by the applicant. Nevertheless, it has not been possible to establish the precise date on which the said letter reached the applicant.

There was, therefore, an implied decision of refusal as meant by the aforesaid Arti­ cle 35. The action brought against that decision was clearly within the prescribed period.

The action for failure to act is therefore admissible.

Substance

1. Can the applicant raise an objection of illegality against the letters of the High Authority of 18 December 1957 and 17 April 1958?

According to the established case-law of the Court, an undertaking which contests an individual decision is entitled to raise the objection of illegality against the general decisions on which they are based. The parties are in agreement about the fact that the implied decision of refusal resulting from the absence of a reply for more than two months from the High Authority to the letter from the applicant of 23 July 1958 is based on the principles set out in the abovementioned letters of the High Authority; and such indeed is manifestly the case. The question therefore arises whether those letters constitute decisions.

(a) Does the letter of 18 December 1957 constitute a decision?

Admittedly, the letter of 18 December 1957 was in answer to a request from the OCCF, whose members had failed to agree on the meaning of the words 'own resources', and which had therefore called upon the High Authority to define that concept pursuant to the second paragraph of Article 15 of Decision No 2/57. But the High Authority replied that the problem thus expressed by the OCCF 'was wrongly put', in view of the fact that the OCCF had 'from the beginning by im­ plication adopted the concept of own resources according to the semantic meaning of the term', and that that criterion should be maintained.

It follows that the High Authority did not intend to take a decision, as it had been formally invited to do, but simply to reaffirm the principle which, rightly or wrong­ ly, it considered to emerge logically from the basic Decision No 2/57.

This finding is confirmed by the fact that by Article 53 (b) of the Treaty an amend­ ment to Decision No 2/57 would have required the prior unanimous assent of the Council of Ministers, and that condition was not fulfilled in this case. Moreover, there is nothing to suggest that the High Authority knowingly disregarded that binding requirement.

These considerations are not invalidated by the fact that, in answer to a formal question from the Deutsche Schrottverbrauchergemeinschaft to the High Authority on 6 February 1958, the Market Division replied by letter of 19 February 1958 that the letter of 18 December 1957 was indeed a 'decision'.

In fact, that answer from the Market Division expresses, as it itself says, the opinion of an official of the High Authority and does not necessarily of itself reflect the inten­ tions of the High Authority in the matter.

(b) Does the letter of 17 April 1958 constitute a decision?

Generally, the considerations developed above in respect of the letter of 18 December 1957 are equally valid for the letter of 17 April 1958.

More particularly, its purpose is only to explain to the OCCF the reasons why the High Authority, in its letter of 18 December, approved the exemptions granted to two specific undertakings, saying that the works of those undertakings were 'locally integrated with one or several works not belonging to them, in which ferrous scrap is recovered'.

Thus the letter does not set out a new principle, but merely expressly states a princi­ ple which the administration has already applied by implication in implementing Decision No 2/57.

Therefore the letter of 17 April 1958 does not constitute a decision within the meaning of the Treaty.

2. May the Court examine the legality of the principles set out in the letters of 18 December 1957 and 17 April 1958?

Article 4 of the same decision states that those contributions shall be calculated on

the basis of supplies of 'bought ferrous scrap' whereas 'own resources' shall be ex­ empt from equalization.

The deliveries of ferrous scrap to the applicant Regie Renault constitute purchases, because there is an agreement for the passing of property against a price.

By reason of the fact, according to the wording of Decision No 2/57 such scrap is subject to equalization. The applicant requests exemption, taking the view that group scrap should be assimilated to own resources. It is therefore necessary to ex­ amine whether such assimilation is justified.

(b) As appears from a reading of the letter of 18 December 1957, the High Authority interprets the concept of 'own resources' as meaning that it is only scrap recovered by an undertaking in its own establishments bearing the same company name that is considered as 'own resources', whereas scrap supplied by a works run under another company name is considered as bought scrap, even in the case where close financial or administrative links exist between the supplier and the user.

(c) However, it is necessary to examine whether the assessing of group scrap to the levy—and the exemption for own arisings—is compatible with the purposes of the financial arrangement constituted by the equalization system.

Therefore, this complaint put forward by the applicant must be rejected.

(ii) However, Decision No 2/57 provides for a distinction between bought ferrous scrap and own resources, and this constitutes, as regards the latter, an exception to the general rule mentioned above.

It is therefore necessary to examine whether the exoneration of own resources is legal.

That exception primarily concerns own arisings from the production of steel by the undertakings subject to the jurisdiction of the Community.

If those arisings were subject to equalization contributions, there would be a probability of charging the same quantity of ferrous scrap twice over, which would be manifestly unjust.

(d) The reasoning set out above is confirmed by the concept of discrimination as it appears in particular from the second paragraph of Article 2 and Articles 3 (b), 60 and 67 of the Treaty.

Moreover it appears from Annex II to the ECSC Treaty, second paragraph of (b), that 'undertakings' own arisings' enjoys privileged treatment even in the case of a direct intervention under Article 59 of the Treaty. Therefore a fortiori they must also receive privileged treatment in the application of indirect measures of interven­ tion such as those authorized by Article 53.

It follows from everything that has been said above that the exemption of own resources is not discriminatory and is therefore legitimate.

(ii) To assimilate group scrap to own arisings would be to go beyond the meaning of and the reason for the exemption and would constitute a discriminatory advantage as regards other undertakings.

The lowering of production costs consequent upon an exoneration for group scrap would, in the words of Article 67 of the Treaty, be liable substantially to increase differences in production costs as between those undertakings and those which also produce steel from ferrous scrap but which are not integrated with an undertaking producing that raw material.

That increase in the differences in production costs would not result from changes in productivity, but would be the effect of contingent, geographical, administrative or financial ties, which are at the basis of the concept of a 'group'. It must be observed from the scheme of the Treaty and from its fundamental principles that the word 'productivity' refers exclusively to the results of the effects made by an un­ dertaking. In particular, it must be understood as distinct from and as against any improvement in the competitive position of an undertaking which is due either to interventions of public authorities, or to the creation of a cartel or a concentration, because all these operations, even where authorized or capable of being authorized, artificially alter the normal affect of competition.

It results from the foregoing considerations that the defendant acted legally in applying the principle that so-called group ferrous scrap must be considered as bought ferrous scrap and, therefore, as subject to equalization, and in reaffirming that principle in its letter of 18 December 1957.

4. The arguments based on the exemptions already granted.

The applicant has also alleged that the High Authority has exonerated certain un­ dertakings in so far as they consume ferrous scrap from works which, without bear­ ing the same company name as the consumer works, are 'locally integrated' with the latter.

However, the applicant has not raised the question whether such exonerations are compatible with the purpose and the scheme of the equalization system.

Moreover that question cannot be decided in the context of the present dispute.

The fact that the High Authority or its departments may, in certain cases, have given too wide an interpretation of the concept of 'own arisings' cannot justify the grant of an exemption from the levy in other more or less comparable cases, since such grant is contrary to the very principles of the equalization system.

THE COURT

hereby:

1. Dismisses the application directed against the implied decision of refusal resulting from the absence of a reply for more than two months by the defendant to the applicant's letter of 23 July 1958 as unfounded;

2. Dismisses the application directed against the letter from the Market Division of the High Authority of 31 July 1958 as inadmissi­ ble.

3. Orders the applicant to bear the costs.

Donner Riese Rueff