C-32/65

JUDGMENT OF 13. 7. 1966 — CASE 32/65

5. Even if it does not involve an abuse of a 6. The intention of Article 184 of the EEC dominant position, an exclusive dealing Treaty is not to allow a party to contest agreement may affect trade between at will the applicability of any regula­ Member States and at the same time tions in support of any application. The have as its object or effect the prevention, regulation of which the legality is called restriction or distortion of competition, in question must be applicable, directly and thus fall under the prohibition in or indirectly, to the issue with which the Article 85 (1). application is concerned.

In Case 32/65

GOVERNMENT OF THE ITALIAN REPUBLIC, represented by Adolfo Maresca, Minister plenipotentiary, and deputy head of the Legal Department of the Ministry of Foreign Affairs, acting as Agent, assisted by Pietro Peronaci, Deputy State Advocate-General, with an address for service in Luxembourg at the Italian Embassy,

applicant,

v

2. A declaration that the following are inapplicable (under Article 184 of the EEC Treaty): subparagraph (2)(a) and (b) of Article 4 (2) and Article 5 (2) of

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Regulation No 17/62 of the Council of the EEC, dated 6 February 1962 (Official Journal No 13 of 21 February 1962, p. 204/62) (English Special Edition, 1959- 1962, p. 87); and

3. In addition a declaration that the following is inapplicable (under Article 184 of the EEC Treaty): Regulation No 153/62 of the Commission of the EEC, dated 21 December 1962 (Official Journal No 139 of 24 December 1962, p. 2918/62);

THE COURT

composed of: Ch. L. Hammes, President, L. Delvaux President of Chamber, A. M. Donner, A. Trabucchi and R. Lecourt (Rapporteur), Judges,

JUDGMENT OF 13. 7. 1966 — CASE 32/65

In its pleading dated 5 July 1965 the Com­ a declaration that Regulation No 153/62 mission of the EEC contends that the Court of the Commission is inapplicable; should: order the applicant to bear the costs of the 'Give a preliminary ruling under Article 91 proceedings.' of the Rules of Procedure on the admissibil­ In its reply, lodged on 18 January 1966, the ity of the application as regards the claim Italian Government in answer to the Com­

that Regulation No 153/62 of the Commis­ mission's statement of defence, claimed that sion should be declared inapplicable; the Court should:

EEC, and Regulation No 153/62 of the Commission of the EEC); ; 'Declare that the applicant's conclusions annul Regulation No 19/65 of the Council concerning the annulment of Regulation of the EEC of 2 March 1962; No 19/65 of the Council are unfounded; make an order for costs in accordance with declare that the following are inadmissible the law.' and, secondly, unfounded: the conclusions In its rejoinder dated 11 February 1966 the of the applicant concerning the annulment Commission 'stands by all the conclusions

defence.' ity raised by the defendants, the Italian At the hearing on 1 March 1966 the parties Government, standing by its previous con maintained these conclusions. clusions, opposes the proposition that the defence submissions put forward by the III — Submissions of the parties Commission and the Council concerning the admissibility of the application should A — As to the main head of the application: be dealt with in a preliminary ruling. that Regulation No 19/65 of the Council Further to an order of the Court dated 18 should be annulled November 1965, joining the Commission's defence of inadmissibility to the main 1. First submission, that Article 85 (1) and action, the Commission contended, in its (3) and Article 86 of the Treaty have been statement of defence dated 20 December

In of the Treaty are not fulfilled; prohibiting certain agreements incompati secondly, dismiss as unfounded the applica ble with the Common Market, Article 85 (1) tion of the Government of the Italian logically renders it necessary for Regulation Republic, in the unlikely event of its being No 19/65 to define the scope of this prohibi declared admissible, as regards the claim for tion before defining all the exemptions

provided for by Article 85 (3). Instead of Finally the claim that Regulation No 19/65 doing this the regulation assumes that should have made provision for the possible everything 'is in general terms forbidden by exemption of all other agreements would the rule', even though Article 87 (1) requires limit the discretionary power which Article the adoption of further provisions for 87 gives to the Council in a way which is not applying the principles set out in the whole in accordance with the Treaty. of Article 85. Thus in giving rulings on the The Government of the Italian Republic asks exception without first defining the general whether Article 87 should really be applied rule to which the exception is made Regula rather to Article 85 (3) than to Article 85 (1). tion No 19/65 is diametrically opposed to The applicant opposes the Council's argu the meaning of Article 85 and 87. ment that Regulation No 17/62 has already The Council of the EEC objects first that it defined the scope of Article 85 (1).

This Case 13/61, Bosch). Furthermore whilst situation is all the more contrary to Articles Regulation No 17/62 authorizes the Com 85 and 87 in so far as the Council now holds mission to grant exemptions by individual that Article 85 (1) does not need any clarifi decisions, Regulation No 19/65 empowers cation. it to adopt regulations exempting whole The Government of the Italian Republic categories of agreements 'in so far as they considers it sufficient to note the contrary come within the scope of Article 85 (1).' opinion according to which 'everything is Therefore Regulation No 19/65 has not permitted, except that which is forbidden' enlarged the field of application of the pro and refers to its observations on the second hibitions in Article 85, but has instead submission. However it observes that this created the necessary procedural methods principle cannot be a justification for not for exempting categories of agreements. investigating whether Regulation No 19/65 Moreover this Regulation has no more was not based on intentions contrary to defined the exception than the rule in Article those of the Treaty, or does not lead through 85, but has set up 'a framework within a misuse of powers to results contrary which the Commission must state both the thereto.

. . which fall within the prohi further characteristics which may give rise bition in Article 85 (1).' Therefore in to an exemption from this prohibition must authorizing the Commission to exempt be defined thereafter. To proceed the other categories of agreements fulfilling certain way round is to disregard Article 85 especial conditions, Regulation No 19/65 did not ly since Article 87 makes it clear that regula forbid all the others. These others are per tions to implement the principles in Article missible if they fall outside the descriptions 85 are needed, without distinction between set out in Article 85 (1). In the converse case these principles. they are forbidden not by Regulation No By reason of the importance of Article 85, 19/65, but by Article 85 of the Treaty. business concerns have a right to know

precisely what agreements they must avoid. (1) and (3) and that there has also been Uncertainty would be so harmful to trade a misuse of powers that Article 87 has recognized the necessity of removing it within a short period. The Government of the Italian Republic The Council of the EEC is of the opinion points out the contradiction between the that the applicant has not advanced any Council's position on the one hand and the new arguments and gives 'the impression of liberal philosophy of the Treaty and the wishing in fact, under cover of an applica objectives defined in Article 2 and 3 (f) on

The appli hibition in Article 85 (1) and be void in law. cant's assertion that this Regulation estab Such a measure is illegal because, whilst lishes 'a legal discipline' governing Article declaring that categories of agreements may 85 (3) is ambiguous. If the applicant means be exempted, the regulation might on the by this expression that the Regulation contrary catch important categories of contains a 'specification of the legislative agreements which are perfectly compatible content' of Article 85 (3), this assertion is

of not having brought into operation before Regulation authorizes the Commission to the exception. declare Article 85 (1) inapplicable to agree ments of this type if they satisfy certain con 2. Second submission, that there have been ditions, but 'without prejudice to the appli infringements of Articles 2 and 3 (f) of cation of Regulation No 17/62 of the the Treaty and also of Articles 87 and 85 Council', Therefore an exclusive dealing

agreement which does not fit the descrip seeing that 'under the camouflage of mere tions in Article 85 (1) remains legal, and the administrative simplification' Regulation parties retain the right to show that because No 153/62 has 'indirectly begun to submit of this they need no exemption from a pro the agreements therein mentioned pro hibition which does not apply to their gressively to the vigour of Article 85 (1), agreement. except for some of them which benefit from Regulation No 19/65 has not created a more the exemption in Article 85 (3)'. 'disturbing' situation for any agreement Furthermore owing to a misuse of powers, than that created by Article 85 (1) of the Regulation No 19/65 again infringes Article

Thus they are and an individual assessment as regards the neither exempted, nor indirectly subjected latter, both kinds of assessment leading to the prohibition. either to the inapplicability of the pro The interpretation given by the applicant of hibition (Article 85 (1)) or to the exemption the intentions of the Council with reference (Article 85 (3)). The easing of the formalities to the fifth, the seventh and the last recitals required for certain agreements does not in and to Article 4 (1) of Regulation No 19/65 any way pre-judge the result of the individ is not correct.

stresses that great care is necessary to dis fulfil the conditions laid down by the Com cover the misuse of powers from a con mission in its implementing regulations but, sideration of the explicit objectives and the on the contrary, all the agreements fitting results indirectly attained. It sees in the fifth the descriptions in Article 85 (1) for which recital in the preamble to Regulation No the procedure for exemption has not been 19/65 an indication of a punitive intent. It eased'. also sees in the seventh recital and in Finally the Council expresses the view that Article 4 (1) of the said Regulation an indi 'the agreements which do not fit the descrip cation of a restrictive tendency as regards tions in Article 85 (1) simply do not come the agreements mentioned in Article 1 (1) into the picture'. (a) and (b); this tendency is confirmed by the statement in the last recital according to 3. Third submission, that Articles 85, 86 which 'there can be no exemption if the con and 222 of the Treaty have been infringed ditions set out in Article 85 (3) are not satisfied.' (a) Article 1 (1) (a) of Regulation No To complete this collection of indications of 19/65 a misuse of powers there is the express mention of Regulation No 153/62 made in The Government of the Italian Republic the fifth recital to Regulation No 19/65, thinks that the Court has done no more than

admit the possibility and not the certainty of In excluding vertical agreements from the application of Article 85 of the Treaty to Article 85 under the mistaken pretext that 'vertical agreements' (Judgment in Case the parties to them cannot be competitors 13/61, Bosch, of 6 April 1962). with each other the applicant contradicts This Article in fact covers dealings between another of its asserrtions: the one where persons trading on the horizontal level, Article 85 is presented as 'not intended to whereas Article 86 governs the relationships protect parties to commercial agreements, between persons trading at successive stages, but to ensure competition and to prevent vertically. Thus in an agreement of this the harmful effects which would also result latter type, containing an exclusive dealing for third party dealings because the free clause, the two parties are outside Article 85 play of market forces had become distort since they are not competitors. Where a ed'. It is precisely as regards third parties vertical agreement produces results which (wholesalers and buyers on the market) that are unfavourable to trade between Member a vertical agreement could distort com States, it ceases to be legal not by virtue of petition. Article 85 but of Article 86 which prohibits The proposition that Article 85 (1) does not the abuse of dominant positions. Article 85 apply to vertical agreements should be sup was not intended to protect the parties but ported by evidence that such agreements was motivated by the desire to promote either cannot affect trade between Member competition 'for third party' consumers as States or cannot distort competition in the

Thus the above (1) (b) of Regulation No 19/56, can perfectly mentioned two subparagraphs in Article 85 well restrict competition. should not be considered by themselves but Finally the Council expresses doubts on the related to the fundamental provision of strength of the arguments in the application Article 85 (1), just as the abovementioned based on subparagraphs (d) and (e) of two subparagraphs in Article 86 cannot be Article 85 (1). Whilst admitting that these considered in isolation, but must be related provisions are similar to, indeed identical to Article 86 (1) of which they are part. with, subparagraphs (c) and (d) of Article The Council of the EEC says first that the 86, it draws from this the conclusion that an application is vague in its reasons why agreement is forbidden when it fits the Article 85 should not be applied to vertical criteria stated not just on any one point in agreements. The Council argues that the Article 85 (1) considered in isolation, but in supposed legality of vertical agreements Article 85 (1) as a whole. which distort competition, supported by the The Government of the Italian Republic allegation that these agreements do not con replies that Article 1 (1) of Regulation No stitute an abuse of a dominant position, is 19/65 is directed at the relationship between contrary to Articles 2 and 3 (f), which re- a producer and an exclusive dealer.

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others. The applicant says that this situation tion. The objective of the person granting is perfectly legal, and that it does not see the concession is to penetrate the market why it should be any the less so where con and thus to stimulate competition. If in cessionnaires are used. For the needs are penetrating the market he falls into wrong one and the same; they are for a rational ful practices, he can be called to order not sales organization which may take the form under Article 85, but under Article 86.

On the contrary 'competition' which it uses should be con the Council is opposed to the applicant's sidered as going hand in hand and linked proposition that all these agreements with the objective sought in line with 'necessarily do not do so'. Article 3 (f) of the Treaty. The Council complains that the Govern Given this interpretation, a contract ment of the Italian Republic has still not between a producer and a concessionnaire is made it clear whether it is saying that the not an 'agreement between undertakings' inapplicability of Article 85 to exclusive within the meaning of Article 85, because dealing agreements is because of their all the producer has done is to transfer to the nature, or because of the fact that Article 86 concessionnaire powers which are his own could be applied to them.

same producer. The competition mentioned dealing agreement can never have an effect in Article 85 implies a legal power to take on competition between the parties, the competitive measures, and this cannot applicant asserts that the parties cannot therefore include the concessionnaire be compete with each other by virtue of this cause the person giving him the concession agreement. This means referring to the con-

tent of the contract itself in order to prove applies to vertical agreements. that there is no competition between the The Government of the Italian Republic says parties, whereas in fact the right course is that the reasoning which it has elaborated to prove that there is no competitive si with reference to Article 1 (1) (a) of Regula tuation which the agreement can affect. tion No 19/65 also applies to Article 1 (1) Competition between the parties is certainly (b), subject however to one important conceivable, as is competition between them addition. and third parties, or again between third In transferring goods with the industrial parties themselves. Each of these instances property rights attached thereto, the trans of competition can be affected by exclusive feror is in fact using property rights which dealing agreements. are guaranteed to him by the Member Finally, the Council asserts that the appli States and by Article 222 of the Treaty. cant is in error first in replacing the concept Thus it is inconceivable that Regulation No of an exclusive dealing agreement by the 19/65 can invite the Commission to regulate concept of the 'internal relationship of the the use of industrial property rights, which sale organization' and secondly in supposing are inalienable. It is equally inconceivable that this type of agreement may come under that an agreement relating to these same either Article 86 or Article 85, but not under rights, to be valid, has need of the use of the both. special exemption in Article 85 (3) and that it can be declared void by virtue of Article (b) Article 1 (1) (b) of Regulation No

rights. Accordingly, Regulation No 19/65 of tion, that Regulation No 17/62 of the the Council is in conflict with Articles 85, Council is inapplicable 86 and 222 of the Treaty. The Council of the EEC observes that the 1. The object of the application said regulation in no way prejudices the The Government of the Italian Republic rules in Member States governing the system observes that Article 4 (2) of Regulation No of property ownership notwithstanding the 17/62 exempts certain kinds of agreements fact that subject to certain conditions it from notification, and thus establishes rules provides that the prohibition may be lifted which automatically and totally exclude as regards agreements 'which include re certain agreements from the prohibition set strictions imposed in relation to the acquisi out in Article 85 (1) of the Treaty.

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The decision annexed to Regulation No 27/62 of the whether or not the present dispute involves Commission, which permits precautionary Regulation No 17/62 is for the Court. notification, whilst at the same time author izing the making of a declaration, after an The Council has already agreed in its state ment of defence that the three regulations investigation, that Article 85 (1) does not apply. with which these proceedings are concerned Thus by virtue of Article 184 of the Treaty, are based on the same interpretation of

2. Admissibiliy these two regulations. The Council of the EEC first of all denies that the Government of the Italian Republic 3. Substance may rely on Article 814 in order to request a declaration that Article 4 (2) and Article 5 (2) of Regulation No 17/62 are inapplicable. The Council of the EEC argues alternatively and as a matter of substance that Article 4 For such a request to be admissible it would be necessary, in accordance with the judg (2) of the said regulation does not have the ments in Case 9/56 and Joined Cases 31 and objective alleged in the application.

The last sentence of Article 4 (1) position, because the said Regulation No 19/65 is 'directly based' on the Treaty. makes this point clear. Furthermore the intentions behind Regula On the other hand any agreement not des tion No 19/65 have no connexion with cribed in Article 4 (1) of the regulation but Articles 4 and 5 of Regulation No 17/62 fitting the descriptions in Article 85 (1) must since the said Regulation No 19/65 removes be notified. This is particularly so as regards the prohibition in Article 85 (1) from certain all exclusive dealing agreements, whose categories of agreements, and Regulation effects go beyond merely restricting the free No 17/62 introduces an obligation to notify. dom to fix prices, or determine the terms of The fact that these two Regulations both business of one of the undertakings upon assume the same interpretation of Article 85 the resale of goods acquired from the other. (1) namely that it is applicable to vertical The Government of the Italian Republic agreements, cannot be enough to allow takes the view that this interpretation of recourse to Article 184. There is no sufficient Regulation No 17/62 by the Council does relation between the two regulations at issue not lead to excluding certain agreements for the possible inapplicability of Regula from the prohibition in Article 85 (1) auto tion No 17/62 to have any other result than matically, but only to making notification of the abolition of all exemptions from the them not compulsory. The said agreements obligation to notify agreements. may nevertheless be voided at any time.

C — As to the alternative head of the applica only reserved the right to join it at a later tion, that Regulation No 153/62 of the stage of the proceedings. Commission is inapplicable The Commission accepts the proposition of the Italian Government that when the main 1. The object of the application dispute is between parties not including the institution which has promulgated the regu The Government of the Italian Republic con lation in issue within the meaning of Article siders that the Commission, by introducing 184, that institution must be joined as a a simplified procedure in Article 1 of its party to the proceedings.

According seems to have been overtaken and to have ly, under Article 184 of the Treaty, Regula been dropped' in so far as the early doubt tion No 153/62 of the Commission is in raised by the Commission as to whether it applicable if it becomes an issue in the is properly a party to the proceedings may present dispute. have been removed. Finally, it is argued that Regulation No Although the Commission admits that when 153/62 is illegal for the same reasons as the main dispute is between two parties those advanced against Regulation No neither of which is the institution which has 19/65 of the Council. promulgated the regulation 'in issue within the meaning of Article 184', this institution

The appli whether the Government of the Italian cant must also prove a causal connexion in Republic really intended making it a law between this regulation and the regula defendant. This doubt is inferred from the tion which is the main head of the applica heading of the application which is directed tion. not against it but against the Council 'and The Government of the Italian Republic also as regards' the Commission. replies that it cannot be denied, for two This doubt is confirmed by the fact that the reasons, that the Commission is the Commission is not concerned by the first defendant. two heads of the application which call for First, a ruling on the inapplicability of a the annulment of two regulations of the regulation sought under Article 184 may

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Whilst basis but also as an alternative argument in agreeing that if Regulation No 19/65 of the the main action. This is why the applicant Council were to be declared null and void, uses expressions intended to bring out this this could have practical consequences as distinction without giving the Commission regards Regulation No 153/62, the Com the opportunity to deny that it is a defendant mission stresses that this point has nothing as regards this part of the application. to do with the application of Article 184. It concludes from this that 'the conditions (b) Second defence of the Commission: under which an application may be made inadmissibility are not present in this case and therefore the request may not be presented'. The Commission expresses doubts as to The Government of the Italian Republic says whether a Member State can use Article 184 that this submission in defence is not in fact which is intended to protect individuals, and an objection of inadmissibility.

simplified notification procedure which 'may' be used for certain exclusive dealing (c) Objection of inadmissibility raised by agreements, and notification does not con the Council sist of anything other than a duty imposed by Regulation No 17/62. The second is The Council argues against the admissibility directed at another matter in that it em of this head of the application for the same powers the Commission to apply the lack of a connexion with Regulation No exemption in Article 85 (3) to whole cate 19/65 as has already been argued in the case gories of agreements. Therefore 'no bond of of Regulation No 17/62. interdependence recognizable at law' exists Regulation No 153/62 is all the more un between these two measures. assailable under Article 184 because Regula When the period within which an applica tion No 19/65 of the Council is directly tion must be lodged has expired, the illegali based on the Treaty, whilst Regulation No ty of a measure may only be argued in 153/62 of the Commission is based only on reliance on Article 184 if this measure con another regulation; Regulation No 19/65 of stitutes the 'legal basis of the application'. the Council thus constitutes 'a higher order The case-law resulting from the judgments of legislation, which therefore cannot in any in Case 9/56 and Joined Cases 31 and 33/62 circumstances be based on the aforesaid requires a 'genuine bond recognizable at regulation of the Commission'. law' between the two measures.

JUDGMENT OF 13. 7. 1966 — CASE 32/65

3. Substance that this system is illegal. The Government of the Italian Republic The Council of the EEC, in reply to the appli replies first that one of the recitals in the cant's arguments observes that in its view preamble to Regulation No 19/65 which Regulation No 153/62 has no other object refers to Regulation No 153/62 proves that than to simplify, as regards certain ex the latter is not innocuous and is not limited clusive dealing agreements, the notification to introducing a simplified form.

All these proposition that Regulation No 19/65 is factors involve a disregard for Articles 87 illegal as applying to Regulation No 153/62 and 85 of the Treaty. as well, for the said submissions state that Further, a misuse of powers can very clearly both of these measures are illegal for be seen in the succession of regulations precisely the same reasons. which preceded Regulation No 19/35. They First the argument to the effect that Articles are all based on the same line of thinking, 87 and 85 have been infringed does not and their real purpose only became clear apply to Regulation No 153/62. All this after Regulation No 19/65 had been regulation does is to introduce a simplified adopted, even though prior to that their type of form for the notification prescribed apparent purpose was only administrative by Regulation No 17/62 of the Council. simplification. Even though the adoption of a simplified Finally, it is asserted that the Commission procedure takes place within a given has itself agreed that Regulation No 153/62 system, this cannot in itself infringe the has 'partly created a system of control' as Articles of the Treaty which the said system regards exclusive dealing agreements com is applying wrongly. ing within the scheme of Article 85 (1).

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The oral arguments were presented at the IV — Procedure hearing on 1 March 1966. The Advocate-General delivered his reason­ The application of the Government of the ed oral opinion at the hearing on 22 March Italian Republic was lodged at the Court 1966.

Grounds of judgment

The Italian Government has brought an application against the Council of the EEC and, in so far as necessary, against the Commission. The application is mainly for the annulment of Regulation No 19/65 of the Council, dated 2 March 1965, relating to the application of Article 85 (3) of the Treaty establishing the EEC to categories of agreements and concerted practices.

The application also asks, in reliance on Article 184 of the said Treaty, for a declaration that the following measures are inapplicable: subparagraph (2)(a) and (b) of Article 4 (2) and Article 5 (2) of Regulation No 17/62 of the Council, dated 6 February 1962, providing for the notification of agreements in favour of which interested parties wish to claim the benefit of Article 85 (3).

JUDGMENT OF 13. 7. 1966 — CASE 32/65

Finally, and again relying on Article 184 of the EEC Treaty, the application asks for a declaration that Regulation No 153/62 of the Commission, dated 21 December 1962, introducing simplified methods for notifying certain agreements known as exclusive dealing agreements, is inapplicable.

It is for the Council to decide whether a particular regulation is 'appropriate' and it may come to such a decision on a given point without having to deal exhaustively with the whole of Articles 85 and 86; it may therefore apply the exemption set out in Article 85 (3) by means of a regulation if it thinks fit. It does not follow from this that everything which has not been exempted is to be presumed to be forbidden.

Furthermore Article 85 (3) of the Treaty provides that the exemption in question may be granted to categories of agreements. The need of undertakings to know their legal position with certainty could justify giving priority to the use of this power, which does not require the Council to adopt rules simultaneously for applying the other provisions of the said article. Thus, without disregarding

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Article 87, the Council was entitled to rely on Article 85 (3) as its authority for adopting a regulation covering the exemption of categories of agreements. It was in a position to do this without bringing about any alteration in the principles set out in Article 85 (1) and without foregoing its right to make any further regulation applying any other provision of the said Article 85 to agreements not provided for by the regulation at issue.

The second submission, that there has been both an infringement of Article 85 and a misuse of powers

It is argued against Regulation No 19/65 first that it infringes Article 85 (1) and (3) and at the same time Articles 2 and 3 (f) of the Treaty; secondly that the regulation constitutes a misuse of powers in assuming that all the agreements coming within the exempted categories properly fall within the absolute prohibition in Article 85 (1), and thus in regarding the descriptions set out in Article 85 (1) as properly met not only by the categories exempted by the said regulation, but also by all agreements of the kind mentioned in the said categories made between more than two undertakings, or between two undertakings but without fitting one of the descriptions laid down in Article 1 of the said regulation.

presupposes that this agreement falls within the prohibition imposed by Article 85 (1), the authorization in Article 85 (3) to grant this same benefit to categories of agreements does not imply that because a particular agreement comes within these categories it necessarily fits the descriptions set out in Article 85 (1).

In empowering the Council to authorize exemptions to categories of agreements 85 (3) only requires it to exercise this power as regards categories of agreements which fit descriptions in Article 85 (1). A Council regulation would indeed have no purpose if the agreements in the categories defined by it could not fit the said descriptions. However, to define a category is only to make a classification and it does not mean that the agreements which come within it all fall within the pro­ hibition. Nor does it mean that an agreement within the exempted category, but not exhibiting all the features of the said definition, must necessarily fall within the prohibition. Therefore to grant exemptions by categories cannot amount, even by implication, to passing any pre-conceived judgment on any agreement considered individually.

Regulation No 19/65 does not contravene these principles. Article 1 (1) of the said Regulation provides that the Commission may 'by regulation declare that Article 85 (1) shall not apply to categories of agreements to which only two undertakings are party' and which contain certain provisions found in exclusive dealing agree­ ments. By paragraph (2) of the same Article the regulation which the Commission is to" adopt 'shall define the categories of agreements to which it applies and shall specify in particular: (a) the restrictions or clauses which must not be contained in the agreements; (b) the clauses which must be contained in the agreements, or the other conditions which must be satisfied'.

The third submission, that Articles 86 and 222 of the Treaty have been infringed

A first series of complaints is brought against the contested regulation in that by Article 1 (1)(a) thereof it treats exclusive dealing agreements as falling not under Article 86 on the abuse of a dominant position, but under Article 85, this latter Article being applicable only to agreements between businesses acting at the same level ('horizontal agreements') whilst agreements between businesses operating at successive levels ('vertical agreements') come only under Article 86, which has thus been disregarded along with Article 85.

Neither the wording of Article 85 nor that of Article 86 justifies interpreting either of these Articles with reference to the level in the economy at which the under­ takings carry on business. Neither of these provisons makes a distinction between businesses operating in competition with each other at the same level or between businesses not competing with each other and operating at different levels. It is not possible to make a dinstiction where the Treaty does not make one.

JUDGMENT OF 13. 7. 1966 — CASE 32/65

are legally distinct. Furthermore they give different results, for two methods of distribution, one of which is incorporated into the producer's business whereas the other is not, are not necessarily equally efficient. It is admittedly true that the wording of Article 85 makes the prohibition applicable, subject to the presence of the other factors described, to an agreement between a number of undertakings, and therefore excludes the case of a single undertaking which incorporates as part of its activities its own distribution network. However this does not mean that by a mere business analogy, which anyhow is incomplete and contradicts the wording in question, the contractual situation arising from an agreement between a pro­ ducer undertaking and a distributor undertaking must be considered legal.

Moreover, as regards the position of a single undertaking as described above, the intention in Article 85 of the Treaty is to respect the internal organization of an undertaking and only to question it, by way of Article 86, if it reaches a point where it amounts to an abuse of a dominant position. But the Treaty cannot have the same reservations about barriers to competition resulting from an agree­ ment made between two different undertakings, which it is normally sufficient to prohibit.

Thus it cannot be denied that an agreemtnt between a producer undertaking and a distributor undertaking is an example of 'agreements between undertakings'.

An agreement between producer and distributor intended to restore national partitioning in trade between Member States could be such as to run counter to the most fundamental objectives of the Community. The preamble to and the body of the Treaty are aimed at removing barriers between States and in many provisions the Treaty firmly opposes their re-appearance. It could not allow under­ takings to recreate such barriers.

said categories 'which include restrictions imposed in relation to the acquisition or use of industrial property rights'. In doing so, in so far as Article 222 might be concerned, the regulation has not prejudiced in any way the rules in Member States governing the system of property ownership.

In making the provisions therein contained the disputed measure has, without infringing Article 222, correctly relied on the generality of the wording of Article 85 which covers 'all agreements between undertakings' to enable it to exempt from the prohibition agreements containing restrictions relating to industrial property rights.

It follows from all the above considerations that the application for the annulment of Regulation No 19/65 must be dismissed.

The subsidiary heads of the application, concerning the arguments that Regulations Nos 17/62 of the Council and 153/62 of the Com­ mission are inapplicable

Relying on Article 184 of the Treaty, the Government of the Italian Republic has, in the same application, requested that certain provisions of Regulations Nos 17/62 of the Council and 153/62 of the Commission be declared inapplicable.

The Council and the Commission have raised an objection of inadmissibility against this part of the application, arguing in particular that these regulations do not constitute the legal basis for Regulation No 19/65, the annulment of which is requested under the principal head of the application and cannot therefore be the subject of proceedings as provided for in Article 184 of the Treaty.

Therefore the said requests are inadmissible.

Costs

The applicant has failed in its application.

Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 2, 3, 85, 86, 87, 173, 184 and 222; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Article 69,

Delivered in open court in Luxembourg on 13 July 1966.

A. Van Houtte Ch. L. Hammes

Registrar President