C-5/69

2. Policy of the EEC — Rules on competition between undertakings — Agreements which may affect trade between Member States — Concept (EEC Treaty, Article 85)

3. Policy of the EEC — Rules on competition between undertaknigs — Exclusive dealing arrangements with absolute territorial protection — Prohibition — Pos­ sibility of avoiding such prohibition by reason of the weak position of the parties concerned on the market in the products in question (EEC Treaty, Article 85)

Établissements J. Vervaecke (Société de Personnes à Responsabilité Limitée), Brussels,

on the interpretation of Article 85 (1) of the said Treaty,

THE COURT

composed of: R. Lecourt, President, A. Trabucchi and J. Mertens de Wilmars, Presidents of Chambers, A. M. Donner, W. Strauß (Rapporteur), R. Monaco and P. Pescatore, Judges,

Advocate-General: J. Gand Registrar: A. Van Houtte

gives the following

(c) The abovementioned num­ (a) From I February 1965 Ver­ ber of appliances shall be vaecke shall order from Erd & attained by the end of an Co. 50 washing-machines every initial period fixed at six two months until a total of months from the date of 600 appliances is reached. signature of the contract. (b) The price is faxed at DM 578 per appliance. Vervaecke under­ (8) (a)Erd & Co. undertake to takes to deliver free of charge 'protect' Vervaecke in the to Erd & Co., on the delivery exclusive sales sector of each consignment of 50 guaranteed to it. appliances, a bill of exchange accepted for the amount of the (b) If Vervaecke is unable to purchase price and payable in dispose of the appliances four months. from Erd & Co.'s range the latter shall be entitled (c) When Vervaecke fulfils the undertaking to deliver a total to supply another importer. of 600 washing-machines in (c) Erd & Co. shall be obliged all, it shall be released from to offer any new appliances its obligations under the con­ which they produce to tract of 15 September 1963. Vervaecke and only after the latter has refused to dis­ Vervaecke disputes the existence of such an agreement. In the course tribute them may they be of inquiries made by the court offered to another importer. before whom the proceedings took (9) Vervaecke undertakes not to place, the following declarations sell competing appliances with were obtained concerning the scope features similar to the appli­ which the parties to the contract ances of Erd & Co.' attributed to the term 'territorial Several times during 1964 this protection' on which they had contract was supplemented by addi­ agreed: tional clauses in writing dealing (a) Mrs Greta Vervaecke makes inter alia with the following points: inter alia 'the following state­ — the initial period provided for ment: Mr Volk apointed Ver­ in Article 4(c) was extended vaecke as his sole representa­ until 31 April 1964 with the tive in Belgium and in Luxem­ option of a further extension to bourg and undertook that no- 31 December 1964; one else would be allowed to — it was agreed that taking into sell there the washing-machines account the expansion of sales manufactured by Erd & Co. in 1964, a new minimum num­ Vervaecke attached a great deal ber of appliances to be deliver­ of importance to this factor ed monthly to Vervaecke and without it would not have (would) be finally fixed in undertaken to accept delivery January 1965 on the basis of of a minimum number of accounting factors (sales appliances. Mr Volk gave an figures)'. assurance that he could pre­ Mr Volk states that on 19 Novem­ vent third parties from import­ ber 1964 the two undertakings ing his appliances into Belgium (verbally) concluded another agree­ after they had left Germany or ment the tenor of which is as another country. Moreover Mr follows: Volk required Vervaecke to

restrict its sales to Belgium drying machines was: and Luxembourg. in 1963, 2361 appliances, (b) Mr Oskar Volk stated in parti­ in 1964, 2066 appliances, cular: in 1965, 1652 appliances, — that Mr and Mrs Vervaecke in 1966, 821 appliances. made conclusion of the con­ tract conditional on Ver­ vaecke having the sole right II — Tenor and reasoning of of sale in those two the order making the reference countries; — that he himself promised On 5 December 1968 the Oberlandes­ Mr and Mrs Vervaecke that gericht, Munich, decided to ask the he would prevent all Court, under Article 177 of the EEC deliveries to other Belgian clients and deliveries by Treaty, to give a ruling on the following other German firms which question: might come to the attention 'In determining whether the disputed contract of 15 December 1963, as of Erd & Co.; — 'that nevertheless, far rrom amended on 1 January 1964 and 11 requiring that Vervaecke March 1964, falls within the prohibi­ should supply only Belgium tion set out in Article 85(1) of the and Luxembourg, he also EEC Treaty, must regard be had to allowed it to supply coun­ the proportion of the market which tries in which Erd & Co. the plaintiff in fact acquired or ulti­ were not then represented. mately endeavoured to acquire in the B — Mr Volk considered that Vervaecke Member States of the European Economic Community, in particular in had failed to respect its contractual Belgium and in Luxembourg, the sales obligations and brought it before sector for which the defendant enjoys the Landgericht, Kempten. In its "absolute protection"?' judgment of 29 June 1967 the This court states as the reasons for its Landgericht in essentials found for order that, in order to settle the dispute for Mr Volk. Vervaecke appealed before it, it must decide whether the con­ against this judgment to the tract concluded between the parties to Oberlandesgericht (Higher Regional the main action is automatically void. Court), Munich. Vervaecke submitted before those two courts that according to Article III — Procedure 85 of the EEC Treaty the dis­ puted provisions were auto­ The order referring the matter was re­ matically void because its under­ ceived at the Court Registry on 28 taking was guaranteed 'absolute January 1969. territorial protection'. Mr Volk on Vervaecke and the Commission of the the other hand considered that European Communities submitted state­ those provisions were valid be­ ments of case pursuant to Article 20 of cause the proportion of the market the Protocol on the Statute of the Court which he had acquired in Belgium of Justice of the European Economic and in Luxembourg and that which Community and the Commission put he had in fact endeavoured forward oral observations at the hearing to acquire was extremely small. on 7 May 1969. In that connexion, he stated that The Advocate-General delivered his his production of washing and opinion at the hearing on 3 June 1969.

Vervaecke was represented by Mr (a) The following facts should be noted: Ledoux of the Brussels Bar, and the — The disputed contract and its Commission by its Legal Adviser, Mr amendments were not notified to Zimmermann. the Commission. — The total production or washing- machines in the Common Market IV—Summary of the ob­ was 2 997 000 units in 1963 and servations submitted 4 179 000 units in 1966. The total by the parties con­ production in the Federal Repub­ cerned pursuant to lic of Germany amounted to Article 20 of the 1 036 000 units in 1963 and to Statute of the Court 1 482 000 units in 1966. For 1963 of Justice of the EEC Erd & Co.'s production (2 361 units) thus represents 0.08% of With particular reference to Articles 1, the total production of the Com­ 4 and 8 of the agreement in dispute, mon Market and 0.2% of the pro­ Vervaecke declares that it constitutes duction in the Federal Republic. what is known as an exclusive distribu­ In Belgium, the production of tion contract. washing-machines was 121000 Vervaecke sets out the following argu­ units in 1963 and 63 000 units ment: in 1966. In 1966, the total num­ — Article 8(a) of the contract is in­ ber of appliances distributed in compatible with Article 85 of the Belgium and in Luxembourg was EEC Treaty together with the regu­ 163 000; the annual number of lations adopted by the Commission in appliances (960) which the dis­ implementation thereof. This clause puted contract bound Vervaecke provides for a 'complete and water­ to distribute thus represents 0.6% tight exclusive dealing arrangement', of the total sales in this sector. because it binds Erd & Co., not only (b) as it has been formulated, the ques­ to refrain from supplying other pur­ tion put by the Oberlandesgericht, chasers in Belgium and in Luxem­ Munich, amounts to asking the Court bourg, but in addition to take meas­ to apply the Treaty to a particular ures to prevent parallel deliveries in case, which falls outside its jurisdic­ those countries. tion under Article 177. Nevertheless — furthermore tne contract binds Ver­ it is simple to deduce from this the vaecke to accept a minimum of 80 real question of interpretation, which appliances per month, which it would is whether regard must be had to the have been initially unable to do if proportion of the market controlled another undertaking had been dis­ by the manufacturer who has con­ tributing the same appliances in the cluded with a distributor an exclu­ protected sector. Consequently it sive dealing contract containing 'ab­ would not have undertaken to order solute territorial protection', in de­ a minimum quantity without the termining whether Article 85(1) is guarantee of the territorial protection applicable. in question. It is thus not only (c) Neither tne decision of the Com­ Article 8(a) of the disputed contract mission of 23 September 1964 but the entire contract which is auto­ (Official Journal of 20 October matically void. 1964, p. 2545 et seq.), nor the judg­ The observations or the Commission of ment of 13 July 1966 whereby the the European Communities may be sum­ Court confirmed that decision in its marized as follows: essentials (Joined Cases 56 and

58/64, Grundig-Consten v Com forth above, however, show that the mission, [1966] E.C_R_ 299) enables question before the Court does not it to be concluded that all contracts turn on this point; the disputed con displaying the above characteristics tract must be considered independ fall within the prohibition set out in ently of the abovementioned regula Article 85. tions. (d) The commission refers to certain (e) The contract in question, continues regulations which either provide that the Commission, constitutes an it is obligatory to notify agreements 'agreement between undertakings' or grant exemption or exempt from within the meaning of Article 85(1). the prohibition certain categories of It explains why, in its view, agree agreements: ments like the present one have as — Regulation No 17/62 of the their object the prevention, restric Council (Official Journal of 21 tion or distortion of competition. February 1962, p. 204 et seq.); Nevertheless, it adds that, according — Regulation No 153/62 or the to the case-law of the Court and the Commission (Official Journal of practice followed by the Commission 24 December 1962, p. 2918 et itself in adopting its decisions, in seq.); order for the prohibition set out in — Regulation No 19/65/EEC of the Article 85 to come into play it is Council (Official Journal of 6 insufficient that the agreement has as March 1965, p. 533 et seq.); its objective the purely theoretical — Regulation No 67/67/EEC of the restriction of competition.

the Court of 13 July 1966: Italy v competition 'to an appreciable ex Council and Commission, Case tent' ('spürbar') (judgment in Case 32/65, [1966] E.C_R_ 389, paragraph 56/65, loc. cit., p. 249). 2 of the summary). Nor can the fact It is true that the Court has stated that an agreement is not notified in its judgment in Joined Cases 56 render it automatically void (judg

The Com the disputed contract satisfy the mission, however, states that this conditions for exemption for cate declaration must be understood in gories of agreements listed in Regula the context of the particular facts tion No 67/67; apart from the lack of which formed the basis of that judg notification the factor which, under ment and there may not be attributed Article 3(b) of that regulation ex to it a general scope amounting to cludes its application, is that Erd & an inference that when it is estab Co. undertook to 'protect' Vervaecke lished that an agreement has as its in the sales sector which was guaran object the disturbance of competition

VÖLK v VERVAECKE

regard to the seriousness of its on the market for the products in effects. Moreover, it would be in­ question'. Consideration of the pre­ compatible with the rationale of sent case in terms of those criteria Article 85 to have recourse to differ­ leads to the following findings: ent criteria depending on whether — The brand or washing-machines the object or the effect of the agree­ manufactured by Erd & Co. re­ ment under consideration was en­ mains almost unknown and is in visaged. competition with similar products (f) In deciding whether an agreement of many other manufacturers who has an appreciable effect on the have penetrated the market much market, in the case of exclusive more successfully. dealing agreements the situation — Erd & Co's production and the arising from the agreement for third proportion of the market which party undertakings and consumers it occupies are very small whether must be compared with that which the entire Common Market, the would obtain if that agreement did Federal Republic or the sales not exist (judgment in Case 56/65, sector of Belgium and Luxem­ loc. cit., p. 250). It is true that in bourg are considered. this connexion account must be — in these circumstances it must be

taken of the proportion of the market admitted that even when an agree­ which a manufacturer controls or ment guaranteeing strict 'terri­ endeavours to acquire within the torial protection' is concluded, the Common Market or in a 'protected' manufacturer does not appreci­ sales sector. The Commission de­ ably restrict competition. clares that it is in accordance with (g) The Commission declares that the this concept that the judgment in the same reasons preclude recogniz­ Case 56/65 (loc. cit., p. 252) requires ing that the agreement in dispute that there be taken into considera­ 'may affect trade between Member tion 'the nature and quantity of the States' (Article 85(1)). In order for products covered by the agreement' such a deleterious effect to be found together with 'the position of the it is necessary that it should be grantor and of the concessionnaire fairly widespread.

5/7 If an agreement is to be capable of affecting trade between Member States 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 in such a way that it might hinder the attainment of the objectives of a single market between States. Moreover the prohibition in Article 85(1) is applicable only if the agreement in question also has as its object or effect the prevention, restriction or distortion of competition within the Common Market. Those conditions must be under­ stood by reference to the actual circumstances of the agreement. Consequent­ ly an agreement falls outside the prohibition in Article 85 when it has only an insignificant effect on the markets, taking into account the weak position which the persons concerned have on the market of the product in question. Thus an exclusive dealing agreement, even with absolute territorial protec­ tion, may, having regard to the weak position of the persons concerned on the market in the products in question in the area covered by the absolute pro­ tection, escape the prohibition laid down in Article 85(1).

8/9 The costs incurred by the Commission of the European Communities which submitted its observations to the Court are not recoverable. As these pro­ ceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the Oberlandesgericht, Munich, the decision on costs is a matter for that court;

An exclusive dealing agreement, even with absolute territorial pro­ tection, may, having regard to the weak position of the persons con­ cerned on the market in the products in question, escape the prohibi­ tion laid down in Article 85(I).

Lecourt Trabucchi Mertens de Wilmars

Donner Strauß Monaco Pescatore

Delivered in open court in Luxembourg on 9 July 1969.

A. Van Houtte R. Lecourt

Registrar President