C-56/65

JUDGMENT OF 30. 6. 1966 — CASE 56/65

In Case 56/65

Reference to the Court under Article 177 of the Treaty establishing the European Economic Community by the Cour d'Appel (First Chamber), Paris, for a prelim­ inary ruling in the action pending before that court between

SOCIÉTÉ TECHNIQUE MINIÈRE v MASCHINENBAU ULM

SOCIÉTÉ TECHNIQUE MINIÈRE

and

MASCHINENBAU ULM GMBH

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure good stock of spare parts'. Finally it was stipulated that 'without the written consent By an agreement made on 7 April 1961 of M.B.U.' T.M. 'may not assign the rights Technique Minière (hereinafter referred to and obligations of this agreement to a third by the initials 'T.M.'), a French company party'. incorporated with the object of selling pub­ According to the Cour d'Appel, Paris, there lic works equipment both on its own behalf is no doubt that T.M. retained the right to and on behalf of others agreed to take re-export the equipment acquired from delivery of thirty-seven graders over a pe­ M.B.U. to places outside the contract ter­ riod of two years from the German under­ ritory. Furthermore any potential French taking Maschinenbau Ulm (hereinafter re­ buyer may make his purchases in other ferred to by the initials 'M.B.U.'). Under the countries of the Common Market by means terms of this contract M.B.U. granted T.M. of parallel imports. 'the exclusive right to sell' these graders 'in After M.B.U. had delivered six graders to French territory'. The parties also agreed T.M. and corresponding bills of exchange that 'the delivery of machines which com­ maturing on 12 July 1962 had been accept­ pete with those mentioned in the first clause ed, an interlocutory order made on 24 July [the exclusive dealership clause] shall only 1962 upon a motion by T.M. appointed a be carried out with the consent of M.B.U.'. receiver of the said bills. The order also T.M. undertook 'to ensure that a repairs appointed an expert to examine 'whether service functions properly and to build up a the machines were unsuitable for the use for

which they were intended and incapable of Article 85 (3) may be taken in respect of sale to French customers'. The expert found agreements of the kind described in Article that they were in conformity with 'the terms 85 (1) until they have been notified. Second of the order' and 'perfectly capable of being ly it notes that Regulation No 153 intro sold on the French market'. The Tribunal duces a simplified notification procedure de Commerce de la Seine then declared by a for exclusive dealing agreements which are judgment given on 8 January 1964 in an made between only two undertakings and action brought by M.B_U_ that the contract, whereby one party gives an undertaking to in so far as it remained unexecuted, was the other that he will not deliver certain annulled and that T.M_ must bear the products to any person but that other per

ment was 'absolutely void' as being con 'do not seem to have authority to add any trary to Article 85 (1) of the EECTreaty, or, thing to the prohibitions laid down by alternatively, that it should suspend pro Article 85 (1) of the Treaty' and that Article ceedings until the Court of Justice of the 1 of Regulation No 19 provides that, with European Communities had given a ruling out prejudice to the application of Regula on the interpretation of the said Article, and tion No 17, the Commission may by regu the regulations adopted in implementation lation and in accordance with Article 85 thereof, upon a reference under Article 177. (3) of the Treaty declare that Article 85 (1) M.B_U_ then argued that notification to the shall not apply 'to categories of agreements Commission of the EEC was not compul

ritory which is the primary responsibility With regard to this the Cour d'Appel, Paris, of the concessionnaire with whom the noted first that Article 4 of Regulation No agreement is made; 17 states that no decision in application of — do not fetter the right of dealers and con-

sumers in the country of the consession hidden. The interpretation of Article 85 and naire to obtain supplies through parallel of the regulations adopted in implementa imports from concessionnaires or sup tion thereof with reference to a certain type pliers in other countries of the Common of exclusive dealing agreement and to cer Market; tain circumstances has no other purpose — require the concessionaire to obtain the than to apply the aforesaid provisions to consent of the grantor before selling that particular agreement. Having regard to

Interpretation of The official copy of the judgment of the Article 85 (1) Cour d'Appel, Paris, delivered on 7 July 1965, was received by the President of the The Commission, in endeavouring to estab Court of Justice on 19 November 1965. As lish the scope of Article 85 of the Treaty and provided for under Article 20 of the Proto of Regulation No 17 in the light of the facts col on the Statute of the Court of Justice of referred by the national court, considers the EEC, the parties to the main action and that according to those facts the agreement the Commission of the EEC submitted at issue is a so-called exclusive dealing written observations. agreement made between two undertakings Oral arguments were presented at the hear

Fur of the EEC Treaty, it is strictly limited to the thermore this kind of agreement includes an interpretation of Community law and can exclusive purchase commitment on the part not extend to applying that law to a partic of the concessionnaire, except when the ular case. When the wording of the first of grantor authorizes otherwise, and supple the questions referred for a preliminary mentary stipulations concerning stock, ruling by the Cour d'Appel, Paris, is con guarantees etc.

JUDGMENT OF 30. 6. 1966 — CASE 56/65

It is usually for the na 16). The Commission adds that 'notwith tional court to decide whether the restric standing the fact that the Commission has tion on competition is appreciable. sole power to apply Article 85 (3), Article Again according to the Commission, the 85 (1) can nevertheless be applied both by wording of Article 85 (1) shows that agree the Commission and by the national author ments restricting competition which only ities as long as the Commission has not concern trade within one State alone or initiated any procedure (Regulation No 17, only affect trade between a Member State Article 9)'. and third states do not fall under the pro In this context and taking into account the hibition. The expression 'which may af type of agreement under consideration the fect .

parties. The wording of Article 85 (1) from being 'distorted' or, according to the proves, it is claimed, first that there is a opinion of the Advocate-General in Case restriction on competition within the mean 13/61, to prevent a restriction on competi ing of that provision when the freedom of tion leading to 'the diversion of trade from action of the contracting parties is limited its normal and natural routes'. The Com and when the position on the market of a mission concludes from this that the type of third party is adversely affected. Secondly agreement under consideration determines such a restriction may occur at any level of the conditions under which the products of the economic process whatever, including the grantor are imported from one Member any stage at which distribution takes place, State to another. Accordingly, trade be which presupposes that the agreement may tween Member States develops otherwise be horizontal or vertical. than it would without these restrictions on However restriction on competition is not competition. It is for the national court to a purely theoretical concept; the position of decide whether these restrictions 'are of the parties to an agreement or of third par some importance' when it is faced with a ties on the market must be altered to an concrete case. Upon its being finally estab appreciable extent, without this meaning lished that through an agreement of the type that the test is a quantitative one.

SOCIÉTÉ TECHNIQUE MINIÈRE v MASCHINENBAU' ULM

is therefore only very limited. Furthermore, and of thereby adapting itself to the de it is alleged that since there is no prohibition mands of a larger market, because as a on exports and re-exports the activities of general rule such concerns do not have suf parallel suppliers and importers are per ficient financial resources to set up their mitted, and that therefore the agreement own sales organization in countries other prevents the partitioning of the Common than their own. Thus there is less and less Market and is in line with the attitude opposition to the view that exclusive dealing adopted by the Commission when giving agreements of the kind at issue are perfectly negative clearance.

It observes that the ment falls within the ambit of Article 85 (1). Italian Government's opinion is that Article There is no obligation on the "parties to an 85 (1) should not be applied to such agree agreement of the type in question to notify; ments and that, according to the German they are simply entitled to request the Com Federal Government, the prohibition con mission to give a negative clearance if they tained in Article 85 (1) is only applicable in wish to avoid the possibility of its being certain strictly limited circumstances.

chase. An undertaking to sell is an under purchase. M.B_U_ submits that, according taking by the grantor to sell only to the sole to the position which the Commission has dealer within the contract territory, and an defended up till now, the grant of exclusive undertaking to purchase is an undertaking rights of sale is in principle of itself a restric by the dealer not to sell machines which tion on competition within the meaning of might compete with the goods covered by Article 85 (1), even without its being tied to the agreement without first obtaining the a supplementary guarantee in the form of a consent of the grantor.

JUDGMENT OF 30. 6. 1966 — CASE 56/65

ready established there. Therefore, when an ness on his own account. exclusive dealing agreement is made, the According to M.B_U_, the Commission, in objective sought is certainly not a restriction an opinion of 24 December 1962, has al on competition, but on the contrary an ready accepted the inapplicability of Article attempt to provide extra competition by 85 (1) to exclusive dealing agreements made offering another source of supply for the with agents and commission agents. goods on the given market. Thus the system The reasons given on that occasion can of exclusive dealing tends to favour com equally apply to dealers in business on their petition and to increase its intensity. own account. Since the economic objectives It submits that the grant of an exclusive and the effects as regards competition are right of sale does not have the effect of the same, a discriminatory application of preventing, restricting or distorting com cartel law does not seem justified and would

market. In fact, without exclusive dealing own sales system. agreements the goods of a producer could Fourthly, should the Court reject the above only be bought from him, so that there arguments, M.B_U_ submits that its proper would only be one seller, the producer him course would then be to examine the cir self. Once such agreements are accepted, the cumstances in which the prohibition in producer ceases to act as seller and his place Article 85 (1) is applicable to exclusive is taken by the exclusive dealer, who is the dealing agreements. In doing so, the market only seller for the products covered by the to take into consideration is the market in

The producer plier whose function is to make the goods can only grant an exclusive right to sell available to the successive commercial lev when he knows that the grantee must look els, instead of the producer himself. after his interests effectively and do what a Thirdly, the application of Article 85 (1) to sales organization run by himself would exclusive dealing agreements of the type have done, so that a desirable division of under discussion leads to undesirable results work between production and distribution

is achieved. On this point the Commission's thereof. Further, the Commission's inter opinion resulting from its decision in the pretation would in practice make the two 'Jallatte' Case is not satisfactory because it basic conditions contained in Article 85 (1) departs from the rules of law and fails to identical, which would be illogical. adhere to the only test which is decisive, Finally, M.B_U_ argues that since exclusive namely whether competition on the market, dealing agreements of the type under con and not access to the market, is prevented, sideration are designed with the objective of restricted or distorted.

tion on competition as between the pro For all the above reasons M.B_U_ concludes ducers. Finally, if in interpreting Article 85 that the prohibition contained in Article 85 (1) the test was whether an agreement (1) is not applicable to an agreement such as makes access to the market more difficult the one at issue. for competitors, this would mean that any T.M_ first describes the nature and content purchase agreement of whatever kind could of an exclusive dealing agreement such as come under the prohibition, in view of the the one at issue. It states that the intention obstacle such an agreement presents to the behind exclusive dealing agreements is to sales opportunities of competitors, espe organize distribution networks within a cially where a long-term delivery agreement commercial market so as to ensure that or an agreement for the supply of large supplies reach the market while competition quantities is involved. is eliminated and fixed profit margins are With regard to the second basic condition guaranteed. Such agreements constitute for prohibition contained in Article 85 (1) sales monopolies at the various levels of (obstacles to trade between Member distribution held by the exclusive dealers States), M.B_U_ argues that exclusive deal within the territory granted to them.

for prohibition. On the question whether it under the reciprocal obligation to guarantee is enough for the Commission, in order to them by foregoing any activity which might apply Article 85 (1), that an obstacle to jeopardize them. competition has the result of making trade Thus T.M_ further argues that, when a between Member States develop differently market is divided up geographically into from the way in which it would have devel concession areas, each concessionnaire is oped without that obstacle, and of thus required to confine his activities to his own influencing to an important extent the con territory so as not to undermine the exclu ditions prevailing on the market, M.B_U_ sive rights of a concessionnaire in an ad submits that there can be no doubt as to joining territory by any sales exports which this from the German, Dutch and Italian he might be able to make.

JUDGMENT OF 30. 6. 1966 — CASE 56/65

stated. It must be ensured that such excep On the basis of the above arguments T.M_ tions are actually observed and that they suggests a reply to the 'true question' with are not in fact belied by hidden agreements. which, in its opinion, the Cour d'Appel It is also important to make sure that such should be concerned and which is contained parallel imports as may be allowed do in by implication in the request for interpreta practice give purchasers a real freedom of tion. choice and that their prices are competitive, This question is whether a national court or even though two sets of transport costs and tribunal, entitled to take decisions on the of customs duties both have to be paid. For application of Article 85 (1) of the Treaty by the truth is that it is not the judicial inter

If the second point of view is questions of fact which must be investigated correct, the agreement in question has not in each particular case. been notified as required by the regulations, T.M_ submits that this is indeed how the and therefore the national court must apply Commission has understood the matter in the sanctions laid down by Community its decisions given in application of Article law. 85 and in the wording of Regulation No Since the Cour d'Appel, Paris, has not 153. For this regulation to be applied, it is raised any dispute as to the legality of the not sufficient for the exclusive dealing agree implementing regulations, all that has to be ment not to contain any express prohibi done, according to T.M_, is to interpret

inapplicability. Article 85 (1) catches all

agreements which produce, no matter to and evade the sanctions which they lay how small an extent, any one of the results down. listed therein. The only agreements which can be given negative clearance are those C — The second question: Interpretation o which do not produce those results to the Article 85 (2) slightest extent whatsoever. Despite the inconvenience of compulsory notification of According to the Commission, the possibil agreements which might qualify for negative ity of an agreement being automatically clearance, this interpretation is the only one void as provided for by Article 85 (2) is a which allows for an objective test and matter which only requires consideration of effective control. the expression 'agreements' in order to be Thus, having regard to the judgment of the understood. Court in Case 13/61, it must be accepted In referring to legal writing, it asserts that that, since exclusive dealing agreements the expression 'agreement' covers not only may be prohibited 'in specie' by Article 85 clauses which restrict competition and affect (1), none of them, 'ut singuli', can be exemp trade between Member States but also ted from the requirement to notify. This 'other stipulations which do not matter would still be the position even if an exam from the point of view of competition'.

Amongst these con against a diversity of solutions resulting ditions is the consent of the grantor which from the various 'more or less absolute' the concessionnaire must obtain before de concepts of nullity in national law. 'The livering machines likely to compete with the nullity imposed by Article 85 (2) constitutes products covered by the agreement. It is a Community concept'. submitted that this consent restricts free The Commission further submits that, since dom of trade and of competition and justi Article 85 (1) does not state that the nullity fies the application of Article 85 (1). must be governed by the rules which are to Finally, T.M_ submits that, since the author be followed for applying the prohibition, in ities of the Community have decided determining the extent of the civil sanction through regulations which have the force of laid down by Article 85 (2) one must refer to law in every Member State that exclusive the purpose of the rules on competition on dealing agreements are to be under their the basis of an interpretation founded on control, it is not desirable for national the objectives of Community law.

JUDGMENT OF 30. 6. 1966 — CASE 56/65

The rec the system under which that part of an ognition of these uniform legal principles by agreement which is contrary to Community the Court binds the courts and tribunals of rules is void is a Community system, and the Member States. this is what matters. Thus in the case contemplated by the ques In short the Commission proposes that 'in an agreement containing a clause which is tion referred, the agreement at issue would contrary to Article 85 (1) of the EEC Treaty become a non-exclusive agreement for the this clause is necessarily automatically void supply of goods. under Article 85 (2)' but that 'the validity of the other provisions of the agreement are to T.M_ argues that since the agreement at issue has not been notified it should be be determined in accordance with the rules of the national law applicable to the par regarded as prohibited by Article 85 (1) and ticular case'. automatically void under Article 85 (2), because of Articles 5 and 6 of Regulation M.B_U_ recalls that it has argued before the No 17. Cour d'Appel, Paris, that the contract at issue escapes the application of Article 85 It is asserted that the judgment in Case (1) and (2) and that in addition, although 13/61 supports this line of reasoning, and the Cour d'Appel, Paris, has asked the that in accordance with this reasoning the Court of Justice of the European Commun agreement should be declared void as from ities to rule on the scope of Article 85 (2), it 13 March 1962. cannot have asked the Court to apply this

SOCIÉTÉ TECHNIQUE MINIÈRE v MASCHINENBAU ULM

Grounds of judgment

By a judgment of 7 July 1965, forwarded to the Court of Justice of the European Communities on the following 19 November, the Cour d'Appel, Paris, (First Chamber) has duly referred to the Community Court under Article 177 of the EEC Treaty certain questions relating to the interpretation of Article 85 of the said Treaty.

The questions are worded as follows:

'1. What interpretation should be given to Article 85 (1) of the Treaty of Rome and to the Community regulations adopted in implementation thereof with regard to agreements which have not been notified and which, whilst granting an "exclusive right of sale", — do not prohibit the concessionnaire from re-exporting to any other markets of the EEC the goods which he has acquired from the grantor; — do not include an undertaking by the grantor to prohibit his concessionnaires in other countries of the Common Market from selling his products in the territory which is the primary responsibility of the concessionnaire with whom the agreement is made; — do not fetter the right of dealers and consumers in the country of the con­ cessionnairs to obtain supplies through parallel imports from concession­ naires or suppliers in other countries of the Common Market; — require the concessionnaire to obtain the consent of the grantor before selling machines likely to compete with the goods with which the concession is concerned?

2. Does the expression "automatically void" in Article 85 (2) of the Treaty of Rome mean that the whole of an agreement containing a clause prohibited by Article 85 (1) is void, or is it possible for the nullity to be limited to the prohibited clause alone?'

The Court is requested to interpret Article 85 (1) with reference to 'agreements which have not been notified' and which, subject to certain conditions, have granted an 'exclusive right of sale'.

Failure to notify

In order to be prohibited as being incompatible with the Common Market under Article 85 (1) of the Treaty, an agreement between undertakings must fulfil certain conditions depending less on the legal nature of the agreement than on its effects on 'trade between Member States' and its effects on 'competition'.

Thus as Article 85 (1) is based on an assessment of the effects of an agreement from two angles of economic evaluation, it cannot be interpreted as introducing any kind of advance judgment with regard to a category of agreements determined by their legal nature. Therefore an agreement whereby a producer entrusts the sale of his products in a given area to a sole distributor cannot automatically fall under the prohibition in Article 85 (1). But such an agreement may contain the elements set out in that provision, by reason of a particular factual situation or of the severity of the clauses protecting the exclusive dealership.

Since Regulations Nos 17/62 and 153/62 cannot have widened in any way the prohibitions imposed by Article 85 (1), the fact that an agreement is not notified to the Commission, as provided for in those regulations, cannot make an agree­ ment automatically void. It can only have an effect as regards exemption under Article 85 (3) if it is later established that this agreement is one which falls within the prohibition laid down in Article 85 (1). The prohibition of such an agreement depends on one question alone, namely whether, taking into account the circum­ stances of the case, the agreement, objectively considered, contains the elements constituting the said prohibition as set out in Article 85 (1).

This provision, clarified by the introductory words of Article 85 which refers to agreements in so far as they are 'incompatible with the Common Market', is directed to determining the field of application of the prohibition by laying down the condition that it may be assumed that there is a possibility that the realization of a single market between Member States might be impeded. It is in fact to the extent that the agreement may affect trade between Member States that the inter­ ference with competition caused by that agreement is caught by the prohibitions in Community law found in Article 85, whilst in the converse case it escapes those prohibitions. For this requirement to be fulfilled it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States. Therefore, in order to determine whether an agreement which contains a clause 'granting an exclusive right of sale' comes within the field of application of Article 85, it is necessary to consider in particular whether it is capable of bringing about a partitioning of the market in certain products between Member States and thus rendering more difficult the interpenetration of trade which the Treaty is intended to create.

The effects of the agreement on competition

Finally, for the agreement at issue to be caught by the prohibition contained in Article 85 (1) it must have as its 'object or effect the prevention, restriction or distortion of competition within the Common Market'.

The competition in question must be understood within the actual context in which it would occur in the absence of the agreement in dispute. In particular it may be doubted whether there is an interference with competition if the said agreement seems really necessary for the penetration of a new area by an under­ taking. Therefore, in order to decide whether an agreement containing a clause 'granting an exclusive right of sale' is to be considered as prohibited by reason of its object or of its effect, it is appropriate to take into account in particular the nature and quantity, limited or otherwise, of the products covered by the agree­ ment, the position and importance of the grantor and the concessionnaire on the market for the products concerned, the isolated nature of the disputed agreement or, alternatively, its position in a series of agreements, the severity of the clauses intended to protect the exclusive dealership or, alternatively, the opportunities allowed for other commercial competitors in the same products by way of parallel re-exportation and importation.

The second question relating to the interpretation of Article 85 (2)

Article 85 (2) provides that 'Any agreements or decisions prohibited pursuant to this Article shall be automatically void'.

This provision, which is intended to ensure compliance with the Treaty, can only be interpreted with reference to its purpose in Community law, and it must be limited to this context. The automatic nullity in question only applies to those parts of the agreement affected by the prohibition, or to the agreement as a whole if it appears that those parts are not severable from the agreement itself. Con­ sequently any other contractual provisions which are not affected by the prohibi­ tion, and which therefore do not involve the application of the Treaty, fall outside Community law.

THE COURT

in answer to the questions referred to it by the Cour d'Appel, Paris, by judgment of that court dated 7 July 1965, hereby rules:

In reply to the first question

Agreements containing a clause 'granting an exclusive right of sale' do not of their very nature necessarily contain the elements incompatible with the Common Market as set out in Article 85 (1) of the Treaty

Nevertheless an agreement of this type may, when considered on its own, contain these elements by reason of a particular factual situation or of particular clauses when the following conditions are met:

1. The agreement containing a clause 'granting an exclusive right of sale' must have been concluded between undertakings whatever their respective positions in the economic process may be.

OPINION OF MR ROEMER — CASE 56/65

granting the exclusive dealership, the nature and quantity of the products covered by the agreement, the position of the grantor and of the concessionnaire on the market for the products in question and the number of parties to the agreement or, where applicable, to other agreements forming part of the same system.

In reply to the second question

The absolute nullity imposed by Article 85 (2) applies to all provisions of the contract which are incompatible with Article 85 (1).

The consequences of this nullity for all other aspects of the agreement are not the concern of Community law.

It is for the Cour d'Appel, Paris, to make an order as to the costs of the present proceedings.

Mr President, points were added (on 13 December 1961). Members of the Court, Under the terms of this agreement Tech­ nique Minière undertook, for a period of This is a case pending before the Cour two years with effect from 1 January 1962, d'Appel, Paris, which has raised questions to buy a certain number (37) of graders of a relating to EEC cartel law which have been given type at a fixed price, to further the referred to you for a preliminary ruling. The interests of the seller generally, to organize facts may be summarized as follows: a repairs service, to maintain an adequate On 7 April 1961 an agreement described as stock of spare parts, to meet the whole of an 'export agreement' was made between demand in the contract territory and, final­ Maschinenbau Ulm, a limited company in­ ly, not to sell competitors' products without corporated under German law, which is a the consent of the vendor. In return it was producer of equipment used by public granted the exclusive right to sell the ma­ utilities, and the French company known as chines in question in France and its over­ La Technique Minière. The purpose of the seas possessions. The agreement was tacitly agreement was the sale of this kind of renewable upon the expiry of the term laid equipment in France. Subsequently the down, subject to the right of either party to agreement was amended and additional terminate it on six months' notice. After

1 — Translated from the French version.