C-52/69

JUDGMENT OF 14.7.1972 — CASE 52/69

orders them to carry out a decision to pany and its subsidiaries overrides the raise prices, the uniform implementa­ formal separation between those com­ tion of which together with other panies resulting from their separate undertakings constitutes a practice legal personality. prohibited under Article 85(1) of the EEC Treaty, the conduct of the sub­ 14. The Community administration is not sidiaries must be imputed to the parent bound to include in its decisions all company. the arguments which it might later use For the purpose of applying the rules in response to submissions of illegality on competition, unity of conduct on which might be raised against its the market as between a parent com- measures.

In Case 52/69

J. R. GEIGY AG, now CIBA-GEIGY AG, a limited liability company governed by Swiss law, having its registered office in Basel, assisted and represented by J. J. A. Ellis, Advocate at The Hague, and H. Flad, Advocate of Frankfurt am Main, with an address for service in Luxembourg at the Chambers of J. Leosch, Advocate, 2 rue Goethe, applicant,

v

Commission of the European Communities , represented by its Legal Advisers J. Thiesing, G. Marchesini and J. Griesmar, acting as Agents, assisted by Professor W. Van Gerven, with an address for service in Luxembourg at the Chambers of its Legal Adviser, É. Reuter, 4 boulevard Royal, defendant,

JUDGMENT

Issues of fact and of law

JUDGMENT OF 14.7.1972 — CASE 52/69

— Imperial Chemical Industries Ltd. (ICI), it formed the Commission that it could not Manchester (United Kingdom), consider transmission to one of its sub­

— Yorkshire Dyeware and Chemical, sidiaries as legally valid service upon itself. Leeds (United Kingdom), By application lodged at the Court Registry — E. I. Du Pont de Nemours Company on 3 October 1969, the Geigy company Inc., Wilmington, Del. (United States brought the present application against the of America). decision of the Commission

A fine of 40 000 u.a. was imposed on A — The applicant's view Azienda Colori Nazionali Affini (ACNA) S.p.A. Complaint concerning the statement of A copy of this decision was sent by reasons

registered letter to Geigy at the offices of its subsidiary in Frankfurt am Main. The The applicant states that with a view to applicant, informed of this communication, justifying its jurisdiction the Commission instructed its subsidiary to return it to the does no more than refer to the principle Commission. By letter of 1 August 1969 according to which the effects of actions

GEIGY v COMMISSION

There the Member States and there is no basis fore Article 190 of the EEC Treaty has been for it in customary international law. infringed on the ground of insufficient Alternatively, according to the applicant, statement of reasons. even if the applicability of the said principle were to be accepted as regards the EEC, Criticism of the ''effects doctrine' ('Aus there must at least be a substantial effect, in other words there must be material wirkungsprinzip') interference with competition at the level of international trade within the EEC. (a) According to the law of the Member Yet in its decision the Commission did not

of competition. It is asserted that the the provisions in question are not of a Member States of the EEC adopted the criminal law nature is, he asserts, of no same attitude in 1967 in respect of the value or force from the point of view of OECD. The Netherlands, in Article 39 public international law. But the Com of the Law on competition, and France, mission is purporting to justify a criminal in Law No 68-678, have even taken express sanction on the basis of the 'effects doc legislative measures against the extra trine'.

JUDGMENT OF 14.7.1972 — CASE 52/69

with a view to regulating their production this principle, the result would be a situa by means of quotas covering their exports tion of anarchy as regards laws in force to the United States was contrary to the and courts claiming jurisdiction, together Sherman Act. He observes that whilst with legal confusion on the part of those several decisions of the American courts concerned. In order to avoid a penalty, require that the effects must be direct and undertakings would have to make their substantial, in other countries, on the conduct conform to the practice of each of contrary, the case-law is vaguer and the States with which they traded, although

States. He concludes that a national case- deal with the questions which arise if the law which has been adopted only by a prohibition is applied extra-territorially. certain number of States and has not been Professor Huber distinguishes between followed generally is not sufficient to effects which are the mere consequence of a establish a custom at international law, measure and effects which form an essen and he further states that the failure in tial constituent element of the offence. recent case-law concerning the suppression The objective territorial principle relates to

the latter situation, and it is therefore to The jurisdiction of the Commission based be distinguished clearly from the 'effects on the 'conduct' of the applicant inside the doctrine' as asserted by the American Alcoa Common Market judgment and as adopted by the Com mission in the contested decision. It is The defendant notes first that the expres argued that by reason of the special sion 'conduct' (or behaviour) means some character of the Community legal order, the thing more than the commission of acts, European Economic Community must, to in that in certain circumstances inaction or a much greater degree than a State, respect failure to act can also be 'conduct'.

Market. Furthermore, and in any event, The applicant 's influence on the conduct of the circumstances and the effects of the the subsidiaries only took effect upon applicant's conduct abroad were such as receipt of the instructions by the sub to give the Community authorities jurisdic sidiaries, in other words, it only took effect tion under international law to apply EEC within the Common Market. competition law. As to the relationship between the sub sidiaries and the parent company, the defendant believes that the application of a The complaint concerning the statement of purely legalistic concept of agency would

submissions. Furthermore, the defendant the effects produced inside the Common observes that the grounds relating to the Market by certain conduct of the applicant Community's claim to jurisdiction are to outside the Common Market be found in part in statements contained in the preamble to the decision as to the effect Alternatively, the defendant argues that it of the activities of the applicant company has jurisdiction as regards the conduct of on competition within the Common Market the applicant outside the Common Market, and on trade between Member States. because of the relationship between that

conduct and the Common Market, and that has been propounded in an entirely this view accords both with the present general way. state of international law and with the The Alcoa judgment asserted the appli­ law of the Member States. cability of American competition law The defendant states that the case only without setting any definite limits as regards raises the question of the power of author­ it extra-territorial application. Thus it was ities amenable to international law to possible to conclude that any agreement make laws and regulations, and not that of made between foreigners abroad restricting their enforcement jurisdiction abroad. competition on the American market could be prohibited by American anti-trust law, (a) The question whether the Commission's however indirect, distant or negligible the claim to jurisdiction accords with inter­ connexion between the agreement and the national law said market or its effects on that market. The defendant observes that the few Furthermore, that judgment constituted authoritative judgments of an international the basis of a broad interpretation of the character deal mainly with the jurisdiction extra-territorial jurisdiction of American of States prosecuting offences against authorities and courts, which have gone common law. Cartel law is in the main of an so far as to issue injunctions to under­ administrative nature. Furthermore, the takings established abroad and to order effects of infringements of the rules which that amendments be made to contracts it lays down are almost never the direct or articles of association the terms of which and physical consequences of the act. have been agreed between foreigners Accordingly, precedents should always be abroad. adapted to the special needs of the subject The diplomatic protests which have been at issue. made in response to this practice have It appears from the judgment delivered by been exclusively concerned with the the International Court of Justice in the application of American anti-trust legisla­ Lotus case that the jurisdiction of a State tion abroad. cannot be limited as a matter of principle However, this problem does not arise in to acts committed on its own territory, but the present case because the contested that on the contrary, in principle, except decision does not go further than to state where a rule of international law provides that the practices complained of constitute otherwise, the State may, in certain cir­ an infringement of Article 85 of the Treaty cumstances, exercise its jurisdiction over and to impose a fine because of this. The acts committed by foreigners outside its simple fact of imposing a fine should be territory. In applying this principle to the considered as exercising an enforcement case which it was hearing, the Court at The jurisdiction. Hague attached decisive importance to the Article of the Netherlands Law on

The solution consists in finding a reason result it is sufficient to make a prudent able compromise between these two application of the doctrine of economic extreme positions, taking the special needs effects, taking into account the extent of of competition law into account. The the direct economic effects resulting from necessity for such a compromise was the conduct of the applicant, and in accepted by the Swiss Federal Court in a particular the successive price increases in judgment of 21 March 1967 concerning the common market. In the present case the application of the Federal Law on this result is in accordance with the prin cartels to an agreement dividing up the ciples laid down by the International market together with an exclusive dealing Court of Justice in the Lotus case.

States A compromise should be attempted on the basis, first, of a criterion limiting jurisdic tion to direct effects, as was decided by In answer to the applicant's argument the Swiss court, and, secondly, of the according to which in the absence of principle of the protection of essential express provisions in the Treaty establish interests, taking into account the fact ing it, the Community cannot exercise an that every State is highly interested, and extra-territorial jurisdiction to which the quite rightly so, in maintaining the eco Member States are allegedly hostile, the nomic structure of the country and in defendant points out first of all that even allowing to the forces which go to make up if the Community was claiming to exercise that economy the freedom to act. The wider rights than those claimed up till defendant asserts that the Community now by the Member States, there is no legislation on cartels is a matter of public reason why this claim should not be policy within the Community and that justified, bearing in mind the fact that the therefore the applicant cannot claim that Community is an independent entity in when it sells its products in the Community international law.

first head of its argument) that the con­ The diplomatic protests and legislative duct of the applicant undertaking took measures mentioned by the applicant place wholly outside the Community, the constitute a reaction against the excessive jurisdiction of the Community is justified extra-territorial exercise of enforcement by reason of the economic effects that this jurisdiction alone. Therefore it is scarcely conduct has produced within the common possible to glean any information from market and of the resultant disruption of them as to the attitudes of the States the public policy of the Community as concerning the extra-territorial effect of regards competition law. To reach this their competition law.

JUDGMENT OF 14.7.1972 — CASE 52/69

Where, in its statement of defence, the The defendant fails to draw the necessary Commission asserts that the applicant consequence from the distinction between pursued an activity contrary to Article 85 competition law and criminal law, namely of the Treaty within the Common Market, that no exceptions can be made to the this assertion is inadmissible, it is argued, strict territorial principle as regards com­ because it does not appear in the contested petition law which, unlike traditional decision. criminal law, is not recognized by the The defendant 's theory, according to great majority of States. The infringement which actions decided upon by its sub­ dealt with in the Lotus case fell within the sidiaries must be considered as actions of generally recognized traditional criminal the applicant, fails to take into account the law. As opposed to this, a concerted prac­ legal independence of the subsidiaries in tice which, according to the concept relation to the parent company, and the adopted by the Commission, does not theory is thus completely alien to Com­ depend on the existence of an agreement, munity law and to the law of the Member cannot give rise to a fine in any of the States. The American doctrine of the 'alter States of the EEC.

GEIGY v COMMISSION

The law and is not accepted outside the United theory of the connecting link is formulated States. by the Commission in such a general As to the protests of states against way that in practice, so it is argued, it American policy on foreign cartels, the would appear to be wholly inapplicable. applicant observes that these protests are also directed against the adoption of laws and that, furthermore, any execution of a (b) According to the internal law of the Member States law by force, and in particular the recovery of a fine, represents the exercise of 'enforce ment jurisdiction'. The applicant argues that the Commission's On 12 October 1969 the British Govern

Professor Huber ob Although the German legislation is serves, inter alia, that Swiss competition widely drafted, this does not mean that law is not based on the same conception the German legislature intended to justify as EEC competition law since the subject- the application of national law to foreign matter of the protection is not the same. undertakings on the basis of the 'effects Therefore the importance which Swiss doctrine'. Furthermore, the German competition law attaches to the 'effect' in Government is amongst those which have the sense of an infringement of a personal protested against the extra-territorial ap right of the interested party is not com plication of American anti-trust legislation. parable to the application of the 'Aus The same is true of French practice.

States. The principle of the protection of essential Therefore the applicant doubts whether interests, according to which it is not even the government representatives on the necessary for an effect to have occurred on Advisory Committee approved the Com the territory of the State claiming jurisdic- mission's point of view.

D — The defendant's rejoinder pany jointly and severally liable with the subsidiary for obligations entered into by The legal personality of the Community the latter, and on the other hand recognizes under international law the right of the parent company to give instructions to its subsidiary. In certain In its rejoinder the defendant stresses first respects French and Italian companies that the Community has legal personality legislation and the draft Belgian law on under international law, and states that companies also take into account the this follows both from the provisions of particular relationships existing within an Articles 113,114,228 and 238 of the Treaty, industrial concern.

The Commission true that in certain areas it alone now has already taken favourable note of the possesses certain sovereign powers which particular situation of members of a the States have assigned to it, including concern in giving negative clearance. notably powers in the field of competition Therefore it must be admitted that un law. In such areas the Community may favourable consequences can also follow therefore exercise the said powers to the from such a relationship. full, subject to the rules of international law, even if the Member States have not Jurisdiction justified by the effects which previously exercised those powers com the conduct of the applicant has produced within the Common Market

Furthermore, accord being necessary for them to do so. The ing to recent legal commentators, the Court at The Hague has delcared that this concept of legal personality should only principle applies equally to criminal be applied in so far as it does not result in matters, notwithstanding the strict ties unjust and unacceptable consequences which exist between jurisdiction in criminal within the legal order. It is on the basis matters and the concept of the State. of this idea that the new German com Therefore the applicant's assertion that a panies legislation makes the parent com- State give up a part of its powers in relation

to the traditional view of criminal law, but As for the distinction between direct effects not as regards competition law, is in and indirect effects which according to the contradiction with the reasons which led applicant is not sufficiently clear, the the International Court to approve extra defendant observes that this criterion is territorial jurisdiction in respect of tradi used in many legal systems and in several tional criminal law. branches of the law. The application of If the Commission 's reasoning according this criterion together with the principle to which competition law cannot be of the protection of essential interests and treated on the same footing as traditional the theory of the connecting link ensure a criminal law is accepted, the general rules solid legal basis for the contested decision expressed in the Lotus judgment are as regards the jurisdiction of the Com applicable without restriction, and this mission. means that in the absence of any rule of As for the applicant 's argument that the international law to the contrary the Commission should, in order to justify Commission has jurisdiction within the its jurisdiction, prove at least that the territory of the Community over activities effects within the Common Market are taking place outside it, the basis of such substantial, the defendant observes that it jurisdiction being the theory of the con does not see why the criterion used for necting link. evaluating direct effects should be different Even it one were to approve the line of from that used in relation to actions per reasoning according to which infringements formed within the Common Market. of competition law should be treated in the same way as infringements of ordinary (b) The question whether the Commission's criminal laws and were thus to apply the claim for jurisdiction accords with the theory of effects as a constituent element internal law of the Member States the jurisdiction of the Commission would

It is asserted The diplomatic protests to which the that the origin of these restrictions is to applicant refers were mainly concerned be found in actions performed outside with American draft laws concerning the the common market by undertakings requirement that documents located a- foreign to the Community. The only effect broad be returned to the United States, of the absence of a 'foreign commerce and this, so it is argued, is a typical case clause' is, so it is asserted, to prevent of enforcement jurisdiction.

JUDGMENT OF 14.7.1972 — CASE 52/69

In Swiss Federal basis within the limits of international law. revenue law, economic considerations are The principle that the rules on competition not authority for disregarding the legal in the Treaty are applicable extra-terri autonomy of companies, except in cases torially cannot be rendered subject to the where that autonomy has been established condition that all the anti-trust laws of the for the sole purpose of evading tax. Member States must point the same way. It is asserted that the truth of the matter is It is asserted that Article 39 of the Nether that in arguing that subsidiaries and parent lands Law on competition has only been companies constitute one entity the Com applied as regards requests for the trans mission is trying to overcome the obstacle mission of information or documents of territorial limits. made by the American authorities. The defendant objects that the applicant As for the opinion on the question of the did receive notice of the contested decision Community's jurisdiction put forward by and that its subsidiary forwarded the the Advisory Committee on Restrictive decision to Switzerland.

it is addressed. Common Market and entirely controlled The applicant opposes the assertion con by the applicant means that the decision tained in the contested decision stating thus notified reached the internal structure that the subsidiaries form part of the of the applicant, even if the subsidiary 'internal structure' of the parent company has separate legal personality. It is argued and observes that in its judgment in Case that this principle must also apply to the 8/56 (ALMA), the Court took the view notification of measures during the course that a letter had by due process reached the of a purely administrative procedure. internal structure of the addressee upon In view of the tact that the said judgment duly reaching the registered office of the of the Court does not require that once undertaking in question. But this condition the decision has reached the internal was not fulfilled in the present case because structure of the addressee, the latter must the applicant's registered office is at Basel have actual notice of it, the obligation to and not at Frankfurt, where the Com notify was fulfilled a fortiori in the present mission attempted to notify its decision. case, because the contested decision did The independence of the subsidiaries at indeed come to the notice of the addressee. distinct legal persons is also relevant as In its reply, the applicant denies that it is the procedural level.

GEIGY v COMMISSION

in law. According to the second paragraph case-law of the Court of Justice in the of Article 191 of the Treaty, notification of judgments concerning ferrous scrap. a decision is an indispensable requirement It was for reasons of courtesy in inter without which the decision cannot take national relations, and taking into account effect. Therefore the fact that the applicant in particular the position of the Swiss learnt of the decision in a wholly fortuitous Government, that the contested decision way must not be taken into account as was not sent by post.

taking concerned itself. According to secrets, were omitted from the publication Swiss law, which is the only law applicable did not directly concern the applicant. to the applicant as regards determining Furthermore, the authorities of foreign where its registered office is, the applicant, States or of international organizations being a limited liability company, cannot cannot be compelled to follow rules for have several registered offices. Therefore notification made by a State for its own it is impossible to consider the registered nationals. office of its subsidiary as being the Finally, an irregularity concerning notifica registered office of the parent company. tion cannot in any case render a decision Besides, the legal independence of sub

JUDGMENT OF 14.7.1972 — CASE 52/69

. . place where notification of the same was decides . . .'. It clearly appears from this to be effected. According to a generally text that the decision was taken in applica recognized principle of public international tion of Regulation No 17 as a whole, and law, each sovereign State has the right to not only on the basis of Articles 3 and 9. decide whether it will permit foreign Furthermore, the wording of paragraph (3) authorities to serve notice of official of the abovementioned Article 3 is such documents by post on a person resident in that the special power given by that its territory. The notice of objections was article to the Commission does not exclude an administrative measure of a coercive the power to impose fines. nature, officially commencing a procedure The procedure was commenced with of a quasi-criminal nature.

GEIGY v COMMISSION

matters, and a fortiori when a criminal The applicant could have elected domicile matter is involved. In criminal matters, in one of the Member States of the Com­ the legal obstacles cannot be removed; it munity if it had wished the defendant to is not even possible to do so by electing respect the provisions in force in Switzer­ domicile in Switzerland or by way of other land. It could have done so because, con­ measures open to private individuals. trary to what Professor Huber asserts, the These considerations lead the applicant to procedure in question is not of a criminal conclude that the decision infringes Article nature.

from this. The Commission's argument Swiss practice, which the Commission that the procedural requirements of Com criticizes for being allegedly too restrictive, munity law are fulfilled, notwithstanding is based on public international law. the fact that notification may be irregular, The applicant also stresses that, contrary as soon as the applicant has taken notice to the Commission's statement, it has not of the statement of objections amounts to submitted written and oral observations approval of an infringement of the prin on the notice of objections; only its sub ciples of public international law. The fact sidiaries have done so. that the Commission later tried to give As for the possibility of electing domicile notice of the final decision to a subsidiary within the EEC, the applicant observes of the applicant in Germany, and not that it has never been invited to do so.

Further to any generally accepted principle of more, since it appears that measures of international law. This only involves the inquiry were carried out even after the interpretation of Swiss law, an infringe notice of objections was sent, there was a ment of which cannot possibly constitute further infringement of Article 2 of grounds for an application under Article Regulation No 99, according to which the 173 of the EEC Treaty. notice of the objections adopted by the

Commission must be communicated to sufficiently informed of the facts on which the undertakings involved upon termina­ the objections are based. It is argued that tion of the measures of inquiry. in the present case this means that the Taking into account the vague and im­ Commission should, inter alia, have made precise nature of its terms, the notice of available the file containing the documents objections does not, it is argued, adequately which it had used in so far as this was explain how the applicant was guilty of a necessary to enable the interested parties concerted practice with all the other under­ to be adequately enlightened. Without takings to which the notice of objections seeing the full text of the Telex messages, was sent. The notice therefore lacked the which the Commission only made available basis required under Article 19 of Regula­ by means of Annexes to the statement of tion No 17 and Articles 2 and 4 of Regula­ defence, the applicant could not form its tion No 99. own opinion as to the alleged similarity The applicant also complains of the fact of the wording of those messages. that the contested decision is based on The applicant stresses that its reliance on matters, such as Telex messages being sent the present submission does not imply simultaneously, which do not appear in that it acknowledges having received the notice of objections. service of the notice of objections, this The defendant objects that it is sufficient point being the specific subject of the for the Commission to inform the interested submission set out under No 4, above. parties of the facts knowledge of which is Finally, the applicant argues that infringe­ necessary for determining the objections ment of the right to be heard is always an which the Commission has adopted. In infringement of essential procedural re­ the present case the principal facts are set quirements within the meaning of Article out in the second section of the notice of 173 of the Treaty, since such a right forms objections. part of the fundamental guarantees of any as to the complaint concerning the pur­ system based on the rule of law. suance of inquiries after the notice of In its reply, the defendant argues that the objections had been sent, the defendant applicant is confusing the duties of the observes that the sole purpose of these Commission during the administrative inquiries was to check statements made by procedure with its duties as a defendant certain undertakings during the procedure, before the Court. and in particular the statement that follow­ as for the similarities in the content of the

alleged concerted practice of 1965 with The defendant is of the opinion that, taking those which supposedly took place in 1967 into account the legal and practical and that no measure was taken suspending difficulties of the question, a limitation the time-limit as regards the alleged con period of even three years cannot be con certed practice said to have resulted in the sidered as appropriate in cases of in increase of January 1965. fringement of the Community's rules on The defendant objects that three uniform competition. increases of January 1964, January 1965 In its reply, the applicant observes that the and October 1967 are the result of a Commission cannot raise the argument continuous concerted practice which ex that the three price increases were inter tended over the whole period from January connected, because the contested decision

The fact that the limitation periods that appear appropriate price increase decided upon in January as regards proceedings against infringe 1965 in Italy had to be postponed because ments. To apply national law to a fact two of the undertakings against which pertaining to Community law in cases proceedings have been taken did not where the Community legislation is silent follow the undertakings which took the would render it impossible to apply initiative shows clearly that the producers Community law on a uniform basis. in question had not decided upon further The laws of the Member states only nave price increases for future years. in common the principle that there should Therefore, since the parties concerned did be a limitation period. However, as regards not have a common plan, one cannot putting that principle into practice there possibly say that there was a continuing

cant. The applicant argues that the Commission

example of an imperfect market, this National Board for Prices and Incomes quality being due to objective factors and are said to have reached a similar con not being caused artificially. clusion, taking into consideration the The extremely wide range of products oligopolistic nature of the market in dye- existing on the market means that the stuffs in Europe. buyer cannot have a clear idea of that mar The contested decision merely notes the ket, be it in relation to the technical and simultaneous nature of the increases, the chemical properties of the various dyestuffs, identity of the rates of increase, the or to the prices demanded by the various identity of the products covered by the sellers, or to special terms governing increases and the similarities in the way in delivery and technical assistance. which the increases were introduced, yet The producers have to carry large stocks it does not in any way inquire into the near centres of consumption, because users cause of this so-called parallel action.

The decision does level of research costs, the return from not attribute to any individual under dyestuffs divisions has diminished con taking any specific factors of a nature such siderably during the course of the last ten as to prove the existence of a concerted years. Therefore, once it appears that a practice. It is therefore difficult for the leader undertaking has increased its prices applicant to formulate an attitude to the on the market, other undertakings follow conclusions of a wholly general nature its example immediately. If a sizeable put forward by the Commission. undertaking did not fall in with the in The applicant observes that the rates of crease, this policy would not be to its increase were identical because of the advantage because the other manufacturers existence of price leadership.

ment of the Court in Case 13/60. It is As to the fact that the selling prices to

customers and the selling prices to sub theory of oligopolies starts from the sidiaries were partly increased in different principle that in the oligopoly situation proportions, the applicant observes that there are many ways of arriving at prices, the consequences of an oligopolistic and that it would certainly not be right to market become apparent on the user equate the oligopoly situation with con market, whereas selling prices to sub sciously parallel conduct by participants. sidiaries are not determined by the The theorists accept that undertakings oligopoly system. knowingly adopt parallel conduct only in As for the fact that prices were urn in respect of oligopolies involving a very creased in Italy in 1967, the applicant high degree of interdependence between argues that, contrary to the Commission's undertakings, such that one undertaking assertion, it was not the conduct of the cannot take a measure without its com ACNA company which prevented that petitors being immediately and con increase, but rather the applicant's realiza siderably affected and reacting in conse tion that the conditions necessary for an quence. In this latter situation an under increase were not met, in that the applicant taking only increases its prices when it was not in a position to act the part of expects that the others will also do so.

conduct had nothing to do with a con creasing its prices is placed as to whether certed practice. the others will follow does not auto For all these reasons it is argued that the matically disappear. In order for there to Commission has infringed Article 85(1) be conscious parallelism it is necessary for of the EEC Treaty, in that the grounds on a certain number of factors to be present, which it based its decision were erroneous These include: a limited number of sellers, and in that it did not furnish sufficient high fixed costs, high mobility of demand, evidence in support of its allegations. homogeneity and transparency of prices, The defendant objects that although lack of ability to adapt capacity at short parallel conduct alone does not amount to notice, little elasticity of demand com concertation, at the other end of the scale pared with supply from all competing the parties concerned need not necessarily undertakings, technical obstacles to an have drawn up a common plan with a view nouncements of alterations to prices and to adopting a given course of behaviour. customer resistence to frequent variations It is enough that they let each other know in prices.

increases in question cannot be explained the case-law attribute a leading role to by the oligopolistic structure of the market. homogeneity of products in deciding if con­ In referring to what is expected to happen duct is consciously parallel. According to in such a market in theory, the applicant several writers, when the products are has failed to consider the postulates of diversified the effects of changes in prices price theory employed in the analysis of are much slower and much less foreseeable. parallel conduct. These factors are not Furthermore, even in the case of homo­ applicable in the case of the dyestuffs geneous products, where the prices actually industry. charged usually differ from the prices The defendant observes that the modern publicly quoted, conduct can no longer

JUDGMENT OF 14.7.1972 — CASE 52/69

defence), from the opinion of Professors As for the rate of expansion of the market, Bombach and Hill (Annex 8 to the applica­ which constitutes another test for deciding tion), from documents produced during the whether conscious parallelism can exist, it preparatory inquiries by the undertakings appears that on the whole the dyestuffs ICI, Geigy and Sandoz, and from various industry is expanding at a fast rate, ap­ statistical data produced by the Com­ proximately corresponding to that of mission (Tables I to VI of Annex I to the expansion in the chemicals industry as a statement 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 ducts. Each of the undertakings concerned petition on the market in question is manufactures from 1 500 to 3 500 products particularly intense and purchasers are and these, at least in part, display various inclined to change supplier if more qualities, mixtures and physical forms. The favourable terms are offered to them. differences in strength, shade, fastness and this tendency seems to have increased solubility are such that when the products during the course of the last few years, of various manufacturers are compared it according to the abovementioned Report is rare to find two dyes that are perfectly of the National Board for Prices and identical. The degree of similarity varies Incomes, at page 5. This mobility is considerably: it runs from a fairly high rendered easier by the fact that normally degree of comparability in standard purchasers only maintain low stocks and dyestuffs to the existence of near mon­ only buy in small quantities. opolies, often protected by patents, for pro­ Since purchasers carry low stocks, manu­ ducts having special characteristics. Fur­ facturers must themselves maintain large thermore, the competitive position of the stocks as this makes it easy for them to various dyes and the extent to which one adapt themselves to changes in demand. can be substituted for another are con­ Because competition between manufac­ stantly undergoing rapid change because turers is intense and undertakings are of technical progress. A notable feature of constantly trying to increase their share of the market for the products in question is a the market, they find it necessary to build low level of transparency mainly owing to up their stocks in such a way as to be

This necessarily results in differences in that one undertaking would decide uni­ profits. The widest profit margins are laterally on a large general increase in obtained with speciality products, so long prices without first consulting its competi­ as they remain so. Profits vary in relation tors. Supposing that there were unilateral, to the level of prices for the different independent increases on the part of products on the market. The volume of certain undertakings, each of the other sales has an influence on profits: thus for undertakings would have been able, by example, ACNA can only begin to make a setting different prices and by taking profit on its production of special dyestuffs account of the position occupied on the if the quantity produced reaches a volume market by the various products being higher than that of present demand in manufactured by it, to attempt to obtain Italy. better results. In order to prevent com­ Taking into account these characteristics petitors from immediately withdrawing of the market in dyestuffs and of the their increase, each undertaking would at criteria drawn from the theory of oligopo­ the most have had to tell the purchasers of lies, one is forced to conclude that it is totally interchangeable products that it was inconceivable for undertakings on the falling in line with this increase as regards dyestuffs market to behave with conscious these products, but this would not have parallelism. been necessary for all the other products Since several of the products in question since, because of the lack of transparency are not interchangeable, or only to a small of the market for those products, the extent, an undertaking putting up its various purchasers would not immediately prices cannot assume that its competitors have been able to react to the new prices. will follow suit, at least for the products In its reply, the applicant argues that on in question. The price increases at issue the one hand the defendant, in taking the were introduced indiscriminately for all view that a concerted practice is possible products and this cannot possibly be ex- in the absence of express concertation, is

going against the view generally adopted The concept of homogeneity of products by academic writers, according to which a can only be defined on the basis of a concerted practice requires a concordance given economic situation. According to of wills amongst the parties concerned. On these observers experience shows that the other hand, the Commission contradicts despite the identical nature of the products itself in requiring coordinated conduct on in the technical sense, preferences for the part of the undertakings, because such certain suppliers always exists. conduct, which is more than uniform According to the applicant, the decisive conduct, presupposes prior concertation. element in this case is not the question of Yet the Commission nowhere indicates homogeneity or heterogeneity, but the fact when and how the undertakings in question that there is a high degree of interdependence informed each other of the attitude they between manufacturers, and that in the intended to adopt upon the occurrence of sector in question they are subject to the increases at issue. The only purpose high costs, so that they are obliged to of the statement made by the applicant's seize every opportunity of increasing their representative at the meeting in Basel in prices. August 1967 was to inform the other under It is alleged that the Commission forgets takings of the decision already taken to that growth on the market in question

Furthermore, the European dyestuffs market. For, even if it Commission does not sufficiently ap succeeded in demonstrating this, it could preciate the limits to mobility of demand be the case, even in the absence of pressure on the European markets in the products in imposed by the market, that the applicant question. It is asserted that from the point acted independently. of view of production, no manufacturer of The correct way to assess the applicant 's dyestuffs would be in a position to satisfy conduct is to start, not with concepts taken the demand which could theoretically from any given theory about oligopolies, exist on the market if he did not rally to a which is what the Commission does, but general increase introduced by the other rather with precise findings as to the manufacturers.

it applies a legal system different from the turers have a choice only between European system. ruinous price competition or improving According to Professors Bombach and Hill, their returns by following a leader under differences between products can result, taking when it increases its prices. inter alia, from particular delivery and The importance which the defendant maintenance terms related to the product, attributes to stocks does not reflect and from the rapidity of technical progress. business reality, because stocks always

remain geared to current transactions, and accepted by the market. Speculative con therefore they can never be sufficient to siderations take precedence over con meet sharp increases in demand due to siderations relating to costs. Furthermore, possible increases in prices not followed the person introducing a price increase by the applicant. To maintain enormous does not know the extent of his competitors' stocks for this purpose would not be costs. It may be that the profits situation economically viable. varies from one manufacturer to another, As regards the alleged differences between but a calculation of the profit per product the situations of the manufacturers on the would be extremely unreliable. market, the applicant observes that the The applicant argues that when the Com Commission overestimates the amount mission decided that there were no market represented by speciality dyes in the total pressures in relation to speciality products sales figure.

It uniform colour obtained by mixing dye- also lost sight of the fact that the large stuffs makes it possible to eliminate the number of dyestuffs renders it impossible in importance of specialities. The English practice to introduce a general price report on speciality dyes to which the increase with different rates depending on Commission refers only deals with the the product. These were factors justifying proportion represented by these dyes in the expectation that the various producers the complete range of a manufacturer. It would fall in line with the undertaking does not deal with the fraction which they announcing an increase, even as regards represent of the total sales figure. The non-interchangeable speciality products. large number of specialities produced by Furthermore, the events in connexion each manufacturer does not have any with the increase of 1 January 1965 in effect on the total sales figure. Italy show that there is a risk in such The special relationships between manu decisions to make increases. facturers and users noted by the Com Graduated price increases, which in the mission are, it is argued, inherent in the Commission's opinion offer the under European dyestuffs market as a whole, takings excellent prospects, would in and they offer identical commercial pos reality lead to a ruinous price war, which sibilities to all manufacturers, since the would have repercussions for the customers market situation is the same for all. because in such a situation the manu It is asserted that the differences between facturer would no longer have the financial the rates of expansion do not prove that means necessary to attempt innovations once manufacturers have decided to and ensure that customers are given increase their prices they can reasonably reliable service. The applicant believes expect that their competitors' returns will that before giving such advice the Com

the applicant. Prices are always increased refusing further transactions at such low up to the amount which, in the mind of the prices) are essential factors in any price person introducing the increase, will be increase and therefore they necessarily

feature in the letters from all the manu parallel there is a presumption of fact as facturers. Furthermore, no similarity is to the existence of a concerted practice, to be found in the sale of the goods in unless the particular structure of the question in a number of important market is such as to create economic particulars, as appears from the table constraints causing the various under produced in Annex III to the reply. takings to behave in a uniform way. That The applicant formally denies the Com is the position in American case-law. mission's assertion to the effect that it As for Community law on competition, a adopted a more prudent course at the concerted practice within the meaning of time of the later increases. Article 85 exists every time that the con Furthermore, it is alleged that the Com duct of several undertakings on the market mission admits that conscious parallelism proceeds from a common will on the part can occur on the European dyestuffs of the interested parties, whether that market, because it has not imposed fines common will is the offspring of reciprocal on other manufacturers of dyestuffs, action or of the action of a third party. although the latter increased their prices There is a common will not only when the exactly as the applicant did, and because it undertakings come to an understanding as declares that it did not impose fines in to their conduct on the market but also these cases since it was not convinced when they deliberately ensure that there that those manufacturers participated in a can be no lack of knowledge about their concerted practice. future conduct by keeping each other In its rejoinder, the defendant argues that informed, and, in so doing, they coordinate the concept of a concerted practice is not their conduct. The element of cooperation equivalent to the American concept of consists in the fact that, by reason of the

required by the law. According to the adduced sufficient proof that concerted defendant, it is enough that there exists practices existed. Furthermore, it has conscious and purposeful cooperation be shown that the structure of the market for tween several undertakings, without its the products in question was such that being necessary that there be a common there is no explanation of this uniform plan consisting, for example, in prior conduct other than that alleging concerted consultation. practices. Moreover, the Commission has On the concept of a concerted practice, even pointed out a series of facts constitut the defendant also refers to an article by ing indications of concertation. Tolksdorf (Annex VI-I to the rejoinder). According to the defendant, although it is Even in an oligopoly, in so far as the sellers the case that in a limited oligopoly the have differing interests, the fact of several undertakings will practice parallel pricing decisions being taken independently by policies if they allow themselves to be the various undertakings does not neces guided by rational economic criteria, sarily lead to similar conduct on the market. nevertheless such market forces do not This is why where sellers are acting in exist for producers of dyestuffs because the

structure of the market is looser and the The defendant declares that it does not interests of the undertakings differ. have any information concerning the level In these circumstances, the purely theoret­ of costs of entering or leaving the market, ical possibility of parallel conduct on the but says that this question is of hardly dyestuffs market does not offer sufficient any importance in the present case, taking explanation of the three price increases at into account the financial strength of the issue, since those instances of parallelism big manufacturers of dyestuffs. represent irrational conduct in economic as to the homogeneity of products, the terms. The defendant asserts that the opinion of the Commission coincides with objectives and interests of the undertakings that of Machlup, to which the applicant in question called for the adoption of mistakenly referred with a view to contra­ different measures, as indeed they have dicting the defendant's arguments. done in other cases, as appears from Tables The cross-elasticity of prices to which VIII and IX of Annex I to the statement Professors Bombach and Hill refer is of defence. As proof of the accuracy of the simply an instrument for measuring the content of those tables, the defendant intensity of competition. In the present states that it is willing to produce the case the right question to ask is what are original documents on the basis of which the factors on the market which determine the tables were prepared, and copies of the the degree of elasticity. According to invoices. Shubik, these are, amongst others, the In answer to the applicant 's criticism that degree of homogeneity of the products, it has relied premarily on theoretical the transparency of the market and the arguments rather than on the facts, the mobility of demand. defendant asserts that it has analysed the Certain writers do notexclude the possi­ markets in great detail and that with the bility of parallel conduct in the case of help of empirical data it has proved in heterogeneous products. But in such a particular that when the undertakings act case the maintenance of the relationship without concertation their conduct cor­ between the prices of the various products responds exactly with the conduct which is considered necessary. This condition the Commission believes to be appropriate is not met in the markets for dyestuffs, to the situation existing on the market. which are heterogeneous to a large extent, Moreover, the applicant has not disputed both because of rapid and constant change the Commission's point of view concerning in the degree to which products can be the occurrence of parallel conduct, or the substituted for one another and because accuracy of its account of the circumstances of the competitive position of the various which must be fulfilled in this connexion, dyes

output. What matters is the existence of a As to the fact that certain undertakings to measure of autonomy in fixing prices. The which the notice of objections was ad factors mentioned by the applicant (rapid dressed have gone unpunished, the de technical progress, the importance of fendant notes that it was not entirely con technical assistance to the customers) vinced of their guilt. makes it possible, so it is argued, for the As regards the problems concerning the undertakings to have an individual strategy. structure of the market in dyestuffs, and The defendant states that the applicant the relationship which exists between an underestimates the importance of facts oligopoly covering heterogeneous pro such as the homogeneity or otherwise of ducts, the intensity of real competition and the products, the existence of rapid parallel conduct, the defendant says that technical progress and of a period of it is willing to produce proof of the sound expansion on the market. ness of its arguments, and names Professor It takes the view that the applicant 's Kantzenbach as expert for this purpose. assertions as to the community of interests As to the factual evidence for the existence and the foreseeable conduct of competitors of prior concertation, the defendant is in contradiction with the real situation observes that the instruction to increase on the market. prices immediately appears in thirteen of The applicant 's statement that dyestuffs the fourteen orders, the instruction to divisions are not profitable is shown to be cancel current offers is found in twelve of untrue by the fact that demand for and the fourteen letters and the prohibition production of these products has doubled against making out antedated bills is found

Finally, it points out As for the rate of expansion of the market, that in many cases these letters only the defendant takes the view that as regards constituted confirmation of instructions the question of interdependence it is already given by telephone or that in necessary to know to what extent an other cases oral explanations were given increase in the sales of one undertaking as well. On this point the defendant men has repercussions on the sales of com tions the testimony of an employee of the petitors. If consumption is increasing, an Geigy company in Basel. increase in the sales of a active competitor does not necessarily mean fewer sales for

dyes). This forces the supplier to stock the urgency of the deliveries requested, considerable quantities near the different the importance of technical assistance and centres of demand. Since the market in therefore of personal contacts and the question is expanding, the defendant fact that purchases are always made in assumes that stocks are calculated in such small quantities and that there exist a way that sudden demand can be met. variations in colouring between similar

dyestuffs produced by the various manu tion on trade between Member States at facturers. this trade level. As regards the trade The applicant argues that, without denying pattern between subsidiaries and con that the market in question has these sumers, no trade between Member States characteristics, the Commission is content can exist, the reasons for this being prac to assert, without any substantiation, that tical ones. The statistics of the OECD these considerations and factors do not are of no use because they only concern justify discounting the possibility of intra- trade between manufacturers and market Community imports by certain users ing outlets and therefore do not show where there exist sufficient disparities whether trade exists at the consumer level. between the levels of prices of dyes in the Trade between Member States would have

There was such a 9. The submission concerning the restriction restriction in this case because the concerted on competition practice in question extended to the territory of several Member States. Trade The applicant observes that the struggle between Member States was particularly involved in obtaining orders and thus in seriously affected because the undertakings conquering a share of the market does not concerned, taken as a whole, effect more take place in the same way in all sectors than 80% of deliveries of dyestuffs in of the market. It is argued that the opinion the Community, and because they in of Professors Bombach and Hill shows creased their prices in such a way that it that in the dyestuffs sector, competition would have been quite impossible for takes place through individual price offers consumers to import directly from other made by each manufacturer to each cus Member States. tomer, through the offer of a wide range of Contrary to what the applicant asserts, products, through intensive research and there has for many years been significant development, through the maintenance of trade in dyestuffs between States inside large, permanent stocks, and through the the Community, and the amount of this quality of technical assistance to customers. trade and the profits therefrom have been The consequence, it is argued, has been

Despite these in argument in evidence of an alleged restric- creases, the tendency of prices to fall in

that the impugned undertaking could not Finally, the applicant denies that it relied be unaware that the practice complained upon the interpretation favourable to itself of constituted an infringement of Article without further inquiry, since it asked for 85, the Commission has not taken account the opinion of an eminent expert, Professor of the situation on the market in dyestuffs, Huber. When it took its decisions to raise or of the particular situation of the appli­ prices in 1964 and 1965, it was not possible cant as an undertaking having its registered for the applicant to take account of the office outside the EEC. Given the diver­ judgment of the Swiss Federal Court of gences of view as to the applicability of the 21 March 1967 to which the Commission doctrine of jurisdiction based on effects, refers. it was not unreasonable for the applicant In its rejoinder the defendant observes to suppose that the Commission had no that at the time covered by the judgment jurisdiction to commence proceedings of the Bundesgerichtshof mentioned by the against it. Therefore, even if it was wrong applicant, it was more difficult for the on this point, it must be admitted that it accused in that case to interpret a legal has committed a pardonable error, and concept appearing in a regulation made that therefore the alleged infringements of in 1947 by the military government than Article 85(1) of the Treaty are not im­ for the applicant to interpret Article 85 putable to an offence on its part. of the EEC Treaty.

not take sufficient account of the fact that result from effecting a general and the applications lodged by the various linear increase in prices, as compared dyestuffs manufacturers have not been with an increase differing in respect of joined. It is argued that the said statement, each customer, product and market? which contains numerous references to The answer to this question is to be cases brought by the other manufacturers, given both on the hypothesis that the infringes the rules of procedure and the producer is taking the initiative in order made by the Court on 11 December making an increase and on the hy­ 1969. In examining the dispute, the pothesis that the producer is faced arguments put forward in the statement of with a general and uniform increase defence should be disregarded. announced by a competitor. In its rejoinder, the defendant replies that it (c) Taking into account in particular the cannot be prohibited from referring to the files concerning parallel cases for the degree of transparency of the market, purpose of adducing evidence in support are dyestuffs other than speciality dyes practically interchangeable and, if so, of its arguments since the infringement of to what extent? What is the approxim­ Article 85(1) arises from a collective action ate proportion of speciality dyes com­ on the part of the various applicants. pared with the total production of dyes for each of the undertakings concerned? IV — Procedure

prices to do so otherwise than by a Court, having regard to the proposal made general uniform and public increase, by common agreement between the parties by fixing different rates for each pro­ on the names of two experts, instructed duct in his individual relationships Horst Albach, Professor of Business with each customer? Management at the University of Bonn, and Wilhelm Norbert Kloten, Professor of (b) For a producer acting independently, Political Economy at the University of what advantages and disadvantages Tübingen, to prepare the report jointly.

JUDGMENT OF 14.7.1972 — CASE 52/69

The experts' joint report was lodged at the period in question the advantages to be Court Registry on 23 April 1971. The obtained from a general and uniform experts summarized the results of their increase in prices were greater than the report in the following terms: disadvantages.

Grounds of judgment

1 It is common ground that from January 1964 to October 1967 three general and uniform increases in the prices of dyestuffs took place in the Community.

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.

GEIGY v COMMISSION

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.

It therefore imposed a fine of 50 000 u.a. on each of these undertakings, with the exception of ACNA, for which the fine was fixed at 40 000 u.a.

3 By application lodged at the Court Registry on 3 October 1969 Geigy AG, now Ciba-Geigy AG, has brought an application against that decision.

Submissions relation to procedure and to form

JUDGMENT OF 14.7.1972 — CASE 52/69

The submissions concerning the administrative procedure

(a) The complaint relating to the signing of the 'notice of objections' by an official of the Commission

7 The applicant asserts that the notice of objections refers to the possible imposition of fines, although the decision to commence proceedings only refers to proceedings to establish infringements.

It is argued that in this way the Commission has infringed Article 19 of Regulation No 17/62 and Articles 2 and 4 of Regulation No 99/63, combined with the second paragraph of Article 162 of the EEC Treaty and Article 27 of the Commission's Rules of Procedure.

8 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.

GEIGY v COMMISSION

Moreover, although the decision to commence proceedings mentions 'especially' Articles 3 and 9(2) and (3) of Regulation No 17, it refers to that regulation as a whole, and thus also to Article 15 concerning fines.

9 Therefore this submission is unfounded.

Since there is no convention on the matter between the Community and the Swiss Confederation, the question how this notice is to be served on interested parties established outside the territory of the Community depends on international practice and must be resolved with mutual regard to the spheres of jurisdiction both of the Community and of the third State concerned.

It appears from the file that the authorities of the third State in question do not for the present envisage any practical possibility of service, considered by them to be valid under internal law, on the territory of that State.

Therefore international law cannot be invoked in order to deny the Community the power to take the necessary steps to ensure the effectiveness of measures taken with a view to curtailing conduct adversely affecting competition which has arisen in the Common Market, even if the registered office of the undertaking responsible for such conduct is situated in a third country.

JUDGMENT OF 14.7.1972 — CASE 52/69

Furthermore, the main purpose of the notice in question is to ensure that those concerned may exercise the rights which they enjoy under the Treaty and Com­ munity legislation.

There a notice served in accordance with Community rules cannot be considered to invalidate the subsequent administrative procedure if it must be served in a third country, once it is established that by enabling the addressee to take cog­ nizance of the objections held against him it has achieved its purpose.

Such is not the case in the present proceedings.

It appears from the text of the notice of objections that the facts taken into account against the applicant were clearly set out therein.

That notice contains all the information necessary for determining the objections made against the applicant, and in particular the circumstances in which the in­ creases of 1964, 1965 and 1967 were announced and implemented.

Amendments concerning the precise course of the facts included in the contested decision in the light of information furnished by the undertakings concerned to the Commission during the course of the administrative procedure do not infringe the rights of the defence.

GEIGY v COMMISSION

15 Therefore these complaints are unfounded.

In certain circumstances such irregularities may prevent the period within which an application must be lodged from starting to run.

The last paragraph of Article 173 of the Treaty provides that the period of in­ stituting proceedings for the annulment of individual measures of the Com­ mission starts to run from the date of notification of the decision to the applicant or, in the absence thereof, from the day on which it came to the knowledge of the latter.

In the present case it is established that the applicant has had full knowledge of the text of the decision and that it has exercised its right to institute proceedings within the prescribed period.

In these circumstances the question of possible irregularities concerning notifica­ tion ceases to be relevant.

19 Therefore this submission is inadmissible for want of relevance.

The submission as to the limitation period

22 Therefore the submission is unfounded.

Substantive submissions as to the existence of concerted practices

Arguments of the parties

3 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.

24 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 argued that in fact the prices of the products in question displayed a constant tendency to fall because of lively competition between producers which is typical of the market in those products, not only as regards the quality of the product and technical assistance to customers, but also as regards prices, particularly the large reductions granted individually to the principal purchasers.

The fact that the rates of increase were identical was the result, it is said, of the existence of the 'price-leadership' of one undertaking.

It is argued that Geigy's conduct at the meeting of 18 August 1967 in Basel was characteristic of an undertaking controlling prices on an oligopolistic market and had no connexion with a concerted practice.

Different price increases for interchangeable products either could not produce economically significant results because of the limited level of stock and of the time necessary for adapting plant to appreciably increased demand, or would lead to a ruinous price war.

Dyestuffs for which there are no substitutes only form, it is said, 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 which decided to increase its prices could, it is argued, reasonably expect to be followed by its competitors, which had the same problems regarding profits.

This is especially the case if the parallel conduct is such as to enable the persons concerned to attempt to stabilize prices at a level different from that to which com­ petition would have led, and to consolidate established positions to the detriment of effective freedom of movement of the products in the Common Market and of the freedom of consumers to choose their suppliers.

27 Therefore the question whether there was a concerted action in this case can only be correctly determined if the evidence upon which the contested decision is based is considered, not in isolation, but as a whole, account being taken of the specific features of the market in the products in question.

The characteristic features of the market in dyestuffs

28 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 manufactures 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.

Thus the establishment of the Common Market would not appear to have had any effect on this situation, since the differences between national price levels have scarcely decreased.

On the contrary, it is clear that each of the national markets has the characteristics of an oligopoly and that in most of them price levels are established under the influence of a 'price-leader', who in some cases is the largest producer in the country concerned, and in other cases is a producer in another Member State or a third State, acting through a subsidiary.

According to the experts this dividing-up of the market is due to the need to supply local technical assistance to users and to ensure immediate delivery, generally in small quantities, since, apart from exceptional cases, producers supply their subsidiaries established in the different Member States and maintain a net­

work of agents and depots to ensure that user undertakings receive specific as­ sistance 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

The increase in the prices of certain dyes and pigments introduced on 1 January 1965 in all the Member States, except France, applied to all the products which had been excluded from the first increase.

The reason why the price increase of 8% introduced in the autumn of 1967 was raised to 12% for France was that there was a wish to make up for the increases of 1964 and 1965 in which that market had not taken part because of the price control system.

Therefore the three increases cannot be isolated one from another, even though they did not take place under identical conditions.

31 In 1964 all the undertakings in question announced their increases and im­ mediately put them into effect, the initiative coming from Ciba-Italy which, on 7 January 1964, following instructions from Ciba-Switzerland, announced and immediately introduced an increase of 15%. This initiative was followed by the other producers on the Italian market within two or three days.

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 colouring and cosmetics.

33 As regards the increase of 1967, during a meeting held at Basel on 19 August 1967, which was attended by all the producers mentioned in the contested decision except ACNA, the Geigy undertaking announced its intention to increase its selling prices by 8% with effect from 16 October 1967.

On that same occasion the representatives of Bayer and Francolor stated that their undertakings were also considering an increase.

From mid-September all the undertakings mentioned in the contested decision announced a price increase of 8%, raised to 12% for France, to take effect on 16 October in all the countries except Italy, where ACNA again refused to increase its prices, although it was willing to follow the movement in prices on two other markets, albeit on dates other than 16 October.

Viewed as a whole, the three consecutive increases reveal progressive cooperation between the undertakings concerned.

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 respec­ tively, 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.

JUDGMENT OF 14.7.1972 — CASE 52/69

Furthermore, the dividing-up of the common market into five national markets with different price levels and structures makes it improbable that a spontaneous and equal price increase would occur on all the national markets.

Although a general, spontaneous increase on each of the national markets is just conceivable, these increases might be expected to differ according to the particular characteristics of the different national markets.

Therefore, although parallel conduct in respect of prices may well have been an attractive and risk-free objective for the undertakings concerned, it is hardly conceivable that the same action could be taken spontaneously at the same time, on the same national markets and for the same range of products.

36 Nor is it any more plausible that the increases of January 1964, introduced on the Italian market and copied on the Netherlands and Belgo-Luxembourg markets, which have little in common with each other either as regards the level of prices or the pattern of competition, could have been brought into effect within a period of two to three days without prior concertation.

GEIGY v COMMISSION

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.

Although every producer is free to change his prices, taking into account in so doing the present or foreseeable conduct of his competitors, nevertheless it is contrary to the rules on competition contained in the Treaty for a producer to cooperate with his competitors, in any way whatsoever, in order to determine a

JUDGMENT OF 14.7.1972 — CASE 52/69

coordinated course of action relating to a price increase and to ensure its success by prior elimination of all uncertainty as to each other's conduct regarding the essential elements of that action, such as the amount, subject-matter, date and place of the increases.

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 prohibited by Article 85(1) of the Treaty.

The effect of the concerted practice on trade between Member States

38 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 preferred to make their purchases of dyestuffs in their own country.

GEIGY v COMMISSION

42 Since a concerted practice is involved, it is first necessary to ascertain whether the conduct of the applicant has had effects within the Common Market.

It appears from what has already been said that the increases at issue were put into effect within the common market and concerned competition between pro­ ducers operating within it.

Therefore the actions for which the fine at issue has been imposed constitute practices carried on directly within the Common Market.

It follows from what has been said in considering the submission relating to the existence of concerted practices, that the applicant company decided on increases in the selling prices of its products to users in the common market, and that these increases were of a uniform nature in line with increases decided upon by the other producers involved.

By making use of its power to control its subsidiaries established in the Community, the applicant was able to ensure that its decision was implemented on that market.

The applicant was able in particular to exercise decisive influence over the policy of those subsidiaries as regards selling prices in the Common Market and in fact used this power upon the occasion of the three price increases in question.

JUDGMENT OF 14.7.1972 — CASE 52/69

In effect the Telex messages relating to the 1964 increase, which the applicant sent to its subsidiaries in the Common Market, gave the addressee orders as to the prices which they were to charge and the other conditions of sale which they were to apply in dealing with their customers.

In the absence of evidence to the contrary, it must be assumed that on the occasion of the increases of 1965 and 1967 the applicant acted in a similar fashion in its relations with its subsidiaries established in the common market.

In these circumstances the formal separation between these companies, resulting from their separate legal personality, cannot outweight the unity of their conduct on the market for the purposes of applying the rules on competition.

It was in fact the applicant undertaking which brought the concerted practice into being within the Common Market.

It is argued that by reason of differences of opinion as to the applicability of the principle of jurisdiction based on effects, the applicant was entitled to take the view that the Commission had no jurisdiction to commence proceedings against it.

There, it is said, it must be admitted that in any event the applicant committed a pardonable error, and that any infringements of Article 85(1) of the Treaty are not imputable to an offence on its part.

GEIGY v COMMISSION

51 It appears from the examination of the submission concerning the jurisdiction of the Commission that that jurisdiction is based not only on the effects arising from a course of conduct pursued outside the Community, but also on an activity pursued within the Common Market and imputable to the applicant.

52 Therefore this submission is unfounded.

The fine

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 85 and 173; Having regard to Regulation No 17/62 of the Council of 6 February 1962; Having regard to Regulation No 99/63 of the Commission of 25 July 1963; Having regard to the Protocol on the Statute of the Court of Justice of the Euro­ pean Communities; Having regard to the Rules of Procedure of the Court of Justice of the European Communities,

JUDGMENT OF 14.7.1972 — CASE 52/69

THE COURT

hereby:

1. Dismisses the application;

2. Orders the applicant to bear the costs.

(See Case 48/69, p. 665)