C-13/60

JUDGMENT OF 18.5.1962 — CASE 13/60

to the continued existence or to the sales units within the Common creation of large production or sales Market for coal and steel, the ECSC units, such as are characteristic of the Treaty grants those who take part coal and steel market, on condition in this market a measure of power to that the resulting system of imperfect determine prices, which is, however, competition serves the objectives of limited by provisions such as those the Treaty and, in particular, that of Article 65 (2) (c) which are intended it safeguards within that market the to safeguard a necessary minimum of measure of competition essential for competition. the observance of the requirements 5. A power to determine prices or to of the second paragraph of Article 2. control marketing applies to a sub­ stantial part of certain products 3. A cartel which has the ability to within the Common Market when regulate the marketing of a substantial the full extent of the effects which it part of a given product within the produces is not of secondary or Common Market exercises a power minor importance, but is such as to of control over marketing within the meaning of Article 65(2) (c) of the jeopardize, within the said market, ECSC Treaty. the measure of competition intended by the Treaty or the execution of 4. By permitting the continued existence the tasks which Articles 2, 3, 4 and 5 and creation of large production and assign to the Community.

In Case 13/60

1. 'GEITLING' RUHRKOHLEN-VERKAUFSGESELLSCHAFT MBH, represented by its managers at Essen, Frau-Bertha-Krupp-Strasse 4,

Concordia Bergbau-Aktiengesellschaft, Oberhausen,

Hütten-und Bergwerke Rheinhausen Aktiengesellschaft, Essen,

Bergwerksgesellschaft Dahlbusch, Gelsenkirchen,

Emscher-Lippe Bergbau-Aktiengesellschaft, Datteln,

Essener Steinkohlenbergwerke Aktiengesellschaft in Vertretung der Mannesmann Aktiengesellschaft, Essen,

Ewald-Kohle Aktiengesellschaft, Recklinghausen,

Bergwerksgesellschaft Hibernia Aktiengesellschaft, Heme,

Hoesch Aktiengesellschaft, Dortmund,

Gelsenkirchener Bergwerks-Aktiengesellschaft, Essen,

JUDGMENT OF 18.5.1962 — CASE 13/60

Hansa Bergbau Aktiengesellschaft, Dortmund,

Carolinengluck Bergbau Aktiengesellschaft, Bochum,

Bergbau Aktiengesellschaft Lothringen, Bochum,

Steinkohlenbergwerk Mansfeld GmbH, Bochum-Langendreer,

Märkische Steinkohlengewerkschaft, Hessen b. Hamm,

Steinkohlenbergwerke Mathias Stinnes Aktiengesellschaft, Essen,

Hüttenwerk Oberhausen Aktiengesellschaft, Oberhausen,

Niederrheinische Bergwerks-Aktiengesellschaft, Diisseldorf,

Bergwerksgesellschaft Walsum mit beschränkter Haftung, Walsum/Niederrhein,

Steinkohlenbergwerk Westfalen Aktiengesellschaft, Ahlen

jointly represented by Mr Werner von Simson, Advocate of the Düsseldorf Oberlandesgericht, and Mr Hans Hengeler, Advocate of the Diisseldorf Landgericht, with an address for service in Luxembourg at the office of Mr Werner von Simson at Bertrange, applicants,

supported by the Government of the Land of North Rhine-Westphalia, represented by its Minister of Economics and Transport, assisted by Dr Joseph H. Kaiser, Professor at the University of Freiburg im Breisgau, acting as Agent, with an address for service in Luxembourg at the office of Mr Werner von Simson at Bertrange,

intervener, v

HIGH AUTHORITY OF THE EUROPEAN COAL AND STEEL COMMUNITY, represented by its Legal Adviser, Dr Heinrich Matthies, acting as Agent, assisted by Dr Ernst Joachim Mestmäcker, Professor at the University of Saarbrücken, with an address for service in Luxembourg at its offices, 2 Place de Metz,

Advocate-General: K. Roemer

Registrar: A. Van Houtte

gives the following

JUDGMENT Issues of fact and of law

I — Facts Journal of the European Communities dated 23 July 1960 (pp. 1014/60 et seq.). This The facts may be summarized as follows: Decision is the subject of the present On 19 February 1959 the High Authority application, which was lodged with the took Decision No 17/59, published in the Registry of the Court of Justice of the Official Journal of the European Communities European Communities on 6 August 1960. dated 7 March 1959 (pp. 279/59 et seq.), declaring the formation of a uniform By Order of 3 May 1961 the Court sales organization for all the mining permitted the Land of North Rhine- companies of the Ruhr valley to be Westphalia to intervene in the pending incompatible with the ECSC Treaty. proceedings. The President of the High Authority confirmed this view by letter of 21 II — Conclusions of the parties February 1959. The applicants claim that the Court However, the mining companies of the should: Ruhr valley, at a meeting held on 17 '1. annul Decision No 16/60 of the May 1960, agreed to sell part of their production through a single selling High Authority of 22 June 1960 agency, the 'Ruhrkohle Verkaufsgesell­ (Official Journal of the European Communities, 3rd Year, No 47, of 23 schaft mbH', as from 1 July 1960. July 1960, pp. 1014/60 etseq.); A request for the authorization of this agreement and the accompanying 2. order the High Authority to pay the costs.' decisions was placed before the High Authority on 20 May 1960 by the The defendant contends that the Court should: companies empowered to do so. The High Authority rejected this — dismiss the application as application by Decision No 16/60 of unfounded: and 22 June 1960, published in the Official — order the applicants to pay the costs.

The defendant replies that according to 1. Infringement of essential procedural the Treaty the only positive result to be requirements taken into account as likely to justify a joint-buying or joint-selling agreement (a) Insufficiency of reasons for the is an improvement in distribution or finding as to the requirements of production. The applicants do not Article 65(2) (a) and (b) of the substantiate their statement that the Treaty proposed cartel would bring about advantages for production. Further, The applicants claim that the reasons since the High Authority was not in a given in Recital No 7 in the Preamble position to establish whether a single to Decision No 16/60 as a basis for the selling-agency for all the Ruhr companies finding that the proposed agreement was essential in order to achieve a marked does not conform with the requirements improvement in distribution it did not of Article 65(2) (a) and (b), are have to examine whether the agreement_ insufficient. They maintain that in order to form an association was more to base its refusal upon paragraphs (a) restrictive than its objectives require. and (b) of Article 65(2) the High The High Authority does not have to Authority should have shown in detail express an opinion upon all the reasons and for what reasons the various results advanced in the request for of an improvement in production and authorization, and is only required to distribution, for which provision is made justify its own decision, without having in the agreement submitted for author­ to concern itself with contrary arguments ization and the achievement of which Judgment 4/54, Rec. 1954-1955, p. 196; was sought by the practice of joint Judgment 6/54, Rec. 1954-1355, p. 220; selling, could be obtained by means of a Judgment 2/56, Rec. 1957, p. 36). lesser degree of limitation upon competi­ Above all, the High Authority came to tion and under just as favourable no final decision with regard to the conditions. conditions for authorization contained The only indications of the motives in paragraph (2) (a) and (b) since the which guided the High Authority in its incompatibility of the agreement with analysis of subparagraphs (a) and (b) paragraph (2)(c) was already clear.

(b) Insufficiency of reasons with because of the increasing consumption reference to the requirements of of fuel-oils within the Federal Republic. Article 65(2)(c) of the Treaty, The defendant replies that the year 1959, especially with regard to a power upon which the contested Decision is to determine prices of Ruhr coal principally based, was the most unfavourable year for the coal market (a) According to the applicants the High up to the present time. It is thus in the

This decrease in production losses as a result shows clearly that the concept of 'power of working hours lost through to determine prices' has been misunder absenteeism and the diminution of pit stood. This power can never result from head stockpiles. mere figures. finally, the argument as to competition The defendant states that on the basis from fuel-oils is only of very relative of the above figures it would be illogical value. The use of fuel-oils in proportion to deny that the undertakings in question to the total consumption of energy is less are in a position to determine prices on in the Federal Republic than in the

situation would arise; of the circumstances obtaining during a given year; the High Authority has — the mere fact that Ruhr prices have consistently taken as its basis the year for many years stood below cost 1959 alone, whereas the market situation prices and are, almost without and the actual state of competition exception, the lowest in the Common can only be judged over a longer period Market, shows that they are not of time. Had the High Authority established freely but rather as a adopted the latter method it would have result of the competition between Ruhr coal and coal from other found that the state of competition in respect of coal production in general, mining areas of the Common Market and of Ruhr coal in particular, had been and third countries; deteriorating steadily for years, notably — the High Authority states that a

joint-selling agency could compensate coalfields reacted to any great extent decreases in revenue brought about to price changes effected a short time by measures intended to meet com previously in the Ruhr; petition and provide a choice between — the importance of many facts as to those mines best able the make competition from coal from third deliveries at competitive prices. The countries; ability to bear decreases in revenue — the High Authority itself finds that does not depend upon turnover coal is faced with ever increasing figures but upon costs and profit- competition from fuel-oils.

interchangeable; ments. In particular, the defendant — the High Authority ignores several emphasizes that coal prices are showing aspects of the development of com a tendency to rise, whereas fuel-oil petition between coal and fuel-oils. prices are falling. The intervener accuses the High Authority The tact that the cartel is not capable of of illogical behaviour, in that it did not raising prices does not indicate that it is draw the requisite conclusions from its not in a position to determine them; it own Ninth General Report and from merely shows that the cartel has already the statement of the President of the exhausted its influence over the market High Authority before the European and that the present price level is due Parliament on 8 May 1961.

The of the Community; it failed to appreciate real question is whether the influence the following matters, amongst others: exerted by other Community under — the competition from coal from takings on the prices of Ruhr under Belgium and the Netherlands, takings is so strong that the latter particularly in Southern Germany, can no longer determine and the fact that deliveries of coal independently list prices within their from the Ruhr to the Netherlands principal sales-area. have for some time been made at — There is nothing contradictory in prices aligned on Dutch prices; stating that competition from coal from third countries co-exists with the — the competition existing between Ruhr coal and coal from the other power to determine prices. German coalfields, as well as the — The applicants' view, that even a fact that neither German nor foreign small volume of imports can influence

price-levels, clearly amounts to saying than 10% of total production in the that a cartel which dominates the Federal Republic. market must be authorized if between — As for 'certain types of anthracite', 5 and 10% of 'outsider' undertakings it is characteristic of the applicants to threaten its position. The references request authorization to conclude to the Eighth General Report are agreements for the balance of employ­ beside the point; even in the event of ment, wherein it is noted that, with a structural crisis the Treaty does regard to the anthracite in question, not provide for a 'structural crisis far from experiencing a recession, cartel' to resolve it. The proposed producers are often unable to meet agreement has no such object in view, the demand. since it does not provide for a (e) I he applicants express the opinion controlled decrease in production that the 'Ruhrkohle Verkaufsgesellschaft capacity. mit beschrankter Haftung' has no 'power — If one deduces from the use of to determine prices' since it cannot make measures dictated by commercial an independent choice as to the level of policy that the Ruhr lacks the power prices in respect of a substantial to determine prices one is led back proportion of its sales. The influence on to the argument that the High prices which would result naturally Authority and the Government of from the formation of a single joint- Member States have no right to selling agency, in that it eliminates intervene as long as cartels are competition between the members of the capable of attaining the objectives of cartel, is not relevant to the question the Treaty. whether the cartel as such has the actual — The extensive exposition devoted to power to determine prices on the market the question of fuel-oils is irrelevant. for the goods it sells. The influence upon The High Authority gave express prices exercised by the practice of joint recognition in the statement of reasons selling does not amount to domination for its contested Decision to the fact of the market or to the exercise of a that fuel-oils present a strong and power to determine prices within the ever-growing element of competition. meaning of Article 65(2) (c) (cf. the It is generally agreed, moreover, that opinion of Mr Advocate-General this competition affects different types Lagrange in Joined Cases 36 to 38/59). of coal in differing ways. In the present case, there could only be — Coking coal appears to be least said to be a prohibited cartel if 'Ruhr­ affected by competition from fuel-oils. kohle Verkaufsgesellschaft' no longer Prices of this type of coal have been encountered any real competition on the rising steadily and were raised again market.

existence of a prohibited cartel. Some It is not true to say that 'internal examination should however be made, consumption', apart from consumption as it were by way of a subsidiary by the mines themselves, and deliveries consideration, of the extent of the to associated undertakings should not quantitative element. First, the data be attributed to the undertakings in provided by the High Authority contain question, because the market and a large number of uncertain factors competition would not be effected by which are useful only as approximations, them. The cartel defines the 'concepts, and which impart a measure of rules and conditions governing internal unreliability particularly to the figures consumption by factories' and it super­ with regard to coke. Moreover the vises adherence thereto. This system High Authority should not have taken enables the cartel to control sales and to into account reserved stocks, that is, determine prices. sales made not through the joint-selling It should be mentioned that deliveries

JUDGMENT OF 18.5.1962 — CASE 13/60

intended by Article 65(2) (a), which — It is not easy to understand how a could be attained by the application of buying and selling organization can that agreement. result in improvements in production. The insufficiency of the statement of — The High Authority was unable to reasons is such as to constitute in itself find that a single sales organization an infringement by the High Authority was essential in order to achieve of its obligation under the Treaty to noticeable improvement in distribu­ examine the facts of its own motion. tion. A more thorough examination The only indications of the reasoning of this question would have been adopted by the High Authority in necessary only if the agreement was construing Article 65(2) (b) lie in its one for which authorization could be use of the expressions 'considerable granted. Since, however, this is not resources' and 'centralization' (para­ the case no decision was taken with graphs 5 and 6 of Recital No 7 of the regard to Article 65(2) (b). Preamble to the contested Decision). — The provisions of subparagraph (b) These show, at most, that the High do not only refer to internal relation­ Authority sees in the joint-selling agency ships between members of the cartel. an undesirable concentration of power. Reference should be made in this Furthermore it is clear from the French connexion to the judgment of the text of Article 65(2) (b) that it applies Court in cases 36, 38 and 40/59 of to the relationship between the cartel 15 July 1960, which establishes that and its members, not to that between there is no justification for pleading the cartel and the rest of the market, in support of Article 85 of the Treaty which is governed by Article 65 (2) (c). establishing the European Economic This interpretation is confirmed by the Community. 'More restrictive', similar provision contained in Article within the meaning of Article 65(2) 85(3) (a) of the Treaty establishing the (b), refers to restrictions upon European Economic Community, which competition whose importance grows clearly expresses the same objective as with the number of undertakings that assigned to Article 65(2) (b), namely which are coordinating their market that restrictions imposed upon the behaviour.

for the purposes of subparagraphs (a) not dominate the market in fuel and and (b), are to be authorized. According power. So construed, Article 65 would to a general principle of interpretation, be practically pointless and the High a provision creating an exception to a Authority would be able, in particular, to rule is to be construed strictly (Judgment authorize a cartel of all the coal producers 7 /56 and 3 to 7/57, Rec. 1957). of the Community, which would be The applicants give an account of their absurd. Special care must also be taken interpretation of Article 65(2)(c) and in examining the reference to the general extract the four conditions contained in objectives of the Treaty. The Treaty this provision. They emphasize that the contains no provision from which it is extent of the cartel (quantitative possible to conclude that cartels have criterion) is only of importance if, in the right to take upon themselves the relation to this cartel, 'a certain Community's organizational duties, and concentration of power' (qualitative thus to encroach upon the jurisdiction criterion) has previously been of the High Authority. The provisions established. Comparison with Article with regard to agreements are not 85(3) (b) of the EEC Treaty is especially contained in Articles 2 and 3 of the rewarding, as it also is intended to Treaty but solely in Article 65. The preclude domination of the market rule is as follows: 'The elimination of through the concentration of economic competition as such by the formation of power and the elimination of cartels is illegal, prohibited and void'. competition. A cartel can only have a Article 65(2) (c) is not an exception. decisive influence on the market when The prohibition of cartels is the rule, the market is already 'essentially their authorization the exception. independent of the law of supply and Iris not the abstract or concrete danger demand' by reason of the existence of the that the objectives of the Treaty will cartel and its monopolistic power to be contravened which forms the subject determine prices. The French version matter of Article 65(2) (c), but the of the Treaty, American anti-trust case extent of the restriction upon competition law, numerous authors and various as such. Agreements falling with Article parliamentary documents relating to the 65(2) (c) are absolutely prohibited as ratification of the Treaty are in favour the result of what according to the clear of this interpretation. wordingof the Treaty is an insurmount­ However, the High Authority (Recitals able contradiction of the principle of 9 and 10 of the preamble to the competition. The exceptional authoriza­ contested Decision) considers the 'part tion of a cartel agreement cannot in of the market' covered by a sales cartel any event be granted where the results of only as a quantitative element, although this agreement may concern a it appears on occasion to have held the 'substantial part of the products in contrary view (Recital 11 of the preamble question', since the market would to the contested Decision and especially thereby be so deprived of competition Decision No 44/59). that the absolute limit laid down for the Such an interpretation of Article 65(2) intervention of cartels on the market (c) infringes the Treaty. would be reached.

to Article 86, speaks not of a dominant market can avoid loss of sales at the position within the market, but of the expense of other producers'. elimination of competition, thus rein­ The High Authority ought to take forcing the High Authority's argument. account of all factors relevant to the market situation, whether these factors (b) The four conditions contained in fall within the sphere of the Common Article 65(2) (c) Market or not (for example general power policy and social repercussions). (i) The concept of'power to determine The High Authority's General Reports prices' and certain of its members have expressed The applicants explain their conception similar views. In its reasoning, however, of 'power to determine prices' within the High Authority inclines towards a the meaning of Article 65(2) (c) of the very formal definition of what the Treaty. In order to be able to come to Treaty means by power to determine the conclusion that this condition has in prices — 'pouvoir de determiner les fact been fulfilled the High Authority prix'. This definition of the concept would have had to take account in is further removed from the real market concrete form of the actual market situation by the fact that the High situation, and in particular of: Authority feels able to include in the — the changed position of coal on the concept of power within the meaning of fuel and power market; Article 65(2) (c) 'the opposite concept — competition not only from other to that of power, namely the fixing of prices resulting from a position on the Community undertakings but also market which is clearly weak and from undertakings in third countries threatened in the lone; term'. and above all from suppliers of fuel oils; The defendant replies that the only criterion contained in Article — the pressure on prices resulting from 65 (2) (c) is that of the 'substantial part', the high level of stocks and the and that the applicants are following existence of substitute products. Börner in reading into subparagraph The High Authority itself states, in its (c) a 'qualitative' criterion and Eighth General Report (1960, p. 28) giving it a certain precedence. An under heading 34: examination of this criterion would be 'The multiplicity of sources of power confused, whereas it is simple and and of their application, as well as the practical to examine whether the agree­ growing interchangeability of forms of ment affects a 'substantial part' of the power of themselves make for the products in question. creation of a single power-market.' The quotation from the Eighth General Thus there can be no question of the Report (p. 38) is incomplete, and refers domination of the market by a single in fact to the energy policy to be put into selling: agency for Ruhr coal. effect. The energy policy to be followed The intervener emphasizes that a 'realistic is a matter for the competent national and plausible conception of a monopoly' and supranational agencies; the Treaty must be adopted, such as that advocated has not entrusted its direction to the by the mineworkers' union, which stated, cartels.

Treaty. The intervener forgets that this definitely extends its control to all sales case is concerned not with problems of stocks and its price and sales policy is related to energy policy and its co the only relevant one. ordination, nor with those raised by the amendment of the Treaty, but (iii) The concept of a 'substantial solely with the judicial examination of part' of the products in question Decision 16/60, on the basis of the The applicants refer to the fact that the text of the Treaty.

The High Authority, rather than upon quantities produced. however, overlooked the qualitative The High Authority should have left element of market control, as well as out of its calculation of the tonnage put failing, in evaluating the quantitative on to the market not only that portion element, to recognize the fact that total consumed by the mines themselves for reserves, the volume of which is fixed their own purposes, concessionery coal at the discretion of the mining companies, allowed to employees and free supplies, are not controlled by the joint-selling tonnages conveyed to coking plants and agency. to briquette factories belonging to the The defendant observes that the applicants mines, unrestricted sales and sales criticize the finding with regard to effected outside the Common Market, marketing control by using the same but also other reserved tonnages, that arguments as they employed in relation is, deliveries to associated undertakings to the power to determine prices. or to other divisions of the same under It is not true to say that the High taking. These movements of goods do not Authority completely overlooked the affect the market since the associated 'quantitative' element (second undertakings have themselves to use paragraph of Recital No 13 in the the tonnages they receive for their own statement of reasons for the contested

interpretation: conditions which must be obeyed by the undertakings in order to sell these — the expression 'substantial part' is stocks. denied any significance; The sales organization thus quite — the words 'the products in question

The applicants take the view that an sentence of the first paragraph of Article investigation confined to the German 33 of the Treaty. This explains the coal market (Recitals 12(a) and (c) of applicants' constant efforts to establish the existence of a manifest failure to the preamble to the contested Decision) observe the Treaty which the does not comply with Article 65(2) (c). Unlike Article 66, Article 65 of the characterize, for example, as 'a lack of Treaty concerns the whole of the logic'. They contest certain facts as Common Market. being inaccurate and state that facts which were omitted should have been The defendant replies that the market, taken into account, but they do not that is the area of actual competition, should be delineated in accordance with succeed in showing that the general evaluation would consequently have the elements of competition, having been different. regard, therefore, to the competing products and to the geographical extent Furthermore, the application to intervene contains no valid statement of the area in which this competition occurs. The High Authority does not of reasons to support the complaint of consider that the political frontiers of a manifest failure to observe the Treaty, and above all no indication of the kind of a Member State must necessarily coincide with the limits of the competitive market upon which the High Authority should have based its evaluation. market under consideration.

(c) Manifest failure to observe the Treaty (d) Exceptional circumstances

The applicants state that, quite apart The intervener takes the view that the from all the errors of law contained in High Authority failed to take account the contested Decision, the High of a principle of law of general application Authority's 'general evaluation' of the in applying Article 65: the duty situation is so distorted by the latter's incumbent upon all executive bodies to fragmentary examination of the state of take exceptional circumstances into competition in respect of each product, consideration when applying the law. no account having been taken of the This principle is applied in all Member

Grounds of judgment Admissibility

No objection has been raised as to the admissibility of application 13/60, and no grounds exist for the Court to raise the matter of its own motion.

Decision No 16/60, the annulment of which is requested, is an individual decision. Since it arose out of a request made by the applicants, it is a matter which is of concern to them.

The intervention of the Land of North Rhine-Westphalia was allowed by an Order of the Court of 3 May 1961, and satisfies the requirements of Article 34 of the Protocol on the Statute of the Court of Justice.

JUDGMENT OF 18.5.1962 — CASE 13/60

For these reasons Application 13/60 and the intervention arising from it are admissible.

Article 65(2) stipulates that the High Authority may authorize certain agreements if it finds that they fulfil the conditions laid down in the Treaty. This wording strictly limits the subject matter of the present action concerning essentially the validity, with regard to the Treaty, of the reasons which led the High Authority to find that the authorization of a joint-selling agency, as sought by the applicants on 20 May 1960, could not be granted. These reasons are set out in Decision No 16/60 of 22 June 1960.

3. Infringement of the Treaty

Under this heading the applicants put forward two complaints: first, inaccurate interpretation and application of the Treaty; second, inaccuracies in the findings of fact. Under the first heading they maintain that there has been an evident misinterpretation of the Treaty's provisions.

A — Misinterpretation and misapplication of the Treaty

The applicants complain that the High Authority 'interpreted and applied in a manner that was wrong in law':

GEITLING v HIGH AUTHORITY

An examination of the meaning of the words 'fixer' (fix) and 'determiner' (determine) furnishes no decisive grounds for this distinction. Although Article 65(1) prohibits all agreements tending to fix or determine prices, Article 65(2) permits the High Authority to authorize, in some circumstances, certain agreements, provided in particular that they are not liable to give the undertakings the power to determine prices. The difference in wording between Article 65(1) and (2) requires an explanation, which the distinction asserted by the applicants is able to provide.

JUDGMENT OF 18.5.1962 — CASE 13/60

Although clearly the Treaty establishing the European Economic Community cannot provide a decisive answer in the present case, it does give some indirect support to the applicants' argument, in so far as Article 85(3) of that Treaty, which deals with matters analogous to those governed by Article 65 of the Treaty establishing the European Coal and Steel Community, does not require that agreements capable of qualifying for authorization must not confer on undertakings the power to determine prices, but provides that they must not afford them the possibility of eliminating competition in respect of a substantial part of the products in question'.

If it is accepted that a common intention inspired the drafting of Article 65 of the ECSC Treaty and Article 85 of the EEC Treaty, the power to determine prices would be more or less equivalent to the power enjoyed by undertakings under a system where competition had been eliminated. This is clearly the applicants' argument.

In the light of these considerations, the applicants appear to be justified in their arguments in favour of a distinction in principle between 'power to fix prices' and 'power to determine prices'. For the undertaking which is in a position to exercise it, the power to fix prices is an objective fact arising out of an easily perceptible organizational structure. The power to determine prices, however, resides in a power, given to the undertaking in a position to exercise it, to establish prices at a level appreciably different from that which would be established by the effect of competition alone. Thus, to show the existence of a power to determine prices, it is necessary to establish that the actual prices are, or could be, different from what they would have been in the absence of any power to fix prices. Such a proposition involves a subtle comparison between the actual and the potential, of a kind which must rest to a considerable extent on informed speculation.

The High Authority made such a comparison when considering the appli­ cants' request for authorization of 20 May 1960, and in the Preamble to Decision No 16/60 it stated the reasons which caused it to find that the power to fix prices resulting from the existence of thejoint-selling organization,

GEITLING v HIGH AUTHORITY

with which the present application is concerned, was equivalent to a power to determine prices.

It is, therefore, appropriate to examine the validity of these reasons in the lightof the Treaty.

It is not disputed that a joint selling organization enables those who control it to exercise a limited influence upon prices and to ward off the danger of destructive competition (request of 20 May 1960, p. 25), by means of imposing upon all the undertakings under their control, subject to certain reservations, a uniform list of prices.

On this point the Court accepts the opinion of the High Authority to the effect that the joint-selling agreement,

'according to the very terms used by the applicants both in their request and in their application . . . gives them the opportunity to fix or to maintain, in their principal sales area, list prices which differ from what they would have been in the absence of a cartel agreement, . . . and which guarantee protection of their prices to the undertakings concerned in order that they may be free to carry out re-adaptation measures.' (Statement of defence, paragraph 19).

JUDGMENT OF 18.5.1962 — CASE 13/60

The use of this power is obviously subject to external competition, to be examined later, but, with that reservation, it involves a certain power to determine prices. Such power will be effective in so far as it eliminates the competitive pressure which would have reduced list prices — that is to say, therefore, in so far as the procedure of joint selling makes it possible to neutralize the effect which would have been exerted by offers from those member producers of thejoint-selling agency who enjoy the lowest production costs.

It is, therefore, appropriate to examine the effects of this external competition. This was done by the High Authority in paragraphs (b) (c) and (d) of its Decision No 16/60. In paragraph (b) of Recital No 12 of the preamble to that Decision, the High Authority lists the reasons for which it found that the power of the joint-selling organization to determine prices was not excluded by competition from other undertakings within the Community.

This conclusion is corroborated by the very structure of the Ruhr Valley coalfield. In fact, all undertakings producing heavy goods enjoy, in principle

GEITLING v HIGH AUTHORITY

and subject to certain reservations with regard to competition from goods which are lighter or less costly to produce, a margin of geographic protection within which they have the power to determine prices. The proximity between producers and consumers of fuel in the Ruhr Valley gives to the former an appreciable protection against many other producers in the Community.

The argument of the High Authority, according to which

'it would not appear that so far the undertakings of the Ruhr coalfield have followed the price fluctuations of other undertakings within the Community for the purpose of fixing their price levels, but that on the contrary it can be shown that the prices of Ruhr Valley coal have an appreci­ able effect upon calculation of prices in the neighbouring coalfields of the Community,'

JUDGMENT OF 18.5.1962 — CASE 13/60

into the applicants' principal sales area, that is to say the Federal Republic of Germany, and the tonnages of coal produced by the applicants — according to the High Authority 6.3%, as against more than 15% according to the applicants — just as there is disagreement as to the basis to be used for assessing the significance of these figures, nonetheless it is clear that these figures do not support the view that coal imported from third countries has an irresistible effect upon the markets for Ruhr coal within its principal sales areas.

This situation is due both to the geographic protection which the majority of these sales areas afford to the Ruhr as opposed to most of the sources of production in third countries, and to the customs duties imposed by the Government of the Federal Republic on coal imported from third countries. The High Authority rightly observes that, in so far as any systematic price policy practised by producers in third countries did not take account of the market situation and the situation with regard to production costs, such dangers could be countered by measures of commercial policy.

Even before a customs duty on coal originating in third countries was intro­ duced by the Federal Republic of Germany, the selling prices of Ruhr coal had not been directly determined by those of comparable imported coal. This shows that the power to align prices on those of products imported from third countries gives the joint-selling organization, with which the present application is concerned, the means to defend its position without altering its price lists throughout its entire sales area.

There is no doubt that competition from fuel-oil affects the different categories and types of coal in varying degrees, and that the least affected are precisely those which form the greater part of the applicants' output. Similarly, in so far as coal is supplied for burning, the position of fuel-oil in relation to coal varies in strength according to the use to which it is put. The line dividing the spheres of influence of fuel-oil and coal shifts in proportion to the relation between their prices. Consequently, as regards the competition from fuel-oil, there exists a range of prices within which the joint-selling body may choose, if not freely at least with a degree of freedom, its sales policy and, within certain limits, its list prices. The power to determine prices resulting from this is extended and strengthened by the introduction of a fuel-oil tax in the applicants' principal sales area. The conclusions to be drawn from these remarks are in fact confirmed by the difference in price alterations in the various categories and types of coal according to the extent to which they are in competition with fuel-oil.

The above considerations lead to the view that the joint-selling organization would have some power to determine prices. This conclusion is the opposite of that of the applicants who state that

'a person who merely formulates the effects of movements of the market on price levels does in fact fix prices, but cannot determine them'; (applica­ tion, paragraph 26)

and that if a cartel controlling a substantial part of products on the market is

imposed by the laws of supply and demand. Thus in 'fixing' list prices the joint-selling organization would have no other course than to ascertain market prices, these being 'determined' by the law of supply and demand, and more specifically, within the framework of that law, by the prices at which products of other mining areas of the Community, coal from third countries and fuel-oil are offered on the market.

This conception inevitably recalls the atomistic markets described by liberal economics, where each participant was confronted by a market price which he could in no way affect by his own policies. This was a state of perfect com­ petition where, clearly, no supplier had the power to 'determine' a price, but was faced simply with the option to sell or not to sell at the market price, or to vary the volume of his supply in terms of market prices when his production costs varied with the quantity produced.

To see the coal or energy markets as perfectly competitive atomistic markets would be to ignore realities. They are not formed by a swarm of individual producers, unable to affect market conditions by the weight of their individual supplies, but are made up rather of a limited number of undertakings, whose production is almost always substantial. It is the nature of things which makes of the energy market a market in which large units confront one another.

In such a market the producers are not spared competition from their rivals but they do exert by their very size a considerable influence upon market prices and are by this very fact forced into a genuine sales policy.

The applicants also state that the prices of fuel-oil are specially fixed so as to supplant coal from its sales areas, and thus are determined according to coal prices in these areas; they say in particular that

'the oil industry practises substitution competition (generally below cost price)';

that already

'the fact that the prices of fuel-oil, as distinct from the list prices of Community coal, are completely individual and variable, naturally makes it impossible to compete with fuel-oil by a general lowering of list prices. It is interesting to note here the view expressed by the Coal Committee of the O.E.E.C. in its Fourth Report (The Coal Industry in Europe, 1960, headings 5 and 31). The Committee remarks that the competitive advantage of petroleum producers over coal producers is that the former keep their prices flexible, are able, according to the state of the market, to discriminate between different consumers, and can, according to circumstances, sacrifice their prices in order to conquer to any extent the market' (application, paragraph 35).

More generally the applicants assert that

'it is impossible to state in abstracto whether or not there is any domination of the market. Such a question depends more on the actual state of the market, and particularly upon the structure of competition in the energy market.' (application, paragraph 32).

These analyses apply exactly to the coal market and even to the energy market as the applicants themselves have described it. In such markets the power to fix prices is not faced, as it would be in the case of pure competition, with the immovable barrier of market prices, but has an ill-defined area of manoeuvre within which the authority fixing the prices may choose the level at which it establishes them. The fixing of prices within this ill-defined area is a product of the strategy of the large units which confront each other in the market, not the result of a simple ascertainment by them of a market price, which is itself dependent on their decisions.

If the fuel market is indeed an oligopoly, offering to its participants the opportunity of a real economic strategy, it must necessarily confer a certain power to determine prices.

The Treaty establishing the European Coal and Steel Community takes into account the technical and commercial evolution which constantly augments the size of economic units, increasingly giving the coal and steel markets the character of an oligopoly.

The provisions of Article 65(2) and Article 66(2) evidence the intention of the authors of the Treaty not to restrict this evolution, provided that it serves the objectives of the Treaty and particularly that it enables the necessary measure of competition between the large units to exist, in order to safeguard the basic requirement of Article 2, namely, that the Community shall

GEITLING v HIGH AUTHORITY

'progressively bring about conditions which will of themselves ensure the most rational distribution of production at the highest possible level of productivity, while safeguarding continuity of employment and taking care not to provoke fundamental and persistent disturbances in the economies of Member States.'

and that

'amendments to the first part of the first subparagraph of paragraph (2) which allow the authorization of types of agreement not provided for by the paragraph now in force and of Article 65(2) (a), concerning the objectives of agreements qualifying for authorization, may constitute an adaptation of the rules relating to the High Authority's exercise of its powers of authoriza-

JUDGMENT OF 18.5.1962 — CASE 13/60

tion, but on the other hand the deletion of Article 65(2) (c) would go beyond the bounds of any adaptation.'

Thus the Court has shown that it intends, in accordance with the applicants' wishes, to

'interpret and apply the rules of law, bearing in mind the new economic situation (and) . . . the new burden imposed by the dynamics of economic life', (reply, paragraph 53)

GEITLING v HIGH AUTHORITY

This finding is enough to show that by securing control of a part of the coal and coke in the Common Market, the undertakings concerned acquire the power to determine the quantities, areas and buyers which they consider essential in order to prevent the penetration of competitors into their main sales area.

The control exercised by the sales agency on the policy of price alignment also gives the agency the opportunity, by directing supplies at will even in comparatively small amounts in relation to its total sales, of affecting pro­ foundly the marketing of its competitors, and thereby reinforces the control of its own marketing.

It is impossible not to see in this power to regulate marketing, which is vested in the joint-selling agency, a certain power of control over marketing within the meaning of Article 65(2) (c).

The complaints formulated by the applicants, which raise the issue of the inclusion of the reserved quantities are not of such a nature as to alter this qualitative conclusion of the Court, as will be shown in paragraph (c) below.

(c) The concept of 'a substantial part of the products in question within the Common market'

The problem to be resolved in this section is: at what point does the volume of offers for sale under the control of a cartel constitute a sufficiently substantial part of the products in question within the Common Market for it to render the competition existing within the market imperfect, thereby jeopardizing the aims of the Treaty?

The High Authority gave, at Recital No 9 of the preamble to Decision No 16/60, a table specifying for the year 1959 the proportion of tonnages of coal, briquettes and coke sold on the Common Market by the applicants. These proportions vary between 26.1% and 43.7%.

The applicants contest these figures on the grounds in particular that certain reserved tonnages and supplies to associated undertakings have been wrongly included in the calculations.

The Court cannot uphold the applicants on this issue. It was correct to include these factors in the statement of quantities sold, since no other basis of calculation would have given an accurate picture of the part played by the applicants in the market as a whole. Even if it were to be conceded that a substantial part of the reserved tonnages is not involved in essentially commercial transactions, such a concession would not invalidate the accuracy of the High Authority's calculations. In fact, tonnages in the same category deriving from other producers in the Common Market should in this case equally be excluded from consideration and this would alter the absolute value of the figures, but would only alter to a negligible extent the proportion of tonnages sold which is the sole important factor in this case.

'take account of the size of like undertakings in the Community, to the extent it considers justified in order to avoid or correct disadvantages resulting from unequal competitive conditions'.

This obligation demonstrates the importance which the Treaty attaches to the relative size of undertakings in the structure of competition.

The fact, however, that the High Authority scarcely touched upon this point in the recitals of the preamble to its Decision No 16/60 is of little consequence. It is in fact well known that, for example, the coal production of the undertakings grouped together in the sales organization in question is roughly four times as great as that of any other coalfield in the Common Market and is more than twice the total production of Charbonnages de France, the only organization of comparable size.

The above-mentioned orders of magnitude, whatever correction of detail might be necessary, leave no doubt that the 'size' of the Ruhr coalfield, taken as a whole, is in marked disproportion to that of other fields within the Community. Such disproportion cannot but bestow great influence upon the sales organization which causes it in the competition between the large units which confront each other within the Common Market.

Decision No 16/60, refusing authorization for the association of the three joint-selling agencies of the Ruhr coalfield into a single sales organization, had the effect of restoring the Ruhr sales organizations to a size which no doubt differs from that of the largest sales organizations in the Community outside the Ruhr coalfield, but is ofthe same order of magnitude.

Others, such as that relating to the difference between the figure of 47% and that of 53 % as the percentage of Community coal sold within the Federal Republic, raise discrepancies too trifling to call for any alteration in the conclusions which have been reached on the basis of the contested figures.

Finally, others such as that referring to the High Authority's failure to consider the 'trend' of economic development, might possibly be of relevance to the question of insufficiency of the statement of reasons for the Decision, but not to that of an erroneous finding of fact. Moreover, this argument could not have altered the Decision since in 1960 the trend of economic

development was contrary to what it had been in 1959 (rejoinder, paragraph 41). In any case no conclusion can be drawn from this area of disagreement.

The applicants themselves remark, having accused the High Authority of errors in ascertaining the proportion of coal imported from third countries that

'the level of the import quota is not of decisive importance . . . and in fact the amount of imports under the quota does not fully reflect the influence exerted upon the market by coal from third countries' (application, paragraph 35).

The Court fully accepts this view but gives it a wider application. It also agrees with the applicants when they consider

The Court has not been able to find in the part of the preamble referred to above the infringements of the Treaty which the applicants claim to have discovered, nor can it find therein the result of a manifest failure to observe the Treaty. Accordingly, it cannot on these grounds order the annulment sought by the applicants.

4. Infringement of an essential procedural requirement

The applicants submit under this head that insufficient reasons were stated for the Decision. The Court has stated in sections 2(a) (b) and (c) of this judgment that the grounds set out in the preamble to Decision No 16/60 adequately justified in law the conclusions based upon them. The Court is unable to find in the preamble to Decision No 16/60 the contradictions which the applicants claim to have discovered. The Court considers the statement of reasons in Decision No 16/60 to be decisive. All other considera­ tions, including those which the applicants regard as contradictory or inadequate, must be considered as superfluous and cannot therefore justify the annulment of that Decision.

For all these reasons the application must be dismissed.

JUDGMENT OF 18.5.1962 — CASE 13/60

Costs

1. Dismisses Application 13/60 as being unfounded;

2. Orders the applicants and the intervener to pay the costs of the action.

Donner Riese Rueff Hammes Rossi

Delivered in open court in Luxembourg on 18 May 1962.

A. Van Houtte A. M. Donner Registrar President