C-22/71

In Case 22/71

Reference to the Court under Article 177 of the EEC Treaty by the Tribunal de Commerce, Nice, for a preliminary ruling in the action pending before that court between

1. BÉGUELIN Import Co ., Brussels, 2. S.A. BÉGUELIN Import Co. France , Paris, and

1. S.A.G.L. Import Export , Nice, 2. Karl Marbach , Hamburg, 3. Fritz Marbach, Hamburg, 4. GEBRÜDER Marbach GmbH , Hamburg,

on the interpretation of

BEGUELIN IMPORT v G.L. IMPORT EXPORT

JUDGMENT

Issues of fact and of law

I — Facts and procedure In 1969 the undertaking G.L. Import Export, Nice, imported about 18 000 The facts and procedure may be sum­ WIN lighters into France. These had marized as follows: first of all been despatched to Hamburg 1. On 1 March 1967 the Belgian com­ for Gebrüder Marbach, and had there pany, Béguelin Co., hereinafter referred remained in bond; afterwards they were to as 'Béguelin/Belgium' entered into an forwarded and cleared through customs agreement with the Japanese firm in France. The actions brought by the Oshawa whereby the latter appointed Béguelin companies before the Tribunal it exclusive distributor for Belgium and de Commerce, Nice, sought to have G.L. France of pocket gas cigarette-lighters Import Export and Gebrüder Marbach bearing the trade-mark 'WIN' and made prohibited, on pain of a penalty, from by the Japanese firm. Since 18 March selling the products in question on 1967 the Béguelin Import Co. France, hereinafter called 'Béguelin/France', a French territory, and to obtain damages from these firms for unlawful and unfair subsidiary company of Béguelin/Belgium and entirely dependent on the latter competition. The defendants contend economically has been the exclusive that, because Béguelin/France is merely dealer for France; on 25 March 1967 a subsidiary of Béguelin/Belgium and it entered into an agreement with they have common economic interests, Oshawa to this effect. The agreements the exclusive dealing agreement relating have not been notified to the Commis­ to French territory is null and void as sion. being contrary to Article 85 of the The undertaking Gebrüder Marbach has Treaty and as constituting a restriction a similar exclusive dealing agreement in on freedom of trade within the Com­ respect of German territory. munity.

2. By judgment of 8 February 1971 the whether this agreement may be set Tribunal de Commerce, Nice, decided up against third parties? to refer the following questions to the (2) Where a third party has imported Court: into its country, France, the same '(1) Do two separate commercial com­ products, manufactured in Japan, as panies, each having its registered those which the French company office in one of two countries of has the exclusive right to distribute the European Community (Belgium, in France, and this has been done France), contravene the provisions by making use of the parallel right of the Treaty of Rome, especially enjoyed by the exclusive distributor Article 85 of the said Treaty, where in Hamburg appointed by the same it is established that, although con­ Japanese firm for the Federal Re­ stituting distinct legal persons, they public of Germany, that exclusive trade, in their common economic distributor having received the goods interest, in pursuance of the ex­ in transit, re-directed them to the clusive right to distribute manufac­ third party in France, and then had tured products from Japan (which them cleared through the customs is not a member of the European at Marseilles, is such an import Community), in execution of an ex­ procedure contrary to the provisions clusive dealing agreement covering of the Treaty of Rome? Or must French territory granted to one of it be regarded as in accordance with them (Béguelin/France) if, first, the the provisions of the regulation of concession to (Béguelin/France) the Commission of 22 March 1967, covering French territory has been which applies to contracts entered substituted for that originally gran­ into between two undertakings ted to one of them (Béguelin/Bel­ which contain a clause for exclusive gium) to be exercised in respect of purchase or for reciprocal exclusive­ the territories of both countries of ness, provided that the distributor the Community, whereas that for is not prohibited from re-exporting, Belgium remained with the Belgian and that there is no prohibition of company; and, if, secondly, it is parallel imports by third parties?' established that the French com­ 5. The judgment making the reference pany is a subsidiary of the Belgian was entered at the Court Registry on company? Does not a situation in 29 April 1971. In accordance with which economic interests have, un­ Article 20 of the Statute of the Court der cover of two distinct legal en­ of Justice of the EEC, the plaintiffs in tities, been merged in this way, the main action and the Commission of constitute an infringement of the the European Communities submitted principle of free competition in that written observations; the defendants in it consists of a de facto monopoly the main action submitted to the Court between them, capable of affecting trade between the Member States an opinion of Professor Farjat of the and of restricting or distorting com­ Faculty of Law and Economic Sciences petition within the common market of Nice, and expressed the wish to en­ contrary to Article 85 of the Treaty large upon this opinion at the hearing. of Rome? After hearing the report of Judge-

respectively between the Oshawa com fact be no question of independent pany on the one hand, and the Béguelin/ action on the part of the subsidiary: Belgium, Béguelin/France and Gebrüder indeed there can be no agreement in Marbach undertakings, on the other circumstances where only one economic hand, prohibit Oshawa's distributors entity is involved. To hold otherwise from re-exporting to other Member would be to prevent subsidiaries from States of the EEC the WIN lighters being set up in other countries of the supplied to them by Oshawa. The parties Community and that would be to act were also invited to state whether they contrary to one of the main objectives agreed with the figures supplied by the of the Treaty, namely, 'the abolition, as Commission concerning the extent in between Member States, of obstacles to the Community of the market in WIN freedom of movement for persons, ser lighters. vices and capital' (Article 3(c)). The oral observations of the parties to At the present stage of the EEC 's the main action and of the Commission development, there is nothing to warrant were submitted at the hearing on 6 a requirement that a foreign manu

Commission was represented by its dents set by the Court of Justice than Legal Adviser, Erich Zimmermann, an agreement by which a producer en assisted by Jean-Pierre Dubois, of the trusts a single distributor with the sale Legal Department. of his products in a particular area does The Advocate-General delivered his not automatically come within the pro opinion at the hearing on 28 October hibition in Article 85, but does so only 1971. if certain additional considerations are satisfied (Judgment of 30 June 1966 in II — Observations submit Case 56/65, Société Technique Minière ted under Article 20 of v Maschinenbau Ulm [1966] ECR 249 the Protocol on the et seq. and Judgment of 9 July 1969 in Statute of the Court of Case 5/69 Völk v Vervaecke [1969] Justice of the EEC ECR 295). In the present case the

There is therefore miques confondus', (situation in which free competition in the large whole there has been a merger of economic sale, medium wholesale and retail interests) such as there is between the business. Béguelin/Belgium and Béguelin/France Importers, who must not be confused companies, does not come under Article with wholesalers, are completely free 85(1). In such a situation there can in to import and distribute makes which

compete with those covered toy an The present case is on all fours with exclusive dealing agreement. that which was the subject of the judg — Legitimate concern to protect a ment of the Court on 13 July 1966 trade-mark and thus ensure that (Joined Cases 56 and 58/74, Consten industrial property right is protected, and Grundig v Commission [1966] ECR must not be overlooked. Admittedly, 299), which condemned absolute terri it is not easy to establish the point torial protection. This principle was re at which such protection comes op

Vertriebs- GmbH v Helmut Bitsch antee enclosed with the goods. [1970] ECR 523)—to the effect that a Following this line of thought, the clause prohibiting exports, imposed on plaintiffs in the main action declare retailers who are in any case prohibited that they argued before the French from exporting the goods which they court on the basis of unfair competi receive, does not affect the validity of tion again on account of the fact that the agreement—cannot be applied in a the G.L. Import Export firm sold case involving exclusive import clauses. the products in dispute with vouchers In its judgment in Völk v Vervaecke, of this type which were intended to the Court was content to hold that an be honoured by the service set up exclusive agreement guaranteeing by 'the Béguelin/France company. absolute territorial protection 'may' All these considerations indicate that escape the prohibition in Article 85 there was nothing in the situation having regard to the weak position of described by the Tribunal de Com the persons concerned on the market merce, Nice, which constituted a de in the products in in question.

the Japanese firm. The fact that the control)' and, for reasons explained in latter is not a Community undertaking detail by the dependant in the main is of no importance; it suffices to action, to creating a system devoid of establish that competition within the legal certainty. The agreement could be territory of the Community suffered and invoked against third parties only if that the agreements in question affected the concessionnaire had had to incur trade between Member States. abnormally high expenditure and if it

had been notified. However, it remains relationship between the producer on the an open question whether, even in these one hand and the concessionnaire or circumstances, there is any real need concessionnaires on the other. to invoke it against third parties, since 2. Second question it is for the persons granting the con cessions to choose concessionnaires who According to the plaintiffs in the main honour their commitments and to pro action it must be borne in mind that the vide sanctions for those who do not. G.L. Import Export company effected It seems that it is only under French the imports in dispute with the con case-law that third parties are treated currence of the Gebrüder Marbach with severity and that the other Mem undertaking, which was the concession ber States do not recognize the prin naire for Germany of the products con ciple that such agreements prevail cerned and acted solely as forwarding against third parties; indeed it is all agent. Those concerned were therefore

his own country, nor can he rely on the taking in a third country, sets up in German legal concept of 'exhaustion' another Member State a subsidiary, of the rights appertaining to a trade which is wholly dependant upon it, mark. Nor, finally, is such conduct for the purpose of ensuring exclusive covered by Regulation No 67/67. distribution of that product in that Nor can the defendant in the main other Member State and so of turn action avail itself of the principle laid ing to account within that State the down by the Court in its judgment of exclusive concession covering the two 18 February 1971 (Case 40/70 Sirena Member States which was originally v Novimpex and Others [1971] ECR conferred on the parent company?' 69 et seq.) That judgment declared Since agreements, such as that con Article 85 to be applicable 'to the extent cluded between Béguelin/Belgium and to which trade-mark rights are invoked Béguelin/France do not constitute so as to prevent imports of products 'agreements between undertakings' with which originate in different Member in the meaning of the provision quoted, States .

All that the defendants in the main action, matters is the nature of the exclusive according to which, 'the dispute is not

concerned with the use of forms of 85(1) in its judgment in Technique guarantee as the defendants have never Minière v Maschinenbau Ulm, quoted made use of them and the plaintiffs above, the next step must be to consider have produced no evidence to the con­ what conditions the agreements in ques­ trary'. On the assumption that this state­ tion have as their object or effect the ment is correct, it reveals that the prevention, restriction or distortion 'to identity of the product was compromised an appreciable extent' of competition because it thereby lost an essential and within the common market. The Com­ costly element of its make-up, namely mission identifies the principles laid the after-sales service to be rendered on down for this purpose in the judgment presentation of the said forms. Such in Völk v Vervaecke and Cadillon v conduct distorts competition and is Höss as the need to look at the actual therefore contrary to the Treaty. context of the agreement and the pos­ The. defendants in the main action did sibility that, in view of the weak posi­ not advance any argument with parti­ tion of the parties on the market in the cular reference to the second question. products in question, the prohibition The Commission believes that the ques­ may not apply. tion should be recast in the following In addition, the Communication from terms: the Commission of 27 May 1970 (JO C In the case or an agreement, con­ 64, p. 1) concerning agreements of cluded between a manufacturing com­ minor importance and intended to give pany situate in a third country and a precise indication of the extent to an undertaking situate within the which, under the criterion laid down, common market, whereby the under­ competition is restricted, may provide taking situate in the third country some guidance. However, Article 85(1) agrees with the other undertaking to may apply even in cases where the deliver certain products only to the upper limits given in that communica­ latter for re-sale in a prescribed area tion (expressed in terms of turnover and of Common Market territory, does the share of the market in the case of the agreement fall within the prohibition undertakings which are parties to the in Article 85(1) of the Treaty if the agreement) are not reached; in fact, in exclusive dealer objects to third par­ such cases, restriction of competition ties importing the products concerned may be appreciable. In the present case, into the territory for which he has the following facts and circumstances been granted the concession?' must be taken into account: (a) It is first of all necessary to establish — The total annual turnover of the whether such an agreement is liable to affect trade between Member States. Oshawa firm and all its distributor

Netherlands markets. Japanese pro 'the contracting parties make it diffi ducers export more cigarette lighters cult for intermediaries or consumers than those of any other country to to obtain the goods to which the con all the countries of the common tract relates from other dealers with market amounting, in 1969, to ap the common market, in particular proximately 741 metric tons. where the contracting parties: — A feature of the French market in (1) exercise industrial property rights to prevent. . . ;

78/70 Deutsche Grammophon Gesell sion. In reality, the agreement between schaft v Metro-SB-Groß märkte. In Oshawa and Béguelin/France falls with these decisions, the Court held that in in the categories of agreement entitled dustrial and commercial property rights to the exemption provided for under cannot be used to impair the free move Article 1(1) of the regulation; the fact ment of goods within the common mar that the grantor of the concession is ket; this applies with even greater force established outside the common market in a case, such as the present, where is, here again, of no moment. the national law on which the dealer The effect or this provision is that replies does not give him any specific Article 85(1) of the Treaty does not protection. apply to the said agreement because it It accordingly follows that the answer fulfils the conditions laid down under to be given to the national court is as Articles 2 and 4 of the regulation.

JUDGMENT OF 25. 11. 1971 — CASE 22/71

by persons reselling on the territory common market. The exemption pro­ granted under the agreement, products vided for certain categories of ex­ covered by an exclusive dealing agree­ clusive dealing agreement under Regu­ ment concluded for resale of the lation No 67/67 cannot be relied products in a Member State between upon. an undertaking manufacturing the Such an agreement is null and void product and situate in a third country and cannot be invoked against third and an undertaking situate inside the parties.'

Grounds of judgment

1 By judgment of 8 Febuary 1971 received at the Court Registry on 29 April 1971, the Tribunal de Commerce, Nice, has referred to the Court two ques­ tions concerning the interpretation of Article 85 of the EEC Treaty and Regulation No 67/67 of the Commission (OJ of 25 March 1967, p. 849; OJ (English Special Edition) 1967, p. 10).

First question

2 The first question refers to agreements which have not been notified to the Commission and under which a producer established in a third country grants to an undertaking subject to the law of a Member State the exclusive right to distribute his products on the territory of that State.

7 Article 85(1) prohibits agreements which have as their object or effect an impediment to competition.

8 This is not the position in the case of an exclusive sales agreement when in fact the concession granted under that agreement is in part transferred from the parent company to a subsidiary which, although having separate legal personality, enjoys no economic independence.

9 Accordingly the relationship between the companies cannot be taken into account in determining the validity of an exclusive dealing agreement entered into between the subsidiary and a third party.

10 B — To be incompatible with the common market and prohibited under Article 85, an agreement must be one which 'may affect trade between Member States' and have 'as [its] object or effect' an impediment to 'com­ petition within the common market'.

11 The fact that one of the undertakings which are parties to the agreement is situate in a third country does not prevent application of that provision since the agreement is operative on the territory of the common market.

12 An exclusive dealing agreement entered into between a producer who is subject to the law of a third country and a distributor established in the common market fulfils the two aforementioned conditions when, de jure or de facto, it prevents the distributor from re-exporting the products in ques­ tion to other Member States or prevents the products from being imported from other Member States into the protected area and from being distributed therein by persons other than the exclusive dealer or his customers.

18 It follows that, in order to determine whether a contract which contains a clause conferring an exclusive right of sale is caught by that article, account must be taken in particular of the nature and quantity, restricted or other­ wise, of the products covered by the agreement; the standing of the grantor and of the grantee of the concession on the market in the products con­ cerned; whether the agreement stands alone or is one of a series of agree­ ments; the stringency of the clauses designed to protect the exclusive right or on the other hand, the extent to which any openings are left for other dealings in the products concerned in the form of re-exports or parallel imports.

2. Applicability of Regulation No 67/67

19 Under Article 1(1) of Regulation No 67/67, 'it is hereby declared that until 31 December 1972 Article 85(1) of the Treaty shall not apply to agreements to which only two undertakings are party' and in which an obligation is entered into between the parties in respect of exclusive supply or of exclusive purchase, or both, 'for resale'.

20 Under Article 2(1) of the regulation, no restrictions on competition are to be imposed on the exclusive dealer other than those specified therein and these do not include a prohibition on re-exporting the products in question to other Member States.

21 Article 2(2) of the regulation provides that Article 1(1) shall apply notwith­ standing that the exclusive dealer undertakes' certain obligations listed in Article 2(2) which, again, makes no reference to a prohibition on re- exporting.

BEGUELIN IMPORT v G.L. IMPORT EXPORT

27 Though such an agreement, which has not been notified to the Commission, but is exempt from notification under Article 4(2) of Regulation No 17 of the Council, (OJ of 21 February 1962, (English Special Edition) 1959-1962, p. 87 et seq.) remain fully effective until it has been declared null and void, this exemption extends only to certain agreements where 'the only parties thereto are undertakings from one Member State' or to agreements whose sole object or effect is that defined in Article 4(2).

28 The agreements in the present case satisfy neither of these conditions be­ cause one of the contracting parties is subject to the law of a third State and the object or effect of the agreement differs from those referred to in the aforementioned provisions.

29 Since the nullity referred to in Article 85(2) is absolute, an agreement which

JUDGMENT OF 25. 11. 1971 — CASE 22/71

is null and void by virtue of this provision has no effect as between the contracting parties and cannot be set up against third parties.

Second question

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the Commission of the European Communities and of the parties to the main action; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Com­ munity, especially Articles 85 and 177; Having regard to Regulation No 17, especially Article 4, of the Council implementing Articles 85 and 86 of the Treaty; Having regard to Regulation No 67/67 of the Commission on the applica­ tion of Article 85(3) of the Treaty to certain categories of exclusive dealing agreements;

BEGUELIN IMPORT v G.L. IMPORT EXPORT

Having regard to the Protocol on the Statute of the Court of Justice of the European Communities, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the Euro­ pean Communities,

THE COURT

in answer to the questions referred to it by the Tribunal de Commerce, Nice, by order of that court dated 8 February 1971,

4. Since the nullity for which Article 85(2) of the Treaty provides is absolute, the agreement concerned has no effect as between the contracting parties and cannot be set up against third parties.

OPINION OF MR DUTHEILLET DE LAMOTHE — CASE 22/71

The second question

5. An import or export transaction cannot as such come within the prohibition imposed by Article 85(1) of the Treaty.

Lecourt Mertens de Wilmars Kutscher

Donner Trabucchi Monaco Pescatore

Mr President, In 1969, a French import/export com­ Members of the Court, pany the G.L. Import Export, Nice, purchased from the Marbach firm a The Béguelin Company is a Belgian im­ consignment of 18 000 WIN lighters, port/export company. which were the property of Marbach On 1 March 1967 it entered into a but which the latter firm had left in contract with the Japanese firm Oshawa bond at the customs in Hamburg; after under which it was appointed exclusive having taken delivery of them in France, representative in France and Belgium the G.L. Import Export company be­ for the sale of gas cigarette-lighters gan to distribute the lighters on the manufactured by the Japanese firm un­ French market. der the trade-mark 'WIN'. The Béguelin/Belgium and Béguelin/­ A few days later the Béguelin/Belgium France companies heard of this and company set up in France a subsidiary, thereupon commenced proceedings be­ Béguelin/France, which was wholly un­ fore the Tribunal de Commerce, Nice, der its control and Oshawa's exclusive against the G.L. Import Export Com­ dealership for France was then trans­ pany, Nice, and the German firm of ferred by contract of 25 March 1967 Marbach in which they sought to the Béguelin/France company. — first, an injunction against the sale, Shortly afterwards, the exclusive dealer­ on pain of a penalty, on French ter­ ship for the Federal Republic of Ger­ ritory of lighters acquired by G.L. many in the WIN trade-mark was gran­ Import and bearing the WIN trade­ ted by the Oshawa company to the Mar­ mark and bach company, a German firm. — secondly, an order that the French