C-54/69

FRANCOLOR v COMMISSION

kets and, as a result, direct access by producer to cooperate with his competi­ consumers to the sources of production tors, in anyway whatsoever, in order of the whole Community. to determine a coordinated course of action relating to a movement of prices 10. Although every producer is free to and to ensure its success by prior change his prices, taking into account elimination of all uncertainty as to in so doing the present or foreseeable each other's conduct regarding the conduct of his competitors, neverthe­ essential elements of that action, less it is contrary to the rules on com­ such as the amount, subject-matter, petition contained in the Treaty for a date and place of such movements.

In Case 54/69

SA FRANÇAISE des Matières Colorantes (hereinafter referred to as Francolor), now SA Produits Chimiques UGINE Kuhlmann, having its registered office in Paris, 25 boulevard de l'Amiral Bruix, represented by J. Lassier, Advocate at the Cour de Paris, with an address for service in Luxembourg at the Chambers of E. Arendt, Centre Louvigny, 34 B/IV rue Philippe-II, applicant,

v

Commission of the European Communities, represented by its Legal Advisers, J. Thiesing, G. Marchesini and J. Griesmar, acting as Agents, 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

I — Statement of the facts upon its own initiative to commence proceedings under Article 3 of Regulation The facts may be summarized as follows: No 17/62 of the Council for presumed On the basis of information supplied by infringement of Article 85 of the Treaty trade associations of the various industries against the undertakings, including the using dyestuffs, the Commission made Francolor undertaking, which had partici­ inquiries as to whether increases in prices pated in a concerted practice for the pur­ for these products which had occurred pose of fixing prices for dyestuffs. since the beginning of 1964 in the countries By letter of 11 December 1967 the Com­ of the Community were made by mutual mission informed Francolor of its decision. agreement between the undertakings con­ This letter was accompanied by a notice of cerned. objections made by the Commission against In particular, by a letter of 18 August 1964 the undertakings which had participated addressed to the applicant, the Commis­ in the abovementioned increases. There sion's Directorate-General for Competi­ were sixty recipients of the said letter and tion, referring to the increases in the notice. They were producers of dyestuffs selling prices of dyestuffs introduced by established both inside and outside the that undertaking during the course of Community, and their subsidiaries and that year, asked it for information on a representatives established within the Com­ certain number of points with a view to mon Market. examining whether those measures fell In the notice of objections the Commission within the scope of Article 85 of the EEC declared that within the Common Market Treaty. Francolor replied to this question­ the price increases had been introduced by naire by letter of 17 September 1964. the following producers, and by their As a result of these inquiries the Com­ subsidiaries or representatives: mission found that three uniform price increases had taken place. An increase — Azienda Colon Nazionali Affini S.p.A. of 15% affecting most aniline dyes took (ACNA), Milan (Italy), place between 7 and 20 January 1964 in — Industria Piemontese dei Colon di

— Société Française des Matières Colo­ and that a fine of 40 000 u.a. be paid by rantes SA (Francolor), Paris (France), Azienda Colori Nazionali Affini S.p.A. — Fabriek van Chemische Produkten On 3 October 1969 Francolor lodged an Vondelingenplaat NV, Rotterdam application at the Court Registry for the (Netherlands), annulment, or alternatively the reversal, of that decision. — Ciba SA, Basel (Switzerland), — Sandoz SA, Basel (Switzerland), — J. R. Geigy SA, Basel (Switzerland), II — Conclusions of the parties — Fabrique de Matières Colorantes Durand et Huguenin SA, Basel (Swit­ The applicant claims that the Court should: zerland), '(a) Annul, or in any event reverse, the — imperial Chemical industries Ltd. (ICI), measure adopted by the Commission Manchester (United Kingdom), of the European Communities on 24 — Yorkshire Dyeware and Chemical, July 1969 entitled "Decision of the Leeds (United Kingdom), Commission relating to proceedings — E. I. Du Pont de Nemours Company under Article 85 of the EEC Treaty" Inc., Wilmington, Del. (United States of (IV/26.267—Dyestuffs); America). (b) Order the Commission of the Euro­ pean Communities to bear the whole By letter of 10 April 1968, in reply to this costs of the present proceedings.' notice of objections, Francolor submitted its written observations in refutation of the The defendant contends that the Court objections set out against it. should: On 10 September 1968, Francolor Sub­ mitted its oral observations in the presence '(a) Dismiss Application No 54/69 lodged of representatives of the Commission and at the Court Registry on 3 October of the Member States. 1969; At its meeting on 24 July 1969, the Com­ mission adopted a decision ordering (b) Order the applicant to bear the costs.' Francolor to pay a fine of 50 000 u.a. for infringements of the provisions of Article 85(1) of the Treaty, which it had III — Submissions and arguments allegedly committed as a participant with of the parties other undertakings in concerted practices for the purpose of fixing the amount of The submissions and arguments of the price increases and the circumstances in parties may be summarized as follows: which these increases were to be introduced in the dyestuffs industry in 1964, 1965 and A — Submissions as to form 1967. For the same reasons the decision ordered First submission, concerning the commence­ that fines of 50 000 u.a. be paid by: ment of the administrative procedure and the publication of the decision adopted — Badische Anilin- und Soda-Fabrik AG, — Cassella Farbwerke Mainkur AG, The applicant argues that the contested decision is vitiated by infringement of — Farbenfabriken Bayer AG, essential procedural requirements, misuse — Farbwerke Hoechst AG, of powers, infringement of the Treaty and — Ciba SA, infringement of Regulation No 17/62 of the Council because: — J. R. Geigy SA, — Sandoz SA, (a) It involves the simultaneous applica­ — Imperial Chemical Industries Ltd., tion of Article 3 and of Article 15 of the

regulation, whereas the decision of own initiative to commence proceed 31 May 1967 to commence the proce ings pursuant to Article 3 of Regula dure resulting in the contested decision tion No 17/62 of the Council'. Nor referred only to Article 3 of Regula does the word 'especially' appear in tion No 17; the letter addressed to the Prime Minister of France on 22 November (b) The Commission published the con 1967 informing him that proceedings tested decision in the Journal Officiel of had been commenced. It is argued that

Moreover, by reason of the express and exclusive (a) The decision of 31 May 1967 to com mence the administrative procedure mention of Article 3 of Regulation No 17, the Commission is barred from was taken in application of Regula tion No 17 as a whole, and not just imposing a fine on the applicant. on the basis of Articles 3 and 9. The Finally, by reason of the wording of reason why that decision referred the first line of paragraph 21 of the 'especially' to Article 3 of Regulation notice of objections, the applicant was No 17 was in order to forestall the not, it is argued, able to submit future application of the concurrent adequate defence; jurisdiction of the national authorities to apply Article 85(1); (b) The formalities relating to publication of decisions taken pursuant to Article 85 of the Treaty are of a substantive (b) The publication of the decision in the nature. It is asserted that publicity is Journal Officiel, for which no provision required for decisions capable of affect was made in the operative part of that ing the rights of third parties, and that decision, constitutes a measure sub therefore the formality of publication sequent to the occurrence of the is a substantive requirement in this measure in question and cannot as respect, because it alone ensures that such entail its annulment.

FRANCOLOR v COMMISSION

the Commission and the Member States. As regards the relationship The applicant asserts that the contested between the Commission and the decision was taken in violation of the undertakings concerned, it is the notice rights of the defence, which it regards as of objections alone which determines a rule of law relating to the application of the subject-matter of the procedure. the Treaty, because it was not given any The applicant's argument based on means of knowing whether the information paragraph 21 of the notice of objections obtained during inquiries carried out is unfounded; the Commission's inten following the communication of the notice tions appear very clearly since the said of objections was taken into consideration notice of objections includes ample in reaching the decision and in stating the explanations concerning the fines im reasons for it.

they have been duly notified. There is claimed that every time there was a general no reason for regarding the system of increase prices slid quickly downwards as a publication otherwise than in terms of result of discounts given to certain cus a discretionary power given to the tomers. It was on this particular point Commission, which is qualified by that the checks in question were made. Article 21 of Regulation No 17 only Alternatively, the defendant argues that to a limited extent in that it lays down neither Article 19 of Regulation No 17 nor a duty to publish certain kinds of Regulation No 99 was infringed because the decision. inquiries to which the applicant refers Moreover, the decision taken was also (those of 13.12.1967, 25.1.1968 and 6.2. taken in application of Article 3 of the 1968) all took place before the meeting of

10 December 1968 organized for the very fringement of the rights of the defence and purpose of enabling the undertakings infringement of Article 4 of Regulation concerned to submit their oral observa No 99 in that the notice of objections sent tions on the objections as a whole. In any to the applicant on 11 December 1967 did event the contested decision was not based not include a sufficient exposition of the on any objection other than those set out elements of fact and of the documents used in the notice of 11 December 1967. in support of the objections, contrary to The applicant replies that it was not in the principle confirmed by the Court of formed of the result of the abovementioned Justice in Cases 42 and 49/59. investigations and that that result formed The applicant complains that the notice of part of the elements of fact on which the objections omits four specific facts which contested decision was based.

1967. dure, and the inquiries certainly, so it is The defendant replies that according to said, yielded information on this point. the judgment in the Grundig-Consten case, The defendant objects that the information it is not necessary for the whole contents supposedly obtained as a result of the of the file to be made available, and that inquiries mentioned above did not even it is sufficient for the Commission to in constitute aggravating circumstances in form the undertakings concerned of the relation to the objections previously set elements, knowledge of which is necessary out in the notice or as regards fixing the to ascertain which objections were taken amount of the fine. Therefore for the into consideration. This was done in the

The meeting but as an assertion of the interested parties in Basel in August 1967 was mentioned at themselves, who had mentioned it during page 9 of the notice of objections. The the course of the procedure. only reason for the mention of the meeting in London was to introduce the facts set Third submission, concerning the incomplete out in the third paragraph. nature of the notice of objections In its reply, the applicant, having observed that the Grundig-Consten case states that The applicant argues that the contested those concerned must be informed of the decision is vitiated by infringement of an elements of fact on which the objections essential procedural requirement, in are based, points to further silences in the

notice of objections, concerning in par with national regulations cannot have any ticular the subject-matter and results of effect on the compatibility with the EEC the inquiries carried out subsequent to the Treaty of the concerted practice which was notice of objections, as well as certain at the origin of that increase. The French documents appearing in the annexes to authorities approved the alteration in the statement of defence and the report of prices and not the concerted practice the National Board for Prices and Incomes which preceded it. produced during the proceedings in English. Furthermore, the notice of objections does Fourth submission, concerning the reference not contain the slightest indication of the made by the contested decision to a decision way in which the defendant intended the of a national authority individual liability of the parties to be

annulled. Moreover, the Commission is dure. In effect the notice of objections said to be guilty of a misuse of the powers need not necessarily include the supporting conferred on it in order to apply Article evidence in the Commission's possession 85 by contenting itself with adopting as its for the facts on which those objections are own, without any inquiry, the finding of a based. The Commission must have a cer national authority. tain discretion as to the information on the The defendant replies that the statements file which must be made available to the concerning the decision of the Bundes interested party. kartellamt are superfluous in the context It is argued that it would have been pre of the contested decision.

It is not the The defendant offers, alternatively, to price increase itself which is at issue in produce proof that Farbenfabriken Bayer the present case, but the concerted prac AG considers as accurate the version tice, which is contrary to the abovemen according to which Geigy announced on tioned article of the Treaty, and which 18 August 1967 that it envisaged raising its resulted in that increase. Accordingly, the selling prices by 8% on 16 October 1967. fact that the price increase is in conformity The applicant opposes this offer of proof,

which would tend in practice to remove excluded from the proceedings. The in all effect from the order of the Court fringement to which the Commission takes rejecting the joinder of the cases concerning objection can only, it is said, be in the the contested decision. Furthermore, it nature of a momentary or periodical is argued that this offer of proof does not infringement as opposed to a continuous answer the submission put forward by the infringement. The consequence of this is applicant. The latter also criticizes the that time must start to run from the reference made in the statement of termination of each of the alleged and defence to the judgment of the Kammer proven infringements, and not from the gericht which, because of the relative last date on which the last of the infringe nature of res judicata, cannot be set up ments was noted and proven.

was decided upon. That meeting and its continuous concerted practice which ex subject-matter were clearly mentioned in tended over the whole period from January the notice of objections of 11 December 1964 to October 1967. Therefore the 1967 at point XII(a). The decision of the problem of limitation does not arise in the Bundeskartellamt could not have been present case. mentioned therein, because it was not Secondly, the defendant observes that known to the defendant at the time when from the absence of provisions governing that notice was prepared. The grounds of time-limits in the law in force, it follows the judgment of the Kammergericht were that the Commission has retained com put forward purely as a factual argument plete authority as part of its duties and in concerning the evidence adduced in the exercise of its discretionary power to contested decision concerning the subject- determine more precisely, subject to review matter of the meeting in Basel on 18 by the Court of Justice, the limitation August 1967. periods that appear appropriate as regards proceedings against infringements.

However, as in the field of criminal law limitation is a regards putting that principle into practice matter of public policy and must therefore there are important differences. be considered automatically. Taking into In view of this diaparity the Commission account the rules applicable on this point reaches the conclusion that it is im in the Member States and the importance possible to discern any precise criteria and of the penalties at issue, the applicant that therefore as regards limitation periods considers it just and equitable to adopt a for infringements of the provisions of period of limitation of two years. It is Article 85 of the Treaty it is the needs of asserted that this period was only sus Community law alone that should be taken pended with effect from 11 December 1967, into consideration. the date when the notice of objections Even if it were accepted that each of the was sent to the applicant. Therefore all three successive price increases occurred facts prior to 11 December 1965 should be by reason of a new concerted practice,

under Article 11 of Regulation No 17 that the contested decision mentions 'con and by investigations carried out by certed practices' and 'infringements' in officials of the Commission under Article several places, it is nevertheless true that 14 of Regulation No 17 at the registered there was a close relationship and a unity offices of several undertakings, including of purpose between those practices or that of the applicant. infringements, which were merely the The defendant is of the opinion that, reflection of one and the same longstanding taking into account the legal and practical concertation, constituting a continuous difficulties of the question, a limitation infringement. period of even three years cannot be con As regards the length of the limitation

concerted practice. The proof of this is As for the suspension of the period of that in the preamble the contested decision limitation, the defendant asserts that the expressly speaks of 'differentes pratiques criterion which the applicant deduces concertées'. from the case-law does not correspond to The facts at issue could not possibly relate the national solutions, since even in the case to a continuous concerted practice because of a public prosecution the court may of the intense competition which is to be order a nonsuit or grant an order of found on the dyestuffs market, and which nolle prosequi. has brought about a constant erosion of

It is not necessary, In the present case the possibility of fines the applicant asserts, to suppose that was first mentioned in the notice of objec concertation existed in order to explain, tions. Therefore, no inquiry or measure in each of the cases envisaged, the possi-

operates. For it was in the applicant's theory of oligopolies starts from the prin interest to align its prices on those of its ciple that in the oligopoly situation there competitors in order to compensate for are many ways of arriving at prices, and the difficult selling conditions which were that it would certainly not be right to imposed on it on its national market by equate the oligopoly situation with con the application of a rigorous freeze on sciously parallel conduct by participants. producer prices.

In this with a degree of probability bordering on latter situation an undertaking only in certainty, that a mutual will existed. In creases its prices when it expects that the particular, the Commission has not proved others will also do so. It is mainly with that the representatives of the applicant reference to their marginal costs, taking acquiesced in the declaration made by into account their demand curve, that the representative of Geigy SA, Mr Fischer, undertakings decide whether and to what recorded in the minutes of the meeting held extent they will follow a price increase. in Basel on 18 August 1967, according to Therefore, even when the degree of inter which his undertaking seriously envisaged dependence is very high, the uncertainty increasing its charges. No reaction on the in which an undertaking increasing its part of the applicant is recorded in those prices is placed as to whether the others

Another beforehand what attitude they intended to condition should also be added: it is that adopt, so that each of them could regulate the market should be in a period of stagna his conduct, safe in the knowledge that tion such that the interdependence of the his competitors would act in a similar sellers is not affected by notable increases fashion. in demand. The defendant maintains that the price In America both the text-book writers increases in question cannot be explained and the case-law attribute a leading role to by the oligopolistic structure of the market. homogeneity of products in deciding if In referring to what is expected to happen conduct is consciously parallel.

FRANCOLOR v COMMISSION

A further concerted practice within the meaning of reason is the fact that technical services Article 65(1) of the ECSC Treaty, as ap are provided for purchasers, which differ in pears from the fines which it imposed on degree according to the customer. It certain steel works by a decision of 4 follows that there is no single, standard February 1959, which has not been con price for each dye since prices are tested by the parties concerned. negotiated individually with each cus If the criteria elaborated by the text-book tomer, with considerable differences be writers concerning conscious parallelism tween one purchaser and another.

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 In

JUDGMENT OF 14.7.1972 — CASE 54/69

This necessarily results in differences in that one undertaking would decide uni­ profits. The widest profit margins are ob­ laterally on a large general increase in tained with speciality products, so long as prices without first consulting its com­ they remain so. Profits vary in relation to petitors. Supposing that there were uni­ the level of prices for the different products lateral, independent increases on the part on the market. The volume of sales has an of certain undertakings, each of the other influence on profits: thus for example, undertakings would have been able, by ACNA can only begin to make a profit on setting different prices and by taking its production of special dyestuffs if the account of the position occupied on 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. the best 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 the most have had to tell the purchasers of oligopolies, one is forced to conclude that totally interchangeable products that it was it is 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.

Finally, the defendant stresses the fact case that as regards Italy and the Nether that certain passages of communications lands, the applicant was informed by its said to have been addressed almost distributors only at the moment when its simultaneously by the various undertakings competitors changed their prices, a point concerned to their subsidiaries or re which the defendant did not deny in 1964 presentatives in Italy and in Belgium are when it was informed of these facts by the same almost word for word. Francolor.

(c) The 1967 increase tion does not occur. For example, there are the 'barometer undertakings' which, As regards France, the applicant refers to without necessarily being the most power the explanations already put forward under ful, can ensure that their rivals follow the third submission. As regards Belgium, their prices where those prices reflect Luxembourg, the Netherlands and Ger changes in the conditions on the market many, the applicant observes that no evi with sufficient speed. This model, together dence has been supplied in the statement of with that of the 'oligopoly in series' which, defence, and that the defendant admits since certain products cannot be sub that the results of the inquiries undertaken stituted one for another, places each seller after the notice of objections was sent in an oligopolistic subgroup, (each sub were not made available to the applicant group having a different composition during the administrative procedure. because each has different neighbours), The defendant replies that according to the applies exactly to the market in dyestuffs. results of its examination of the structure An analysis of the theoretical behaviour of the market in question there exist on of the participants in an oligopoly neces that market conditions which do not sarily remains imperfect, because knowl correspond to those which, in the opinion edge of it cannot be directly deduced from of academic writers, must be fulfilled any fundamental principle. before non-concerted parallel practices waving thus criticized the theoretical pre

of 13 January 1964 from Francolor to its of manufacturers making up the greater Belgian subsidiary, annexed to the state­ part of the supply (80%) is relatively high ment of defence). This percentage had to (ten). The remainder is produced by seven be lowered to 15 % because of the reaction other manufacturers. In most cases, the of the Belgian customers. It is also the ten principal manufacturers of dyestuffs

JUDGMENT OF 14.7.1972 — CASE 54/69

on page 2 of the decision. In effect, follow dependence of reaction of the sellers, the ing the request for information sent by structure of the market is wide enough to the Commission to the interested parties prevent price competition from being on 18 August 1964, the latter were much paralysed. more circumspect; and the announcements This competition takes place, it is said, of the increases were spread over a longer product by product and purchaser by period and were for the most part effected

It appears prices at which one and the same manu from that table that the dates announced facturer offers its products to its customers, by Francolor's competitors for the entry and in the prices charged on the various into force of the increases coincided with territorial markets, the difference from one the dates announced not only by the country to another ranging up to 40%. Francolor parent company, but also by In this context, the conduct of the under its subsidiaries. takings concerned upon the occasion of the In its rejoinder, the defendant asks, on the three price increases of 1964, 1965 and basis of Article 49 of the Rules of Proce 1967 contrasts strikingly with their usual dure, that Erhard Kantzenbach, Professor conduct on the market, as has been noted at the University of Frankfurt am Main, by Professor Kantzenbach in his report. be appointed as an expert on the problems relating to the structure of the dyestuffs The 1964 increase market, and on the relationship existing between a heterogeneous oligopoly, effec As regards Belgium, the defendant accuses tiveness of competition and parallel con the applicant of attempting to introduce duct. confusion between wholesale prices and selling prices to the customers. The Seventh submission, on the statement of the defendant also opposes the applicant's objections adopted against the applicant in assertions to the effect that its increases the contested decision and of the evidence always followed those of its competitors. put forward in support of them On this point it refers to the dates, men tioned in the notice objections, on which The applicant argues that the contested the other undertakings concerned an decision is vitiated by an infringement of nounced their increases.

FRANCOLOR v COMMISSION

in a position to exercise its powers of and relevant manner, the principal issues review within the meaning of Article 17 of law and of fact upon which it is based of Regulation No 17. As an example of and which are necessary in order that the this lack of precision, the applicant cites reasoning may be understood. paragraphs (b) and (c) of the second The applicant, in its reply, complains of recital of the preamble to the first part of the the fact that it has not been given the decision: 'Almost all the producers in­ opportunity to submit its observations on troduced into these countries, as also into an important part of the decision con­ the countries already affected by the in­ cerning its share of responsibility, which crease of 1964, a uniform increase of the Commission says was identical to that 10% and, as regards 16 October 1967: of the other undertakings concerned, 'An increase of 8% for dyestuffs was without in any way justifying this state­ introduced by almost all the producers in ment.

JUDGMENT OF 14.7.1972 — CASE 54/69

The requirements relating to the state­ (c) Taking into account in particular ment of the reasons for its measures did the degree of transparency of the not, in its opinion, make it necessary for market, are dyestuffs other than it to reproduce that table as part of the speciality dyes practically inter­ reasons given for the decision adopted. changeable and, if so, to what extent? What is the approximate proportion IV — Procedure of speciality dyes compared with the total production of dyes for each of the undertakings concerned? The procedure took the following course: By order of 11 December 1969 the Court decided that the defendant should lodge 2. The parties may, by agreement be­ separate statements of defence without tween themselves, propose the name of reference to the other cases pending on an expert to the Court before 1 October the subject of dyestuffs. 1970. By order of 8 July 1970, the Court, having regard to the report of the Judge-Rappor­ By order of the same date the Court teur and the views of the Advocate- joined Cases 48/69, 49/69, 51/69, 52/69, General, ordered as follows: 53/69, 54/69, 55/69, 56/69 and 57/69 for the purposes of the expert's report. 1. An expert's report shall be obtained in By order dated 13 November 1970 the

FRANCOLOR v COMMISSION

prices in a given field would probably for the purposes of the question asked, have been lower than the average in­ speciality dyestuffs are those who are crease in prices achieved by a general not interchangeable for practical pur­ and uniform price increase. poses, it can be said that the proportion that they represent of the total produc­ tion of dyestuffs in each of the under­ — A general and linear increase in prices takings concerned is very low. How­ involves opportunities and risks both ever, the results of the study show that for the producer who takes the initiative the distinction is of but little use in in putting prices up and for the pro­ assessing the facts envisaged. ducer of dyestuffs who has to fall in with a general and uniform increase Observations on the experts' report were announced by a competitor. Both as lodged at the Court Registry on 3 July regards the producer who determines 1971 by the applicant and on 21 June 1971 the price and as regards those who by the defendant. follow him, the conclusion to be drawn On 28 September 1971 the experts named is that during the period in question by the Court took the oath in accordance the advantages to be obtained from a with Article 49(6) of the Rules of Proce­ general and uniform increase in prices dure. were greater than the disadvantages. The parties presented oral argument at the hearings on 28, 29 and 30 September — The appropriate answer to Question (c) 1971 and on 2 May 1972. is that the degree of interchangeability During the course of the procedure Mr of dyestuffs varies: it ranges from pro­ Advocate-General Mayras replaced Mr ducts which are perfectly interchange­ Advocate-General Dutheillet de Lamothe, able to products for which to all intents deceased. He delivered his opinion at the and purposes there is no substitute. If, hearing on 2 May 1972.

JUDGMENT OF 14.7.1972 — CASE 54/69

6 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.

7 By a decision of 31 May 1967 the Commission commenced proceedings under Article 3 of Regulation No 17/62 on its own initiative concerning these increases for presumed infringement of Article 85(1) of the EEC Treaty against seventeen producers of dyestuffs established within and outside the Common Market, and against numerous subsidiaries and representatives of those undertakings.

8 By a decision of 24 July 1969, the Commission found that the increases were the result of concerted practices, which infringed Article 85(1) of the Treaty, between the undertakings

— Badische Anilin- und Soda-Fabrik AG (BASF), Ludwigshafen, — Cassella Farbwerke Mainkur AG, Frankfurt am Main, — Farbenfabriken Bayer AG, Leverkusen, — Farbwerke Hoechst AG, Frankfurt am Main, — Société Française des Matières Colorantes SA, Paris, — Azienda Colori Nazionali Affini S.p.A. (ACNA), Milan, — Ciba SA, Basel, — J. R. Geigy SA, Basel, — Sandoz SA, Basel, and — Emperial Chemical Industries Ltd. (ICI), Manchester.

9 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.

12 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 competi­ tion have been commenced.

13 The notice of objections sent to the applicant expressly referred to Article 15(2) of Regulation No 17 relating to fines.

14 These submissions therefore are unfounded.

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

15 The applicant asserts that the Commission, in continuing its inquiries following communication of the notice of objections and in not informing it of the informa­ tion thus obtained, disregarded the rights of the defence guaranteed by Article 19(1) of Regulation No 17/62 and by Regulation No 99/63.

16 The Commission has the right and where appropriate the duty to institute fresh inquiries during the administrative procedure if it appears from the course of that procedure that additional investigations are necessary.

21 In particular, it is argued that the contested decision is vitiated by these infringe­ ments in that it relies on a decision of the Bundeskartellamt, which was not mentioned in the notice of objections, in support of the assertion relating to the existence of concerted practices.

22 In order to protect the rights of the defence during the course of the administrative procedure, it is sufficient that undertakings should be informed of the essential elements of fact on which the objections are based.

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

24 It appears from the notice of objections that the facts taken into consideration against the applicant were clearly stated therein.

25 That notice contains all the information necessary for deciding as to the objections put forward with regard to the applicant, in particular the circumstances in which the increases of 1964, 1965 and 1967 were announced and implemented.

26 Additional evidence for the facts taken into consideration and amendments made

FRANCOLOR v COMMISSION

31 Although the Commission was not required to publish the contested decision, there was nothing in the letter or in the spirit of the abovementioned Article 21 to prevent it from effecting publication, if to do so did not involve revealing trade secrets of the undertakings.

32 The present submission is therefore unfounded.

The submission as to the limitation period

33 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 increase of January 1964, exceeded any reasonable limitation period.

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

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

40 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.

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

42 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.

43 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.

49 It is asserted that academic writers accept the proposition that in an oligopolistic market such as the dyestuffs market so-called 'barometer' undertakings, although not necessarily the most powerful, can ensure that their rivals follow their prices where those prices reflect changes in conditions on the market with sufficient rapidity.

FRANCOLOR v COMMISSION

so It is argued that in these circumstances, since there is no conclusive proof of the existence of a common will, it would be quite wrong to regard a common ap­ proach as a concerted practice.

The concept of a concerted practice

51 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. 52 By its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants.

53 Although parallel behaviour may not by itself be identified with a concerted prac­ tice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings, and the volume of the said market.

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

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

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

61 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.

62 Another factor is that the total demand for dyestuffs is constantly increasing, and this tends to induce producers to adopt a policy enabling them to take advantage of this increase.

63 In the territory of the Community, the market in dyestuffs in fact consists of five separate national markets with different price levels which cannot be explained by differences in costs and charges affecting producers in those countries.

68 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 reeds 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.

69 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

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

71 The increase of 15 % in the prices of most aniline dyes in Germany on 1 January 1965 was in reality nothing more than the extension to another national market of of the increase applied in January 1964 in Italy, the Netherlands, Belgium and Luxembourg.

72 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.

78 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.

79 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.

so 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.

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

82 Otherwise the increase was general, was simultaneously introduced by all the producers mentioned in the contested decision, and was applied without any differences concerning the range of products.

83 As regards the increase of 1967, during a meeting held in 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.

89 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.

90 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.

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

93 In fact, from the number of producers concerned is it not possible to say that the European market in dyestuffs is, in the strict sense, an oligopoly in which price competition could no longer play a substantial role.

93 These producers are sufficiently powerful and numerous to create a considerable risk that in times of rising prices some of them might not follow the general move­ ment but might instead try to increase their share of the market by behaving in an individual way.

94 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.

100 The general and uniform increase on those different markets can only be explained by a common intention on the part of those undertakings, first, to adjust the level of prices and the situation resulting from competition in the form of dis­ counts, and secondly, to avoid the risk, which is inherent in any price increase, of changing the conditions of competition.

101 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 undermining this conclusion, tends to confirm it.

102 The function of price competition is to keep prices down to the lowest possible level and to encourage the movement of goods between the Member States, thereby permitting the most efficient possible distribution of activities in the matter of productivity and the capacity of undertakings to adapt themselves to change.

103 Differences in rates encourage the pursuit of one of the basic objectives of the Treaty, namely the interpenetration of national markets and, as a result, direct access by consumers to the sources of production of the whole Community.

104 By reason of the limited elasticity of the market in dyestuffs, resulting from fac­ tors such as the lack of transparency with regard to prices, the interdependence of the different dyestuffs of each producer for the purpose of building up the range of products used by each consumer, the relatively low proportion of the cost of the

FRANCOLOR v COMMISSION

Costs

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

109 The applicant has failed in its submissions.

110 Therefore it must be ordered to bear the costs.

JUDGMENT OF 14.7.1972 — CASE 54/69

On those grounds,

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

(See Case 48/69, p. 665)