C-51/69

defendant,

Application for the annulment of the Commission Decision of 24 July 1969, published in the Journal Official L 195 of 7 August 1969, p. 11 et seq., relating to proceedings under Article 85 of the EEC Treaty (IV/26.267—Dyestuffs),

THE COURT

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

Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

place between 7 and 20 January 1964 in — Farbwerke Hoechst AG, Frankfurt am Italy, the Netherlands, Belgium and Main (Federal Republic of Germany), Luxembourg and on 1 January 1965 it — Badische Anilin- und Soda-Fabrik AG was extended to Germany. On that same day almost all producers introduced, in (BASF), Ludwigshafen (Federal Re­ public of Germany Germany and the other countries already affected by the increase of 1964, a uniform — Cassella Farbwerke Mainkur AG, increase of 10% on dyes and pigments not Frankfurt am Main (Federal Republic of Germany), covered by the first increase. Finally on 16 October 1967 an increase of 8% on all — Société Française des Matières Colo­

BAYER v COMMISSION

For the same reasons the decision ordered Community procedure for fixing and levy­ that fines of 50 000 u.a. be paid by: ing fines is governed by only a few, very general provisions, and by the general — Badische Anilin- und Soda-Fabrik AG, principles of law. Therefore the protection — Cassella Farbwerke Mainkur AG, of the rights of the parties concerned — Farbwerke Hoechst AG, renders it indispensable that the Com­ — Société Française des Matières Colo­ mission should scrupulously respect all rantes SA, the rules as to procedure and all the — Ciba SA, general principles of law applicable to — J. R. Geigy SA, the subject. — Sandoz SA, The defendant objects that the procedural — Imperial Chemical Industries Ltd. rules found in Regulations Nos 17/62 and 99/63 must not necessarily be considered and that a fine of 40 000 u.a. be paid by as rules relating to the application of the Azienda Colori Nazionali Affini S.p.A. Treaty within the meaning of Article 173; Farbenfabriken Bayer AG lodged an for it such were the case infringement of appeal against this decision at the Court procedural requirements laid down in the Registry on 3 October 1969. regulations would always constitute, un­ like procedural requirements set out in the Treaty, grounds for instituting proceedings within the meaning of that article. II — Conclusions of the parties In its reply, the applicant observes that the

JUDGMENT OF 14.7.1972 — CASE 51/69

and 9. The fact that that decision referred in the notice of objections which, it claims, 'especially' to Article 3 of Regulation No are not supported by elements of fact, so 17 was intended to forestall the future that the applicant was not given the oppor application of the concurrent jurisdiction tunity of submitting its observations on of the national authorities to apply Article the factual data allegedly in the possession 85(1). of the Commission in respect of those The applicant argues that the defendant conclusions. The applicant asserts that this cannot set up against it the text of the infringement of the rights of the defence decision relating to the commencement of was all the more unjustified in that the the procedure since it did not receive a applicant specifically informed the Com true copy thereof. mission on several occasions that it required The defendant observes that in the to see the text of the letters sent by the relationship between undertakings and the various producers which allegedly con Commission it is the notice of objections tained coincidences, and asked permission and not the decision to commence the to consult the file in appropriate cases. procedure which determines the scope of The Commission refused. that procedure, as appears from Article The defendant replies that according to the 19(1) of Regulation No 17 and from judgment in the Grundig-Consten case, it Articles 2 and 4 of Regulation No 99. is not necessary for the entire content of In part 5 of the notice in question it is the file to be made available.

In its reply the applicant observes that mission must, in application of Article 85 consulting the file was only one way of of the Treaty, inform those concerned, informing it of the charges laid against it. who are party to the procedure, of all the Instead of generalizing, the defendant

ought, during the administrative procedure, communicated to those concerned, it to have made available the documents from should have sent them an adequate supple which it draws conclusions concerning ment to the notice of objections in respect alleged similarities in wording and in dates, of that further investigation. as it has done during the course of the The defendant replies that the sole purpose judicial proceedings. This failure to make of the inquiries in question was to check information available prevented the appli the accuracy of certain statements made cant from defending itself during the by those concerned either orally in the administrative phase as regards the objec presence of officials of the Commission or tions based on those documents. in written statements in reply to the notice The justification which the defendant of objections.

In any Commission during the administrative event, the contested decision was not based procedure with the obligations upon it in on any objection other than those set out its capacity as defendant before the Court in the notice of 11 December 1967. of Justice. The applicant observes that those inquiries led the Commission to add to and make considerable alterations to the statement 4. Complaints concerning the communica tion of the notice of objections before the of the facts which had already been sent to inquiries were concluded it. It stresses on this point that the notice of objections did not contain any evidence The applicant, after pointing out that per of the existence of a concerted practice as sons duly authorized by the Commission regards the increase of 1967, but simply obtained information from the applicant asserted that those concerned had agreed itself or from its sales companies on the on that increase. But in the contested subject of the 1967 increase on dates falling decision, relying on such matters as the between 19 December 1967 and 15 April Geigy announcement and the findings of 1969, argues that the Commission acted the Bundeskartellamt, which only came in a way incompatible with the very nature to the Commission's knowledge afterwards, of the notice of objections, which must the defendant referred to a concerted constitute the final act of the inquiry, in practice. that the Commission arbitrarily drew up The defendant is opposed to this interpreta its notice of objections at some point tion of the notice of objections, in which during its investigation and not at the end it never spoke of agreements, but always of of it, as it should have done according to concerted practices even as regards the Regulation No. 17 and Regulation No 99. increase of 1967.

JUDGMENT OF 14.7.1972 — CASE 51/69

The was to repeat the protests which it had text of the letter of 27 June to which the already made previously in writing. applicant refers, and which was sent by Furthermore, since there were doubts in the defendant to the applicant with the text the applicant's mind as regards the factors of the draft minutes of the hearing, was in on which in December 1968 the defendant fact only a draft which, because of a mis intended to base its decision, the two take made by officials of the Commission, weeks' notice on which it was invited to was sent to the applicant's counsel instead appear was too short for it to prepare of the letter which was in fact sent to the itself sufficiently, a point which it made applicant. during the administrative procedure. as regards me applicant s complaints to No answer to these complaints is given in the effect that the statements of its counsel the statement of defence. They are further were recorded inaccurately, the defendant developed by the applicant in its reply. produces as an annex to its statement of The defendant states, in its rejoinder, that defence the complete text of the two state the complaint as to insufficient notice is a ments made by the applicant's counsel new submission which cannot be considered during the hearing of 10 December 1968. to be admissible under Article 42(2) of As regards the date when the minutes were the Rules of Procedure. sent to the members of the Advisory Furthermore, notice of not less than 3 Committee, the defendant states that this weeks, such as was given to the applicant, occurred as early as 19 June 1967. cannot be considered insufficient. In its reply the applicant states that the defendant wrongly attributes only sec

hearing. It is argued that therefore no the defendant, the applicant is of the lawful hearing ever took place, which opinion that the defendant should bear the means that there is no point in looking at consequences of this. Besides, the original the contents of the defendant's draft of the accompanying letter addressed to minutes, in respect of which in fact the the applicant did not set a different time- applicant did not fail to use its right to limit from that given in the text described ask for alterations, especially with a view as a 'copy' addressed to the applicant's to deleting inaccuracies in the record of counsel. The original simply asked for the what its counsel said. minutes to be agreed to 'as soon as

possible'. In those circumstances, since the — the fact that ACNA is said to have applicant did not approve the minutes and prevented this from taking place; since there was no reason why it should have approved them before the date given — the meetings for information between to it, the hearing did not fulfil its purpose the producers, especially in Basel and in as regards the applicant. London; Quite apart from the above, the procedural defect consisting in the fact that the draft — the minutes of the meeting at Basel on minutes were sent to the Advisory Com­ 18 August 1967; mittee on 19 June 1969 before they had been submitted to those concerned is in — the examination of the prices of dye- contradiction, it is argued, with the rule stuffs and the announcement of the contained in Article 9 of Regulation No increase made by Geigy; 99. The defendant replies that all the parties — the decision of the Bundeskartellamt present at the hearing were in agreement and the findings made by it. that the minutes would only be drawn up and sent to them for their approval later, The defendant replies, as regards the by reason of the length and complexity matters that the contested decision takes of the statements made in the various into consideration in favour of the ACNA languages, and because of the time neces­ company, that these cannot in any way sary for drafting. As to the mistake of com­ affect the position of the other under­ munication, the defendant observes that it takings, since the decision taken against was only the original letter asking for the them was not based in any way on the applicant's agreement as soon as possible considerations concerning the conduct of which could be valid, not an unsigned ACNA. The meeting in Basel during August 1967 was mentioned at page 9 of The fact that no statement made by those the notice of objections. The meeting in concerned was used against them also London was mentioned only in order to takes all weight away from the fact that the introduce the facts set out in the third minutes were sent to the Advisory Com­ paragraph. Furthermore, the decision mittee before being submitted to those con­ taken does not find against those concerned cerned for their approval. on the basis of their contacts for in­ formation Thestaem ntsrelatingto hed cison f

the very reason that that undertaking did The limitation periods for commencing not take part in that increase. Yet this proceedings against administrative in­ charge was not brought to the attention fringements are not longer than three of the applicant in the notice of objections. years in any of the Member States in any Even in the case of facts which are not case. Since infringements of Article 85 of denied, the applicant ought to be able to the EEC Treaty are not criminal in nature, refute the conclusions which the Com­ analogous criteria should therefore be mission believes it can draw from them. applied. In order to stop time running, the Therefore these facts should be brought to competent authorities must at least take a its attention in any event. measure of a nature such as to produce The applicant states that the Kammer­ legal effects. In the present case no such gericht Berlin did not overrule the decision measure occurred until the decision taken of the Bundeskartellamt for reasons of on 21 May 1967 to commence the proce­ substance relating to German law, but for dure. Proceedings against the increases of reasons of fact. 1964 and 1965 should therefore be con­ The defendant objects that the contested sidered to be inadmissible as being out of decision expressly states that the price time. increase of October 1967 did not cover The defendant objects that the three uni­ Italy. In the notice of objections, the form increases of January 1964, January meeting in Basel in August 1967 was set 1965 and of October 1967 were the result out as one of the facts from which the of a continuous concerted practice which concerted nature of the 1967 increase ap­ extended over the whole period from pears. The question whether a certain January 1964 to October 1967. Therefore conduct found to exist as a fact constitutes the problem of limitation does not arise a cartel or a concerted practice is not an in the present case. element of fact but a problem of legal Secondly, the defendant observes that in assessment. The sole purpose of the ref­ the absence of provisions governing time- erence to the judgment of the Kammer­ limits in the law in force, the Commission gericht Berlin was to confirm the finding retains complete authority as part of its that the undertakings concerned met in duties and in exercise of its discretionary Basel on 17 August 1967. Furthermore, the power to determine more precisely, subject defendant stands by its assertion that the to review by the Court of Justice, the Kammergericht overruled the decision of limitation periods which appear appro­ the Bundeskartellamt of 28 November 1967 priate as regards proceedings against for reasons based on German substantive infringements. To apply national law to a law. Article 1 of the German Law in fact pertaining to Community law in cases question on which the Bundeskartellamt where Community legislation is silent based its decision does not cover the con­ would render it impossible to apply Com­ cept of a concerted practice, and the munity law on a uniform basis. Kammergericht came to the conclusion The laws of the Member Mates have in

reason of a new concerted practice, this took place in this case were of a purely would not mean that the limitation period preparatory nature with a view to a had expired because it has been suspended possible formal measure on the part of the on several occasions since 1964 by written Commission. The principle that the rights requests for information made under of the defence must be respected requires Article 11 of Regulation No 17 and by that only formal measures may suspend investigations carried out by officials of the the period of limitation. Commission under Article 14 of Regula

cerned. In its view it is unthinkable that an market. undertaking should tie its pricing policy so The defendant asserts that the application tightly to possible individual decisions of the time-limit laid down by German taken by some of its competitors. The right law is contrary to the requirement of a claimed by the Commission to set limita uniform application of Community law. tion periods in each particular case con Furthermore, in the absence of common tradicts the requirement of legal certainty principles governing the length of the which is the whole purpose of limitations. limitation period, it is unacceptable to In the absence of a Community limitation apply the period laid down by the law of period, the applicability of the two-year one of the Member States to the whole period laid down by German law is con

The period laid down to the tenor of Regulation No 17. The by German legislation is also valid if it is Director-General for Competition is em wished to apply a uniform period to the powered to take the measures provided for whole of the EEC, the reason being that by Article 14(1) and (2) of Regulation No Germany is the only Member State pos 17 by virtue of a delegation of powers by sessing legislation on competition compara the Commission. It was in the exercise of ble to that of the Community system. these powers that the officials who under As for the suspension of the period of took the abovementioned investigations limitation, the applicant observes that the were given that task. So far as the sus investigations carried out by officials of pension of the limitation period is con the Directorate-General for Competition cerned their activity does not differ in any cannot be looked upon as formal measures way from duties which they carry out on

JUDGMENT OF 14.7.1972 — CASE 51/69

and other technical characteristics. This ever establishing that such a difference great diversity in the properties of dyestuffs would have been possible in the absence of has the effect of preventing prices being the alleged concertation and that it would known on the market, which means that in fact have intensified trade between the user is permanently in a position to Member States. The fact that quantities force the producer to grant individual price delivered at the frontiers increased, as concessions. In this situation, each pro appears from statistics of the OECD for ducer can only learn about price reductions the period 1963 to 1968, constitutes, ac granted by his competitors for each dye cording to the applicant, clear evidence stuff and for each customer to who he is that the increases did not affect the pattern called upon to make a competitive offer of inter-State trade. Furthermore, it is (the applicant states that it has never argued that the Commission does not claimed to know the prices charged by have the power to regulate the level of its competitors, as is wrongly alleged in prices in the various Member States, but the contested decision).

2. Complaints concerning the understanding price at which he sells each of his dyestuffs. of the special characteristics of the The large number of dyestuffs makes it market in the products in question impossible to make separate price adjust ments for each dye in the case of a general The applicant complains that the Com increase in prices. Individual action at the mission did not take into account the level of each customer involving an in special characteristics of the market in the crease in price would obviously be un products in question, and that this pre acceptable for the customer.

BAYER v COMMISSION

view, it is more desirable to take individual that his competitors would act in a similar productivity into account. When a pro­ fashion. ducer has announced an increase in his The defendant maintains that the price prices on the market, his competitors can­ increases in question cannot be explained not for long increase their sales at the by the oligopolistic structure of the market. expense of that producer by refraining In referring to what is expected to happen from introducing the same increase be­ in such a market in theory, the applicant cause the latter is not in a position to has failed to consider the postulates of maintain those new prices if he is not price theory employed in the analysis of followed by his competitors. Such is the parallel conduct. These factors are not position notwithstanding the opinion ex­ applicable in the case of the dyestuffs pressed in the notice of objections accord­ industry. ing to which a producer can increase his The defendant observes that the modern

In production competing producers have pre this latter situation an undertaking only occupations identical to his own after a increases its prices when it expects that long period of price erosion. the others will also do so. It is mainly Individual conduct remains possible in with reference to their marginal costs, relation to a lowering of prices both as taking into account their demand curve, regards the various dyestuffs and as regards that undertakings decide whether and to each customer, by reason of the fact that what extent they will follow a price in the market is not transparent. On the crease. Therefore, even when the degree other hand, in the case of price increases of interdependence is very high, the un producers cannot do otherwise than let certainty in which an undertaking in their tactics be known and they are there creasing its prices is placed as to whether fore forced to adopt a uniform course of the others will follow does not automatically conduct, either because the other producers disappear. In order for there to be con decide to follow the one who takes the scious parallelism it is necessary for a initiative in introducing an increase, or certain number of factors to be present. because they prefer not to follow him and These include: a limited number of sellers, thus force him to withdraw that measure. high fixed costs, high mobility of demand, The defendant objects that although homogeneity and transparency of prices, parallel conduct alone does not amount ability to adapt capacity at short notice, to concertation, the parties concerned little elasticity of demand compared with need not, on the other hand, necessarily supply from all competing undertakings, have drawn up a common plan with a technical obstacles to announcements of view to adopting a given course of behav alterations to prices and customer re

JUDGMENT OF 14.7.1972 — CASE 51/69

A notable charged usually differ from the prices feature of the market for the products in publicly quoted, conduct can no longer question is a low level of transparency automatically he absolutely parallel. mainly owing to the large number of The High Authority of the ECSC also products involved, the differences between adopted the principle that homogeneity of them and the variety of users (textile, products is not of itself a bar to supposing leather, paper, food, rubber and synthetic that a uniform increase in prices made by materials industries and manufacturers of several undertakings constitutes a con paints, ink, cosmetics and so on).

The result of this are applied to the dyestuffs industry it will practice is that the prices calculated for be seen that no such parallelism is possible. each product by each undertaking are not Competition between undertakings on the known, in most cases, to the other under dyestuffs market cannot in any way be takings, nor even amongst the purchasers considered as covering similar products; themselves, as ICI has itself agreed. There this is clear from Report No 100 of the fore changes in prices introduced by one National Board for Prices and Incomes on manufacturer are only imperfectly known the dyestuffs industry, dated 21 January on the market or only become known long 1969, annexed to the statement of defence, after the event. from the opinion of Professors Bombach As for the rate of expansion of the market, and Hill, annexed to the statement of which constitutes another test for deciding defence, from documents produced during whether conscious parallelism can exist, the preparatory inquiries by the under it appears that on the whole the dyestuffs takings ICI, Geigy and Sandoz, and from industry is expanding at a fast rate, ap various statistical data produced by the proximately corresponding to that of ex Commission (Tables annexed to the state pansion in the chemicals industry as a ment of defence). whole. The market for the products in question As for mobility of demand, according to covers about six thousand different pro Professors Bombach and Hill price com

BAYER v COMMISSION

that there are important differences as In these circumstances it is inconceivable regards costs. that one undertaking would decide uni­ This necessarily results in differences in laterally on a large general increase in profits. The widest profit margins are prices without first consulting its com­ obtained with speciality products, so long petitors. Supposing that there were uni­ as they remain so. Profits vary in relation lateral, independent increases on the part to the level of prices for the different of certain undertakings, each of the other products on the market. The volume of undertakings would have been able, by sales has an influence on profits: thus for setting different prices and by taking ac­ example, ACNA can only begin to make ,a count of the position occupied on the profit on its production of special dyestuffs market by the various products being if the quantity produced reaches a volume manufactured by it, to attempt to obtain higher than that of present demand in the best results. In order to prevent com­ Italy. petitors from immediately withdrawing Taking into account these characteristics their increase, each undertaking would at of the market in dyestuffs and of the criteria the most have had to tell the purchasers of

JUDGMENT OF 14.7.1972 — CASE 51/69

The The applicant in its reply, asserts that the events in Italy in 1965 confirm this inter defendant's argument based on the idea dependence of reaction of producers of that the price increases in question were dyestuffs, and they also show that any not compulsorily determined by market undertaking which takes the lead exposes forces is not relevant. The decisive question itself to the risk of not being followed by in this case is whether the uniform con its competitors. This is the reason why duct in question resulted from prior con for many years each producer drew back from the decision which had to taken. certation or whether it was solely the result of an independent decision taken by On an oligopolistic market each producer the applicant. In order that uniform, in has to determine his attitude with reference dependent and deliberate conduct of this to the presumed individual decisions of his sort be possible without prior concertation competitors, which is unlike the situation it is not necessary, in the applicant's view, of automatic reaction existing on a market that it be the result of compulsion.

Individual in As to similarity of products, the applicant creases in relation to certain customers says that the defendant has not properly could only usefully be put into effect in understood the result of the economic the case of products of a particular techno analysis. It is argued that the defendant logical interest. In the applicant's case, mistakenly quotes various authors, such this condition was met only as regards as Shubik, Clark and Machlup, in asserting some ten products representing only 6 to that interdependence of reaction can only 7 % of its turnover in the dyestuffs sector. exist in respect of similar products.

ducts. According to Kantzenbach, where ent rates of increase on the various the oligopoly covers homogeneous pro markets, the applicant observes that such ducts, the potential intensity of competi diversified conduct is possible, but that it is tion is at its highest and, therefore, the highly probable that a uniform increase in real intensity of competition is generally prices introduced on a given market will at its lowest. On the other hand, it is in a extend beyond it because of the inter heterogeneous oligopoly that the real

standard dyes which account for the greater pressures of an oligopoly only in order to part of the market, those products being deny that the conditions for such a situa homogeneous to a large extent. As tion were present on the dyestuffs market. Professors Bombach and Hill have pointed Such pressure exists when the under out, interchangeability is reduced by a takings, acting with reference to economic certain lack of transparency on the dye criteria, practise parallel pricing policies stuffs market.

basis of which these tables were established. dependence of the oligopoly. As regards the rate of expansion of the As for the rate of expansion of the market, market in dyestuffs, the question is not the applicant argues that the market in what is the share of each manufacturer of dyestuffs is a stagnant market considered the turnover of the chemicals industry or of from the point of view of the economy as the national product, but what is the a whole. For the ratio between the value possibility of increasing its turnover.

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Some authors with a view to obtaining the best results even require proof of the existence of an for themselves. On the other hand intensity agreement or of a gentlemen's agreement. of competition is in reality weak when by The mere exchange of information be reason of a high degree of interdependence tween undertakings on the conduct which and similarity of interests undertakings they intend to adopt does not constitute voluntarily adopt parallel conduct in a cooperation and does not amount to the situation where there is an oligopoly for surrender of independence on the part of homogeneous products.

eroded. It is therefore obvious that parallel stitutes a particular case, elaborated by conduct and a high degree of effective American case-law, of 'conspiracy' as competition are mutually exclusive. forbidden by the Sherman Act, which presupposes that the undertakings con cerned are acting with a common will. 3. The concept of a concerted practice This notion of 'concerted action' has decided advantages as regards proof, and In its reply the applicant asserts that the it is not based on a substantive and clear defendant is now alleging, in contrast to definition of an 'agreement', that is to say, the concept of a concerted practice which the common will necessary for 'concerted it put forward throughout the administra

tion. duct. The American case-law which the The citations from American case-law

common will when that conduct is not uniform way. This means that it has ad the necessary consequence of the structure duced sufficient proof that concerted prac of the market. On the concept of a con tices existed. Furthermore, it has shown certed practice, the defendant also refers to that the structure of the market for the an article by Tolksdorf. products in question was such that there is Even in an oligopoly, in so far as the sellers no explanation of this uniform conduct have differing interests, the fact of several other than that alleging concerted practices. decisions being taken independently by Moreover, the Commission has even the various undertakings does not neces pointed out a series of facts constituting sarily lead to similar conduct on the indications of concertation.

Nor is the con cept of an 'agreement' the right term to apply to cooperation between several (a) Concerning the increase of January 1964 undertakings by way of concerted practices. There is a concerted practice within the The applicant criticizes the evidence put meaning of that article every time the forward in the contested decision in conduct of several undertakings on the favour of the alleged concerted nature of market proceeds from a common will on the increases. the part of the interested parties, whether As regards the identity of the rates of that common will is the offspring of increase, the applicant asserts that this reciprocal action or arises because of the was parallel conduct constituting the action of a third party. There is a common logical consequence of the structure of the will not only when the undertakings come market. The applicant did no more than to an understanding as to their conduct on follow Ciba in order to make up for the the market but also when they deliberately erosion of its profit-margins.

will adopt either a uniform or a different that this uniformity of rate did not exist course of conduct according to an alloca from the moment when the producers tion of roles worked out in advance. informed their customers of the increases Therefore it is not necessary to show that which they had decided to introduce, but concertation has taken place or that a that it was the consequence of the play of common plan has been drawn up in order market forces. The differences between the to argue that there exists a concerted increases announced and the real results of practice for the purposes of Article 85. the price movement, and the fact that the In the present cases the Commission has products which the different producers proved that as regards prices the dyestuffs excluded from the increase were not iden manufacturers in question behaved in a tical prove that there was no concertation,

Alternatively, the applicant stresses that The applicant also argues that the de­ the aligning of the instructions which it fendant does not raise any new facts gave to its Italian subsidiary on the points pointing towards the conclusion that con­ of detail relating to the increase introduced certation existed as regards the increase by Ciba, which occurred following the of 1 January 1965. latter's announcement of 7 January 1964 that it intended to increase its prices, only (c) Concerning the increase of October 1967 took place later, for the information which the applicant received on 8 and 9 January The applicant asserts as regards this also from its Italian subsidiary about Ciba's that the only argument put forward by decision was neither complete nor pertinent. the defendant as evidence of the existence As to the alleged similarity of content of of prior concertation between those con­ the orders to increase prices, the applicant cerned is that of their parallel conduct. The asserts that the text of these orders has assertion that they had decided, in the con­ never been communicated to it and that text of their concertation, to introduce an therefore it has not been in a position to increase on the Italian market in Autumn submit its observations on this point in an 1967 and that they did not do so because appropriate manner. Furthermore, the the refusal of ACNA prevented them from orders which it sent to Italy on 9 January, putting it into effect is an assertion found once it had become aware of the content of for the first time in the decision. Therefore Ciba's circular and of the points of detail it cannot validly be put forward in justifica­ in the measure taken by that undertaking, tion of that decision. went beyond that circular. The applicant The meetings between the producers for the also asserts that it never declared that exchange of information, in particular those concerned copied from each other those at Basel and London, cannot con­ their instructions destined for Italy, as stitute evidence as to the existence of prior the defendant alleges in the contested concertation. The Commission cannot decision. validly rely on this fact because the notice The applicant concludes that the evidence of objections does no more than assert upon which the Commission has relied as that the increase was decided upon by all proving the existence of concertation is the producers at a meeting held at Basel proof of nothing but the existence of in August 1967 upon Geigy's initiative, conscious parallelism. without mentioning the existence of minutes, or of their contents, or of the decision of the Bundeskartellamt which (b) Concerning the increase of January asserts that Geigy went so far as to speak 1965 of an increase of 8% with effect from 16 October 1967. Thus the applicant had no The applicant, having pointed out that as opportunity to evaluate the evidence ap­ regards this increase the defendant does parently in the defendant's possession, and no more than allege in the contested thus the rights of the defence were in­ decision that those concerned engaged in fringed. parallel conduct, asserts that this increase The applicant asserts that it did not take was fundamentally different from the 1964 its decision to increase its sales prices by

The applicant maintains that examination of these documents supplied by the 5. Complaints concerning the fine defendant shows that the alleged similarity of content of the producers' orders do not The applicant asserts that the defendant correspond to the reality. The applicant should have taken into account the fine invites the Court to refer to a synopsis of imposed on it by the Bundeskartellamt for the texts of the different written orders the same matter by its decision of 28 which it sent out. November 1967, even though this decision As regards, in particular, the detailed rules was annulled by the Kammergericht. It is accompanying the increase, the applicant argued that this obligation is clear from observes that since the increase carried out the judgment of the Court in Case 14/68. by Ciba on 7 January 1964 in Italy took The defendant objects that those concerned effect immediately, the detailed rules appealed against the abovementioned intended to bring about this immediate decision of the Bundeskartellamt and that entry into force were also laid down. For a later the Kammergericht Berlin, by its businessman it is obvious, in the applicant's decision of 28 August 1969, annulled the view, that such detailed rules must be taken said decision of the Bundeskartellamt. into account in the case of an immediate Since the decision of the Bundeskartellamt increase in prices. was not definitive at the time when the The defendant asserts that the applicant is contested decision was adopted, there was wrong in attempting to deny that the price no danger of concurrent penalties. increases covered substantially the same dyestuffs by resorting to a comparison between the orders to increase prices sent IV — Procedure by the various undertakings. This com­ parison is not conclusive because producers The procedure took the following course.

subject of dyestuffs. By order of the same date the Court By order of 8 July 1970, the Court, having regard to the report of the Judge-Rappor­ joined Cases 48/69, 49/69, 51/69, 52/69, teur and the views of the Advocate- 53/69, 54/69, 55/69, 56/69 and 57/69 for the purposes of the expert's report. General, ordered as follows: By order dated 13 November 1970 the Court, having regard to the proposal 1. An expert's report shall be obtained in made by common agreement between the respect of the following questions: parties on the names of two experts, instructed Horst Albach, Professor of Business Management at the University (a) Taking into account the characteris­ of Bonn, and Wilhelm Norbert Kloten, tics of the dyestuffs market in the European Economic Community, Professor of Political Economy at the especially during the period 1964 to University of Tübingen, to prepare the 1967, would it have been a practical report jointly. possibility, according to normal The experts' joint report was lodged at the commercial criteria, for a producer Court Registry on 23 April 1971. The acting independently who wished to experts summarized the result of their increase his prices to do so other­ report in the following terms: wise than by a general uniform and — Question (a) should be answered in the public increase, by fixing different affirmative; according to normal com­ rates for each product in his mercial criteria a producer of dyestuffs individual relationships with each acting independently could in principle customer? have increased his prices on a variable basis in relation to each customer and (b) For a producer acting indepen­ each product. dently, what advantages and dis­ advantages result from effecting a — An affirmative answer may also be general and linear increase in prices, given to the question whether it would as compared with an increase have been a practical possibility for such differing in respect of each cus­ a producer to increase his prices on a tomer, product and market? The variable basis in relation to each cus­ answer to this question is to be tomer and product, subject to the given both on the hypothesis that following proviso: the average increase the producer is taking the initiative in prices that a producer acting in­ in making an increase and on the dependently could have achieved by hypothesis that the producer is means of a policy of differentiated faced with a general and uniform prices in a given field would probably increase announced by a competitor. have been lower than the average in­ crease in prices achieved by a general (c) Taking into account in particular and uniform price increase. the degree of transparency of the market, are dyestuffs other than — A general and linear increase in prices speciality dyes practically inter­ involves opportunities and risks both changeable and, if so, to what extent? for the producer who takes the initiative What is the approximate propor­ in putting prices up and for the pro­ tion of speciality dyes compared ducer of dyestuffs who has to fall in with the total production of dyes with a general and uniform increase for each of the undertakings con­ announced by a competitor. Both as cerned? regards the producer who determines

Between 7 and 20 January 1964, a uniform increase of 15% in the prices of most dyes based on aniline, with the exception of certain categories, took place in Italy, the Netherlands, Belgium and Luxembourg and in certain third countries.

On 1 January 1965 an identical increase took place in Germany.

On the same day almost all producers in all the countries of the Common Market except France introduced a uniform increase of 10% on the prices of dyes and pigments excluded from the increase of 1964.

Since the ACNA undertaking did not take part in the increase of 1965 on the Italian market, the other undertakings did not maintain the announced increase of their prices on that market.

Towards mid-October 1967, an increase for all dyes was introduced, except in Italy, by almost all producers, amounting to 8% in Germany, the Netherlands, Belgium and Luxembourg, and 12% in France.

JUDGMENT OF 14.7.1972 — CASE 51/69

The submissions concerning the administrative procedure

(a) The complaint relating to the commencement of the administrative procedure

4 The applicant complains that the defendant took a decision imposing a fine, on the basis of Article 15(2) of Regulation No 17/62, although it had only commenced a procedure with a view to a finding of an infringement on the basis of Article 3 of this regulation.

Furthermore, it is argued, the defendant could not rely as against the applicant on the text of the decision to commence the procedure because it failed to sent it a true copy.

BAYER v COMMISSION

5 It is the notice of objections alone and not the decision to commence proceedings which is the measure stating the final attitude of the Commission concerning undertakings against which proceedings for infringement of the rules on com­ petition have been commenced.

However, it is not necessary for the contents of the file to be made available in their entirety.

The Commission's notice of objections, sent to the applicant by letter of 11 December 1967, sets out all the facts necessary for determining the objections taken into consideration.

9 This submission is therefore unfounded.

(c) The complaint relating to a continuation of inquiries following notification of the objections

10 The applicant asserts that the Commission, in continuing its inquiries following communication of the notice of objections, conducted itself in a manner incom­ patible with the very nature of that notice, which must constitute the final measure of inquiry.

JUDGMENT OF 14.7.1972 — CASE 51/69

12 This submission is therefore unfounded.

(d) The complaint concerning the hearing of the undertakings concerned

13 The applicant argues that the period of two weeks given to it for the purpose of appearing before the Commission was not long enough to enable it to prepare an adequate defence.

14 Taking into account the time which had elapsed following communication of the notice of objections, it does not appear that the abovementioned period of notice was of a nature such as to jeopardize the defence of the undertakings concerned.

Furthermore, there was nothing to prevent the applicant from setting out its point of view in writing at a later date and submitting it to the Commission.

15 This submission is therefore unfounded.

Notwithstanding the failure to observe the time-limit of which the applicant com­ plains, this irregularity could only affect the legality of the decision if the record of statements made at the hearing were inaccurate in a manner such as to give rise to misunderstandings on essential points.

Such is not the case as regards the statements of the applicant's counsel, the record of which in the minutes is alleged to be inaccurate.

18 This submission is therefore unfounded.

The submission as to the limitation period

19 The applicant argues that the contested decision is contrary to the Treaty and to the rules relating to its application because the Commission, in commencing on 31 May 1967 proceedings concerning the price increases of 1964 and of 1965, exceeded any reasonable limitation period.

20 The provisions governing the Commission's power to impose fines for infringement of the rules on competition do not lay down any period of limitation.

Arguments of the parties

22 The applicant complains that the Commission has not proved the existence of concerted practices within the meaning of Article 85(1) of the EEC Treaty in relation to any of the three increases mentioned in the contested decision.

23 That decision states that prima facie evidence that the increases of 1964, 1965 and 1967 took place as the result of concerted action is to be found in the facts that the rates introduced for each increase by the different producers in each country were the same, that with very rare exceptions the same dyestuffs were involved, and that the increases were put into effect over only a very short period, if not actually on the same date.

It is contended that these increases cannot be explained simply by the oligopolistic character of the structure of the market.

It is said to be unrealistic to suppose that without previous concertation the prin­ cipal producers supplying the Common Market could have increased their prices on several occasions by identical percentages at practically the same moment for one and the same important range of products including speciality products for which there are few, if any, substitutes, and that they should have done so in a number of countries where conditions on the dyestuffs market are different.

The Commission has argued before the Court that the interested parties need not necessarily have drawn up a common plan with a view to adopting a certain course of behaviour for it to be said that there has been concertation.

It is also argued that the large number of dyestuffs produced by each undertaking makes it impossible in practice to raise prices product by product.

A further argument is that different price increases for interchangeable products either could not produce economically significant results because of the limited level of stocks and of the time necessary for adapting plant to appreciably in­ creased demand, or would lead to a ruinous price war. Furthermore, it is said that dyestuffs for which there are no substitutes form only a small part of the producers' turnover.

Taking these market characteristics into account and in view of the widespread and continuous erosion of prices, each member of the oligopoly who decided to increase his prices could, it is argued, reasonably expect to be followed by his competitors, who had the same problems regarding profits.

Finally, it is argued, if it were possible to apply different rates of increase on different markets, it is nevertheless probable that a uniform price increase in­ troduced on a given market would have repercussions outside it because of the international character of the dyestuffsmarket.

The concept of a concerted practice

25 Article 85 draws a distinction between the concept of 'concerted practices' and that of 'agreements between undertakings' or of 'decisions by associations of undertakings'; the object is to bring within the prohibition of that article a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition.

27 The market in dyestuffs is characterized by the fact that 80% of the market is supplied by about ten producers, very large ones in the main, which often manu­ facture these products together with other chemical products or pharmaceutical specialities.

The production patterns and therefore the cost structures of these manufacturers are very different and this makes it difficult to ascertain competing manufacturers' costs.

The total number of dyestuffs is very high, each undertaking producing more than a thousand.

The average extent to which these products can be replaced by others is considered relatively good for standards dyes, but it can be very low or even non-existent for speciality dyes.

As regards speciality products, the market tends in certain cases towards an oligopolistic situation.

Since the price of dyestuffs forms a relatively small part of the price of the final product of the user undertaking, there is little elasticity of demand for dyestuffs on the market as a whole and this encourages price increases in the short term.

agents and depots to ensure that user undertakings receive specific assistance and supplies.

It appears from the data produced during the course of the proceedings that even in cases where a producer establishes direct contact with an important user in another Member State, prices are usually fixed in relation to the place where the user is established and tend to follow the level of prices on the national market.

Although the foremost reason why producers have acted in this way is in order to adapt themselves to the special features of the market in dyestuffs and to the needs of their customers, the fact remains that the dividing-up of the market which results tends, by fragmenting the effects of competition, to isolate users in their national market, and to prevent a general confrontation between producers throughout the Common Market.

It is in this context, which is peculiar to the way in which the dyestuffs market works, that the facts of the case should be considered.

The increases of 1964, 1965 and 1967

29 The increases of 1964, 1965 and 1967 covered by the contested decision are inter­ connected.

On 9 January ICI-Holland took the initiative in introducing the same increase in the Netherlands, whilst on the same day Bayer took the same initiative on the Belgo- Luxembourg market.

With minor differences, particularly between the price increases by the German undertakings on the one hand and the Swiss and United Kingdom undertakings on the other, these increases concerned the same range of products for the various producers and markets, namely, most aniline dyes other than pigments, food colourings and cosmetics.

31 As regards the increase of 1965 certain undertakings announced in advance price increases amounting, for the German market, to an increase of 15 % for products whose prices had already been similarly increased on the other markets, and to 10% for products whose prices had not yet been increased. These announcements were spread over the period between 14 October and 28 December 1964.

The first announcement was made by BASF, on 14 October 1964, followed by an announcement by Bayer on 30 October and by Cassella on 5 November.

These increases were simultaneously applied on 1 January 1965 on all the markets except for the French market because of the price freeze in that State, and the Italian market where, as a result of the refusal by the principal Italian producer, ACNA, to increase its prices on the said market, the other producers also decided not to increase theirs.

ACNA also refrained from putting its prices up by 10% on the German market.

In fact, after the experience of 1964, when the announcement of the increases and their application coincided, although with minor differences as regards the range of products affected, the increases of 1965 and 1967 indicate a different mode of operation. Here, the undertakings taking the initiative, BASF and Geigy re­ spectively, announced their intentions of making an increase some time in advance, which allowed the undertakings to observe each other's reactions on the different markets, and to adapt themselves accordingly.

By means of these advance announcements the various undertakings eliminated all uncertainty between them as to their future conduct and, in doing so, also eliminated a large part of the risk usually inherent in any independent change of conduct on one or several markets.

This was all the more the case since these announcements, which led to the fixing of general and equal increases in prices for the markets in dyestuffs, rendered the market transparent as regards the percentage rates of increase.

Therefore, by the way in which they acted, the undertakings in question temporarily eliminated with respect to prices some of the preconditions for competition on the market which stood in the way of the achievement of parallel uniformity of conduct.

JUDGMENT OF 14.7.1972 — CASE 51/69

34 The fact that this conduct was not spontaneous is corroborated by an examination of other aspects of the market.

As regards the increases of 1965 and 1967 concertation took place openly, since all the announcements of the intention to increase prices with effect from a certain date and for a certain range of products made it possible for producers to decide on their conduct regarding the special cases of France and Italy.

In proceeding in this way, the undertakings mutually eliminated in advance any uncertainties concerning their reciprocal behaviour on the different markets and thereby also eliminated a large part of the risk inherent in any independent change of conduct on those markets.

The general and uniform increase on those different markets can only be explained by a common intention of the part of those undertakings, first, to adjust the level

BAYER v COMMISSION

of prices and the situation resulting from competition in the form of discounts, and secondly, to avoid the risk, which is inherent in any price increase, of changing the conditions of competition.

The fact that the price increases announced were not introduced in Italy and that ACNA only partially adopted the 1967 increase in other markets, far from under­ mining this conclusion, tends to confirm it.

In these circumstances and taking into account the nature of the market in the products in question, the conduct of the applicant, in conjunction with other undertakings against which proceedings have been taken, was designed to replace the risks of competition and the hazards of competitors' spontaneous reactions by cooperation constituting a concerted practice prohobited by Article 85(1) of the Treaty.

JUDGMENT OF 14.7.1972 — CASE 51/69

The effect of the concerted practice on trade between Member States

37 The applicant argues that the uniform price increases were not capable of affecting trade between Member States because notwithstanding the noticeable differences existing between prices charged in the different States consumers have always pre­ ferred to make their purchases of dyestuffs in their own country.

38 However, it appears from what has already been said that the concerted practices, by seeking to keep the market in a fragmented state, were liable to affect the cir­ cumstances in which trade in the products in question takes place between the Member States.

The parties who put these practices into effect sought, on the occasion of each price increase, to reduce to a minimum the risks of changing the conditions of competition.

42 In view of the frequency and extent of the applicant's participation in the pro­ hibited practices, and taking into account the consequences thereof in relation to the creation of a common market in the products in question, the amount of the fine is appropriate to the gravity of the infringement of the Community rules on competition.

BAYER v COMMISSION

Costs

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

The applicant has failed in its submissions.

Therefore it must be ordered to bear the costs.

Lecourt Mertens de Wilmars Kutscher Donner Trabucchi Monaco Pescatore

Delivered in open court in Luxembourg on 14 July 1972.

A. Van Houtte R. Lecourt

Registrar President

OPINION OF MR ADVOCATE-GENERAL MAYRAS

(Se Case 48/69, p. 000)