C-6/72

11. Articles 85 and 86 seek to achieve market, such a case necessarily exists the same aim on different levels, viz. if practically all competition is the maintenance of effective eliminated. competition within the Common Market. The restraint of competition 13. The question of the link of causality which is prohibited if it is the result between the dominant position and of behaviour falling under Article 85 its abuse is of no consequence, for cannot become permissible by the the strengthening of the position of fact that such behaviour succeeds an undertaking may be an abuse and under the influence of a dominant prohibited under Article 86 of the undertaking and results in the' Treaty regardless of the means and merger of the undertakings procedure by which it is achieved, if concerned. it has the effect of substantially fettering competition. 12. The list of abuses contained in Article 14. The definition of the relevant 86 of the Treaty is not an exhaustive enumeration of the abuses of a­ market is of essential significance, dominant position prohibited by the for the possibilities of competition Treaty. can only be judged in relation to those characteristics of the products Article 86 is not only aimed at in question by virtue of which those practices which may cause damage products are particularly apt to to consumers directly, but also at those which are detrimental to them satisfy an inelastic need and are only to a limited extent interchangeable through their impact on an with other products. In order to be effective competition structure such regarded as constituting a distinct as is mentioned in Article 3 (f) of market, the products in question the Treaty. Abuse may therefore must be individualized not only by occur if an undertaking in a domi­ the mere fact that they are used for nant position strengthens such pos­ packing certain products, but by ition in such a way that the degree of particular characteristics of produc­ dominance reached substantially tion which make them specifically fetters competition, i.e. that only suitable for this purpose. undertakings remain in the market whose behaviour depends on the 15. A dominant position on the market dominant one. for light metal containers for meat If it can, irrespective of any fault, and fish cannot be decisive as long be regarded as an abuse if an as it has not been proved that undertaking holds a position so competitors from other sectors of dominant that the objectives of the the market for light metal containers Treaty are circumvented by an are not in a position to enter this alteration to the supply structure market by a simple adaptation, with which seriously endangers the sufficient strength to create a serious consumer's freedom of action in the counterweight.

Commission of the European Communities, represented by its legal advisers Bastiaan Van der Esch and Jochen Thiesing, acting as agents, having chosen its address for service in Luxembourg in the office of its legal adviser Emile Reuter, 4, boulevard Royal,

defendant,

Application for annulment of the decision of the Commission of 9 December 1971 relating to a procedure in application of Article 86 of the Treaty Case IV/26811 — Europemballage Corporation (OJ 1972, L 7),

THE COURT

composed of: R. Lecourt, President, R. Monaco (Rapporteur) and P. Pesca­ tore, Presidents of Chambers, A. M. Donner and H. Kutscher, Judges,

Advocate-General: K. Roemer Registrar: A. Van Houtte

London, of a European holding concerned to the possible incompatibility company for packaging, in which the of the transaction contemplated with the licensees of Continental in the provisions of Article 86 of the Treaty, Netherlands and in France, Thomassen and to the legal and financial & Drijver-Verblifa N.V. (TDV) of consequences which might thereby arise Deventer and J. J. Carnaud and Forges for these companies. MB then indicated de Basse-Indre (Carnaud) of Paris, that it was postponing its contemplated would be invited to participate. transaction with Europemballage. However, Carnaud indicated, at the end On 8 April 1970, Europemballage of August 1969, that it could not carried out the purchase of the shares participate in the contemplated holding and debentures of TDV offered up to company. that date, thus bringing the initial share On 16 February 1970, an agreement was of Continental in TDV to 91 07 %. signed between Continental and TDV 2. On 9 April 1970, the Commission whereby it was agreed: decided to open of its own motion a (a) that Continental would set up in procedure (in application of Article 3 (1) Delaware (USA) a company of Regulation No 17/62) against (subsequently called Europemballage Continental and its subsidiary Europem­ Corporation) to which it would ballage concerning the acquisition by the transfer its interests in SLW; latter of the majority of the shares in TDV. On completion of that procedure (b) that Continental would induce the Commission made, on 9 December Europemballage to offer to the 1971, a decision under Article 86 of the shareholders of TDV other than MB Treaty which, having set out the reasons and Carnaud, a sum of 140 florins on which it was based concerning the cash for each TDV share of 20 characteristics of the undertakings in florins nominal value. Each TDV question, their mutual links on a shareholder offering his shares personal, financial, contractual and would also receive a certificate technical level and, particularly as granting him a preferential right to regards SLW and TDV, the purchase ordinary shares in characteristics of their production, their Europemballage when these should sales on their respective markets, the be offered to the public. Continental exports of one company into the would provide Europemballage with territory of the other, their competitive the necessary funds for such a situation, etc., provides as follows: purchase by acquiring additional shares in Europemballage. 'Article 1

Continental Can Company Inc. is The applicants submit that the Court required to put an end to the should: infringement of Article 86 of the Treaty establishing the EEC found in Article 1. '1. Declare null and void the decision of For this purpose it must submit the Commission of the European proposals to the Commission before 1 Communities of 9 December 1971 July 1972. 'IV/26 811 — Europemballage' finding that in purchasing 80 % of Article 3 the shares of the undertaking This decision is addressed to Continental Thomassen & Drijver-Verblifa N.V. of Deventer, through the medium of Can Company Inc. in New York.' its subsidiary Europemballage Cor­ This decision, published in the Official poration, Continental Can Company Journal of the European Communities of Inc. of New York has infringed 8 January 1972, No L 7 — wherein it is Article 86 of the EEC Treaty, stated that 'the French language version requiring it to put an end to this is the only authentic version' — was infringement and enjoining it to notified to Europemballage on 14 submit proposals to the Commission December 1971 and to Continental Can before 1 July 1972. by post during the same month. The German version also was communicated 2. Hold that under Article 73 (b) of the to counsel for the applicants on 20 Rules of Procedure of the Court of December 1971. Justice of the European Communities This decision is the subject of the present the Commission of the European application, lodged with the Registry of Communities is required to repay to the Court on 9 February 1972. the applicants the costs incurred by the parties in these proceedings.' 3. In the application, and subsequently by a separate document lodged with the The defendant submits that the Court Registry of the Court on 23 February should: 1972, the applicants submitted, under 'dismiss the application and order the Article 185 of the EEC Treaty, a request applicants to bear the costs.' for suspension of execution of Article 2 of the contested decision. The Presidenr of the Court, after hearing the parties, rejected this request by order dated 21 III — Pleas and arguments March 1972. of the parties On the report of the Judge-Rapporteur, after hearings the Advocate-General, the The pleas and arguments of the parties Court decided to open the oral may be summarized as follows: procedure, after inviting the parties to reply before 1 September 1972 to a A — General observations certain number of questions. The parties presented oral arguments at The applicants submit that the the hearing on 20 September 1972. procedure leading up to the adoption of

sion, without showing any reaction — According to Article 7 of Regulation to the reply which had been made to No 99/63, the oral hearing is only this communication on 9 August intended to afford an opportunity for 1971 and without indicating the completing or developing the written reasons on which its legal opinion observations already submitted under was based. I Article 5. Since the applicants had — Finally, this attitude is not made very detailed written observa­ compatible with the proper conduct tions, the officials of the Commission and of the Member States had no of the oral hearing provided for by Article 7 of Regulation No 99/63, so questions to ask at the hearing on 21 that in the present case the hearing September 1971. Moreover, it was was inadequate, the Commission only after a close examination of the having confined itself to protesting statement of its objections, the reply against the statement of facts of 9 August 1971 and the minutes of contained in the reply of 9 August the hearing, that the Commission issued the decision. 1971, without its representatives and those of the other authorities taking part having asked the slightest question. B — Procedure

— irregular description in the Official request for annulment submitted by Journal of the European Communi­ the applicants. ties of 8 January 1972 of the procedure opened against Continen­ — The description of the procedure in tal, the French version of the decision the Official Journal is not decisive being entitled 'Europemballage for the purposes of the validity of the Corporation'; decision challenged. It is in any case indisputable that Continental must — infringement of the language rules be considered the indirect purchaser (Article 3 of Regulation No 1 of the and Europemballage as the direct Council, OJ No 17, 1958), the purchaser of the majority of the Commission having indicated the shares of TDV. French version of the decision as the authentic version whereas counsel for — Since Continental has its registered Europemballage, authorized to reply office in a third state, the to the Commission's statement of Commission was entitled, under objections, had indicated in the letter Article 3 of Regulation No 1, to accompanying his reply that the choose any af the four official German version of this document languages of the Community. It should be authentic; chose the French language chiefly because Europemballage, which — violation of the rights of the defence, acquired the TDV shares on behalf Article 2 of the decision challenged of Continental, has an office in specifying Continental whereas the Brussels and had itself drawn up in Commission's statement of objec­ French its reply to the Commission's tions (addressed solely to Europem­ objections. ballage) had not been notified to Continental, so that the latter had — The allegation that Continental did not had an opportunity to make not have the opportunity to make known its point of view in known its point of view regarding accordance with Article 19 (1) of the objections made by the Regulation No 17/62; Commission is disproved by a whole series of facts forming part of the — the fact that in this case the procedure in question and recorded Commission has exceeded its powers in the dossier, and also by the since Articles 1 to 3 of the decision conclusions which might be drawn challenged specify Continental, from a statement by Mr Charles B. which, not having a registered office Stauffacher, Vice-Chairman of the and not exercising any activity on Board of Continental Can Company the territory of the Member States, is and Chairman of the Board of not, according to the general Europemballage Corporation, at the principles of the law of nations, hearing on 21 September 1971. subject to the authority of the Commission nor to the jurisdiction — Even on the strict application of the of the Court of Justice. so-called principle of territoriality, there is no doubt that States (and the The defendant replies as follows: Community) are entitled to apply their legislation to acts carried out on — Community law does not require the territory subject to their that notification should be by sovereignty, whatever may be the diplomatic means. Moreover, even if nationality of the authors of those the notification of the act challenged acts. Continental has indeed acted was vitiated by an irregularity, this within the Community through the irregularity does not justify the medium of a subsidiary which,

although having its own legal considered as a legal whole even if each personality, possesses no economic of them has a distinct legal personality. independence. Finally, the defendant objects to the lodging by the applicants of a The applicants insist on the 'lack of competence' of the Commission in memorandum drawn up by counsel for Continental in New York, Mr Helmer relation to Continental, contending that Johnson. This memorandum cannot be the behaviour of its subsidiary cannot be taken into account, first because its imputed to that undertaking without author is not qualified under the violating the fundamental principle of

Having regard to the purpose borrowed from American law which are for which Continental set up inappropriate in applying Community Europemballage and to the fact that the law, for which it suffices that the effects latter, although having legal personality, of the behaviour in question are has no economic independence, the legal produced within the Common Market. personality of Europemballage cannot be taken into account for the purposes of application of the rules of Community C — Merits law on competition. Moreover, a

company. Furthermore, it cannot be 1. Interpretation of Article 86: disputed that SLW, which holds a 'dominant position' and 'abuse of dominant position on the German dominant position' market, is placed under the direct The applicants contend that the concept control of Europemballage and under of abuse enunciated by the Commission the indirect control of Continental. (part II, consideration C, 23) arises from Finally, the references contained in the a legal conception whose object is to

As for of interpretation: American anti-trust law, it is clear that in that law companies which form a unit — The very wording of this Article from the economic point of view are shows that it is not concerned with the

creation or reinforcement of dominant it has identified the second phase with positions nor with facts which might the concept of 'abuse'. impede them or bring them to an end. The first phase quite simply defines the The preparatory work on the Treaty ability of the entrepreneur to exercise a contains nothing to militate against this substantial influence on the market conclusion. Moreover, a comparison situation, and corresponds both to the between the ECSC Treaty and the EEC natural inclination of the entrepreneur Treaty shows that whilst Article 85 of and to the typical characteristics of a the EEC Treaty is essentially in line with market economy.

interpretation. To attain the desired The concept of 'dominant position' result it cannot base itself on Article adopted in the decision in question (part 3 (f) of the EEC Treaty, for the rule laid II, consideration B, 3) is, according to down by that provision is merely a the applicants, purely theoretical. First it framework rule, which the authors of is based on an unrealistic criterion, which the Treaty have only made specific in can only with difficulty be subjected to Article 86 by prohibiting certain forms judicial control. The existence in the of abuse of a dominant position, without present case of 'independent behaviour' however laying down any provisions on such as excessive prices, scarcity of the creation or the enlargement of that goods, deterioration in quality, has not position, which are phenomena of a been proved anywhere in the disputed structural nature. decision. If the Commission's view were correct, it would follow that the — These conclusions are confirmed by Continental group would be in a an analysis of the constituent elements of position to increase its profits or at least

But even with the elimination of residuary supposing that this element were competition, potential or effective', and correctly calculated it does not suffice to

prove the existence of a dominant purpose it is necessary to take into position, since it gives no indication of account numerous factors extending the effective margin of action available over several financial years. to the undertaking. The existence or the maintenance of a dominant position is (b) Abuse of dominant position not necessarily linked with the share of The applicants then criticize the concept the market held by the undertaking, but with various factors liable to arise on of 'abuse' adopted in the contested decision (part II, consideration C, 23 and that market from time to time.

This case rests fairly and squarely on conclusion also applies to the case objective facts which the applicants mentioned in item (b) of the said cannot dispute. It is incorrect that the paragraph. The explicit reference to the existence in this case of a dominant prejudice which the behaviour men position had to be proved by the tioned must cause to consumers shows 'behaviour' mentioned by the applicants. that such behaviour cannot simply Such practices in fact constitute cases of consist of practices internal to the 'abuse' of a dominant position. undertaking or of a structural character. Moreover, the argument based on the Admittedly, it is not excluded that the alleged decline in the profits of SLW is phrase 'in particular' is intended to allow not such as to call in question the for the case where a concentration has existence of such a position. If SLW had been achieved under the effect of a really made less profit in 1971, it is not constraint exercised by an undertaking easy to see why Continental has recently which uses its dominant position for this made an offer to the independent purpose. But where, as in the present shareholders of SLW still remaining, case, the concentration has been made who hold about 14 % of the share

JUDGMENT OF 21. 2. 1973 — CASE 6/72

Continental could the fundamental objectives of the have bought the shares of TDV on the Community that the content and scope capital market without having control of of Article 86 can be discerned. The SLW, and even if the latter company had method of interpretation followed by the not existed. More, it would even have Commission is in conformity with the been impossible in the present case to nature of the Treaty which, as a use such a position on the market in the framework treaty, entrusts to the

industry. Nor did the purchase of TDV Market, to promote throughout the shares take place on the market in these Community a harmonious development products in the Netherlands, but solely of economic activities and an accelerated on the market in shares and debentures. raising of the standard of living in the The disputed aquisition of TDV shares, Member States. For this purpose the therefore, as regards both its subject contracting parties considered it matter and its geographical limits, took absolutely necessary to guarantee the place on a market other than the one maintenance of an effective system of allegedly dominated. competition (Article 3 (f) of the Treaty). The defendant shares the view that In the context of such a system, the Article 86 of the Treaty does not afford concept of abuse is linked with the a basis for effective intervention in existence of behaviour on the part of an advance in a process of concentration. undertaking which is 'objectively' illicit However, the contested decision has in relation to the purposes of the Treaty. nothing to do with the problem of prior Since the 'objective' existence of such control of concentrations in the sense of behaviour is sufficient to establish an Article 66 of the ECSC Treaty, so that abuse contrary to the Treaty, the the observations made on this subject by concept of abuse of dominant position in the applicants are not relevant in the Article 86 does not therefore imply that present case. there is also a fault in the sense of a

failure in propriety or morality. It does States within the meaning of Article 86 not matter, for example, whether in the of the Treaty. present case the applicants paid, as they The applicants reply that on the allege, a fair purchase price to the practical level, the situation of the shareholders of TDV. The real problem undertaking concerned in a case of is whether the applicants have by this subsequent control is even less acquisition practically eliminated the favourable than in that of prior control, competition which existed or at least particularly since Article 86, unlike was possible in these products between Article 85 (3) of the EEC Treaty and TDV and SLW at the date of the Article 66 of the ECSC Treaty, confines

86 (b). In the examples of abusive competitors, or customers. It cannot behaviour cited by this provision, there 'evade' this concept of abuse, to appeal is no question of behaviour on the solely to concepts as vague as 'the market, but of measures internal to an objectives of the Treaty'. undertaking. The Treaty imposes restrictions on undertakings in a Furthermore, the defendant itself has dominant position even in the matter of considered it indispensable that the internal measures, with a view to behaviour of a dominant undertaking protecting consumers from any should in fact lead to prejudice to

. .' since the must take place on the same market as production of metal cans and its that on which the undertaking holds technical development at increasingly such a position. favourable prices has progressed in Europe, thanks to Continental, to the The question whether there is or is not benefit of consumers. If, on the other an abuse of a dominant position depends hand, the Commission is seeking to use on the situation created on the market Article 86 (b) to indicate a situation by where the dominant undertaking way of example, it cannot continue to exercises its activity. see in this situation a case of 'measures The defendant concludes by specifying internal to an undertaking', since it is that since the market in question extends clear from the words 'to the prejudice of at least from the north of Benelux to the consumers' in this Article that the centre of the Federal Republic of behaviour regarded as an abuse of a Germany the abuse of a dominant dominant position must have a bearing position affects trade between Member on the market involving the consumer.

prohibition of the merger of large-scale This is even more true in the present undertakings and the industrial policy case, in which the applicants, by means laid down by the Commission, the of a merger with the last remaining European Parliament and the Economic serious competitor, have practically and Social Committee. eliminated the competition still remaining in the relevant market. The defendant in its rejoinder puts In addition, it is argued, an forward the view that the applicants are interpretation of the general clause of mistaken in thinking that undertakings Article 86 in the light of the examples are in a less favourable position in the given in the second paragraph suggests case of retrospective control of mergers than in the case of antecedent control. that Article 86 prohibits undertakings in a dominant position from engaging in The defence submits that the applicants practices which are permissible for a in this line of argument fail to recognize 'normal' undertaking. Such actions, even that Article 66 of the ECSC Treaty made if adopted by a normal undertaking all mergers subject to prior approval and cannot be viewed as fitting in with the that as a result the freedom of action of aims of the Treaty; however, they are undertakings was more severely less damaging, both for trading partners restricted than in a situation where the and competitors and for consumers, authorities can retrospectively demand since the normal undertaking, which is measures of dissolution. In addition, exposed to competition, runs the risk in Community law offers undertakings the the long run of losing its customers to possibility of making sure about the other suppliers. The undertaking in a Commission's verdict on any intended dominant position is, however, not behaviour, as they can apply for a exposed to this risk. 'Limiting negative clearance under Article 2 of production, markets, ... etc.', leads, in Regulation No 17. consequence of the dominant position, The defendant goes on to make its directly to the detriment of consumers, standpoint more precise by attempting, who have at their disposal only in view of the silence of the provisions insufficient possibilities, or none at all, on this point, to develop the scope of of changing to products offered by other Article 86 on the basis of the examples undertakings.

In the same way a merger of two important is not what the firms comparatively small undertakings that Continental and Europemballage might had previously been in competition with possibly have intended to do, but what one another could indeed bring about a they have actually done. noticeable restriction of competition, but it does not lead to the elimination of all To this, the defendant makes objection that the description of the facts in the effective competition, because trading case is by no means incorrect or partners and consumers still have insufficient, but in connection with the sufficient possibilities of alternative conclusions drawn from it gave a precise

In this use of the dominant position might connection the defendant draws admittedly be in the background to the attention to a section (on pages 7 and 8) cases quoted as examples in of Annex 1 of the reply. sub-paragraphs (a), (c) and (d) of Article 86, but in the case of sub-paragraph (b) The applicants and the defendant go on and the present case this point has no to discuss several points in the statement of reasons for the decision and in

Commission. The description of the facts the Commission stated. In addition four of the case in particular is said to of the plants mentioned in the decision contain a series of 'background claims', had been closed on account of which are devoid of substance and could insufficient profitability. give the superficial observer the impression that an extensive conspiracy To this, the defendant replies that the against competition was at work. There data contained in the decision described can be no justification for saying that the state of affairs at the time of the there is any plan by Continental to events reported.

JUDGMENT OF 21. 2. 1973 — CASE 6/72

types of packaging. The data in Annex 8 licensees had agreed on limitations of of the application moreover confirm that competition among themselves in the framework of the so-called market SLW's turnover predominantly arises from the sale of metal containers. information system described in section b of consideration D 4, the applicants To this, the applicants reply that cans for animal foods and meat cans are two reply that this market information system has nothing to do with the separate categories, which are differen question in dispute. tiated in particular by their intended application.

In survey the total position of SLW, one addition the applicants themselves admit would have to take into consideration, that SLW is the only producer of these in addition to the light metal containers, cans in Germany. If one accepts the every other activity of SLW in the applicants' point of view that there was packaging field (plastic containers, a particular separate market for these cardboard, paper, machinery and products, then one would come to the apparatus, etc.). The low percentage conclusion that the applicants have a shares, within SLW's total sales, actually monopoly position in that market. occupied by the figures mentioned in the decision shows that these figures do not Shares of the market held by TDV:

SLW itself had not the alleged percentage is no longer differentiated between cans for meat correct, on account of the imports of the

firm Kaiser-Aluminium (Germany) Change in the type of packaging: which after the merger has become a Recital I serious competitor in the market for this The applicants are of the view that the kind of packaging in the Netherlands. Commission failed to indicate that the Besides, these cans do not form part of users' choice of type of packaging is not the 'relevant market', and have nothing determined by the 'various criteria' to do with meat cans, if only because the mentioned in the decision, because all type of machinery required for the large scale packers can at practically any production of these cans is different in time change over from one means of the two cases. packaging to another, and in fact do so. Finally, as far as the cans for fish and To the objection of the defendant that a crustacea are concerned, the percentage change in the type of packaging, for mentioned by the Commission gives a which considerable investment is misleading picture of the real situation, required, is for smaller and middle-sized since there was only a very restricted firms bound up with considerable market in Holland in this field, in which difficulties, and poses problems even for TDV's turnover in 1970 had shown a large undertakings, the applicants put tendency to fall rapidly. forward an estimate of the cost of a The defendant replies that at the time of glass-filling machine with a capacity of the disputed merger TDV was almost 150 glass jars per minute. the only supplier of cans for meat The defendant objects that the change products and for beer in the from one type of packaging to another is Netherlands. The imports of Cebal and not only a question of costs. The Kaiser-Aluminium had been minimal; peculiarities of the products to be and they had essentially not started until packed, as well as the habits of after the merger. In the case of cans for consumers, also restrict the possibilities fish and Crustacea, TDV is still the only of such a change. supplier in the Netherlands. Even if there was something of a fall in this market, 3. The 'economic assessment' of the this was far and away compensated by facts found by the Commission the rapid development of the market for (a) The 'dominant position' beer cans. — SLW's share of the market

cans in concerned, the Commission has has peculiarities which preclude the not taken into consideration the fact that existence of a dominant position even glass and plastic containers, with a more clearly than in the case of cans for market share of about 30 %, with a fish and meat. tendency, in the case of the latter, to a In the first place the problem of slight increase, represent essential transport is of no importance at all in competition between these products and the case of these products, and in the metal cans. second place 'White Caps' are produced To the objection of the defendant that in in about 47 countries by licensees who the case of preserved fish products, glass are not obliged to observe any territorial receptacles and plastic containers on the restrictions in the sale of their products, one hand, and metal cans on the other, and in fact sell them within whatever are hardly in competition with one geographical area they can reach. another because they are used almost The defendant in reply puts forward a exclusively for the packing of products calculation made on the basis of the of different kinds, the applicants remark official German statistics for 1969 and that metal is also used for products that data supplied by SLW: from these, it is are not sterilized and that glass is also argued, it can be concluded that SLW's used for 'genuine' preserves. share of the market in Germany in metal The defendant replies that in the light of caps for glass containers (of the the weak position of other suppliers and 'twist-off type) comes to 52 %. importers a market share of 65 % in the As far as the peculiarities of the market case of meat cans would in itself suffice are concerned, while it is theoretically for the assumption of a dominant correct that other metal caps can be position of SLW in this market. In actual imported into Germany without special fact, however, SLW's shares of the difficulties and without high transport market must be much higher. The costs, users prefer the 'twist-off type of applicants' estimates are incorrect cap, which Continental has legally because they take into consideration protected by patents and which may cans imported from Germany. It must be only be produced by its licensees.

Germany. As far as the market for fish cans is concerned, the defendant refers to a The applicants reply that the calculations of the defendant are passage in SLW's annual report for 1969, incorrect and that SLW's share of the from which it appears that SLW had increased its turnover in this product market in metal caps only comes to about 42 %. The Commission's estimate (page 16 of the rejoinder). is based on a gap in the official German statistics, which could be explained by an error (since corrected) in the figures The market for metal caps: Recital B, 7 supplied by one of the SLW plants. Moreover, the applicants dispute the The applicants argue that it is incorrect suggestion that the licensees in other to state that SLW has a 50 to 55 % share countries only exceptionally export of the market in metal caps in Germany. 'twist-off caps to Germany.

EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION

A strong position in the case of containers for applicants omitted to declare no less than 46 % of their production of metal beer and other beverages is, however, of caps, and this seems scarcely credible. no significance, since for example 99 % Moreover, the statements of the of packaged beer is bottled, and in the applicants cannot be reconciled with case of fresh milk, the metal can has their own data about SLW's share of the practically no share of the market at all market in all types of metal closures (the applicants refer to Annex 9 to the (Part I of the decision, Recital F, d). If application). the share of the market in metal caps In 8 b) the Commission was apparently were reduced in accordance with the trying to give the impression that SLW applicants' explanation, then the share had a strong position in the market for of the market in crown corks would plastic packaging for fish as well.

But it and I, 1 c of the decision). correctly states that SLW, with the share of the market mentioned, has a strong Finally, there could be no question of position in the field of metal' containers the applicants being blamed for the for beverages. consumers' preference for 'twist-off caps. Glass containers could be closed In b) the decision states that SLW also with three different types of caps manufactures plastic containers with ('twist-off, 'Pano' or 'Omnia'), but in various applications, so that it is in a each case they are produced for a position to deliver such packaging for definite type of cap. TDV produces all fish products. The argument that fish is three kinds of cap, so that the applicants mainly marketed fresh or frozen has no can now offer also products which could value. The same is true for meat, fruit be used as a substitute for 'twist-off and vegetables.

JUDGMENT OF 21. 2. 1973 — CASE 6/72

with regard to the position held by abundance of competing suppliers of Continental in the relevant market, such machines.

especially on the basis of its technical Dealing with the production programme, experience and economic and financial the applicants make the point that whilst strength, were insufficiently based upon it may be convenient for purchasers to facts and not proven. buy all the packaging they require from The defendant objects that the fact that the same manufacturer, what is decisive an undertaking not only manufactures is the fact that they are at liberty to packaging, but also the machinery obtain it elsewhere. Naturally Europem­ necessary for the production and use of ballage has considerable financial the packaging, must in the long run backing from Continental. But that does provide it with a technical lead and not make it different from other therefore with an advantage over its undertakings active in the European competitors who only make packaging. packaging market. American Can, Saint In claiming that no closing machine Gobain, and Metal Box, for example, manufactured by Continental was being have the same access to the capital used by SLW's customers, the applicants market, and this access is therefore no

EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION

special peculiarity of the Continental Republic only 169 % of vegetable oils Group. and fats are supplied in metal containers Over against this, the defendant remarks while chemicotechnical products are that it is not only convenient for users, predominantly supplied in plastic but almost unavoidable, to buy all cans containers.

them. That is evident, for example, from metal cans for olive oil, too. paragraph 1 (b) of the standard hire Competition of major buyers: Recital contract used by SLW in Germany. B 18 In addition, the claim that SLW The applicants express their astonish manufactures no closing machines under licence from Continental is incompatible ment at the conclusions reached by the with SLW's annual report for 1969 and Commission in this recital. It cannot, in their opinion, seriously be claimed that with the fact established during the examination of the case that of a total of technological progress and favourable 37 licensing agreements concluded with prices are 'prohibited as incompatible with the Common Market'.

packaging. It is, they say, not correct container industry, which is so dynamic that the contents of metal packages can and strong in Great Britain today, is be sterilized or pasteurized after closure built on technology imported from the United States. In this framework the more quickly than is the case with glass jars. In the Federal Republic fruit is granting of licences has been of inestimable value to the licensees. sold more frequently in jars than in metal containers. In Holland unsweet The applicants go on to make the point ened condensed milk is practically only that five customers take 27 % of SLW's sold in glass jars. In the Federal Republic meat can production and four customers it is sold in metal containers as well, but take up to 53 % of its fish can these are made mainly by the sellers production. Two of these customers

JUDGMENT OF 21. 2. 1973 — CASE 6/72

And by no means was intended to forbid if the market for fish cans is contracting, technological progress and favourable this can only strengthen the power of prices as incompatible with the Common customers' demand still further. Market, but confined itself here to the On this point, the defendant argues that objective listing of those elements which Continental's technical lead in fact indicated the existence of a dominant guarantees its dominant position position on the market. vis-à-vis the buyers of the cans, who In addition one must not under-estimate would in fact meet with very great the significance of the contacts between difficulties if they were to try to engage Continental and its European licensees. in manufacture of their own cans. A note made by Mr P. C. (correctly: The difficulties which, according to the R. C.) Hietink about a meeting of the arguments of the applicants, a Board of Directors of TDV on 15 manufacturer of cans would meet with, October 1969 illustrates this. if he wished to change his supplier of On the second point the defendant tinplate (cf. on this point the arguments remarks that while 27 % of SLW's on Recital C set out later), would be production of meat cans goes to five much greater for a purchaser who customers, 23 % of this production is wished to begin manufacturing his own supplied to a large number of buyers, so cans, because he would not have the that it is not possible to speak in this experience and the knowledge which the sector of a buyers' power of demand. Continental Group has at its disposal for And in the case of fish cans, too, where the manufacture of technically perfect the situation is possibly somewhat less cans. In face of these obstacles, even an favourable, it could not be said that the undertaking with the financial power of buyers are in a particularly strong Unilever is discouraged. In addition, this position, particularly as the remaining undertaking is not a particularly large 47 % of the production was delivered to purchaser of metal packaging, because it numerous smaller purchasers. On top of uses other forms of packaging for the this, the applicants themselves continu major part of its products. ally rely on the argument that the market for fish cans is a shrinking and relatively (b) Abuse of a dominant position unimportant one. Potential competition between SLW To this, the applicants counter that as and TDV:

EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION

In addition the claims that SLW could To change suppliers would entail high have competed with TDV in the Benelux costs for the manufacturer of the cans countries through the firm of and a long period of adaptation would Schuybroek in Antwerp, and TDV could be unavoidable. Besides other factors, have competed with SLW in Germany supplies from other countries (e.g. through the firm of Tedeco in Hamburg, Japan) did not give any genuine are purely theoretical and unfounded. possibility of alternative choice on To begin with, SLW's share in account of the very close cooperation Schuybroek only comes to 45 % and between supplier and processor which that of TDV in Tedeco only to 50 %. was necessary, quite apart from freight Such shares are not sufficient to make costs.

the partly-owned company sell products Besides, there has not only been of the competing, even if shareholding, practically no competition between TDV enterprise. and SLW across frontiers before the

Another point which should not be merger, and there could not be even overlooked is the fact that an American today on account of reasons not undertaking with independent powers of connected with the merger, but also no decision, the Illinois Tool Works, orders had come from other countries

participates with a share of 50 % in the which were more favourably situated as firm Tedeco, which operates in any case regards transport, at least for part of the on a different market, that for plastic products, and such orders were hardly containers. coming in even today (e.g. from France, Secondly, it is stated, competition Denmark or England). between TDV and SLW in the German If, on the other hand, the Commission market is not possible, simply because of laid such great value on potential the lack of standardization of competition, it should also have taken dimensions and can specifications. In the into consideration the potential case of meat cans the German competition after the enlargement of the production is almost entirely aimed at Community, for example that from the home market, whereas more than Metal Box for metal closures of the

JUDGMENT OF 21. 2. 1973 — CASE 6/72

It is of The reasons are mainly production the opinion that SLW with the help of specifications, packaging specifications, its share in the firm Schuybroek and and consumer preferences. The smaller TDV with the help of its share in enterprises are not active only in markets Tedeco could particularly easily have which the applicants 'left accessible' to become active in each other's sphere. them, but competed even with the This seems in particular plausible in the applicants with offers at cut prices. case of Tedeco, just because it is active The defendant maintains its viewpoint in a quite different market from TDV, and remarks in conclusion, on the and is not in competition with it. TDV's potential competition between SLW and share in Tedeco is admittedly only 50 %, TDV, that the argument based on the but the remaining 50 % is only a fi tinplate price in Germany is two-edged, nancial share, which exerts no influence because if SLW really had to pay more

relationships and agreements. The practically impossible. If these claims smaller enterprises, on account of the were correct then neither the market

A — On the irregularity of the administrative procedure

2 (a) The applicants argue that the contested decision was irregular on account of the fact that Continental had been given no opportunity to state its point of view in the administrative procedure in accordance with Article 19 of Regulation No 17/62 of the Council and Article 7 of Regulation No 99/63 of the Commission. Therefore, it was argued, the decision offended against the right of being heard.

3 It is established that the applicants, by letter of 14 May 1970 sent through their representative, requested the Commission, which had previously directed its enquiries as to the acquisition of the TDV shares and debentures to

JUDGMENT OF 21. 2. 1973 — CASE 6/72

Continental, to apply in future to Europemballage. From the minutes supplied by the applicants of the hearing of the parties on 21 September, 1971, it is moreover clear that amongst the people taking part in this hearing was Mr Charles B. Stauffacher, in his capacity as a member of the Board of Directors of both the applicants. From these circumstances it is clear that Continental has had the opportunity to state its case in the administrative procedure.

4 (b) The applicants also argue that the statement of objections of 15 March 1971 was not accompanied by a sufficient statement of reasons, for the Commission had simply cited its objections without mentioning the supporting reasons. The statement of reasons in the decision was also insufficient since it merely repeated the statement of objections of 15 March 1971 without taking into consideration the reply given by the affected parties on 9 August 1971, and also because it made no mention of supporting-reasons for the objections made.

10 A decision is properly notified within the meaning of the Treaty, if it reaches the addressee and puts the latter in a position to take cognizance of it. This was so in the present case, because the contested decision actually reached Continental and the latter cannot make use of its own refusal to take cognizance of the decision in order to render this communication ineffective.

11 (e) The applicants finally claim that the Commission offended against Article 3 of Regulation No 1/58 of the Council on the regulation of the language system for the European Economic Community, by describing the French text of the contested decision as authentic instead of the German one.

12 According to Article 3 of the abovementioned Regulation, written documents, which any organ of the Community sends to a person subject to the juris­ diction of a Member State, are to be drawn up in the language of that State. As the applicants have their registered office in a third state, the choice in the present case of the official language of the decision had to be based on what relations existed within the Common Market between the applicants and one state or another of the Community. Europemballage had opened an office in Brussels and set out its written observations in the administrative procedure in French. The facts of the case being as indicated, it is not evident that the choice of the French language as the official language of the decision offended against Article 3 of Regulation No 1/58 of the Council.

13 The pleas based on formal errors in the administrative procedure must therefore be dismissed.

17 The plea of lack of competence must therefore be dismissed.

C — On Article 86 of the Treaty and abuse of a dominant position

18 In Articles 1 and 2 of the Commission's decision of 9 December 1971 Continental Can is blamed for having infringed Article 86 of the EEC Treaty by abusing the dominant position which it allegedly held through Schmalbach- Lubeca-Werke AG of Brunswick (hereinafter called SLW) in a substantial part of the Common Market in the market for light metal containers for meat, meat products, fish and crustacea as well as in the market for metal closures for glass jars. According to Article 1 the abuse consists in Continental having acquired in April 1970, through its subsidiary Europemballage, about 80 % of the shares and debentures of TDV. By this acquisition competition

EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION

in the containers mentioned was practically eliminated in a substantial part of the Common Market.

21 The distinction between measures which concern the structure of the undertaking and practices which affect the market cannot be decisive, for any structural measure may influence market conditions, if it increases the size and the economic power of the undertaking.

22 In order to answer this question, one has to go back to the spirit, general scheme and wording of Article 86, as well as to the system and objectives of the Treaty. These problems thus cannot be solved by comparing this Article with certain provisions of the ECSC Treaty.

JUDGMENT OF 21. 2. 1973 — CASE 6/72

23 Article 86 is part of the chapter devoted to the common rules on the Community's policy in the field of competition. This policy is based on Article 3 (f) of the Treaty according to which the Community's activity shall include the institution of a system ensuring that competition in the Common Market is not distorted. The applicants' argument that this provision merely contains a general programme devoid of legal effect, ignores the fact that Article 3 considers the pursuit of the objectives which it lays down to be indispensable for the achievement of the Community's tasks. As regards in particular the aim mentioned in (f), the Treaty in several provisions contains more detailed regulations for the interpretation of which this aim is decisive.

24 But if Article 3 (f) provides for the institution of a system ensuring that competition in the Common Market is not distorted, then it requires a fortiori that competition must not be eliminated. This requirement is so essential that without it numerous provisions of the Treaty would be pointless. Moreover, it corresponds to the precept of Article 2 of the Treaty according to which one of the tasks of the Community is 'to promote throughout the Community a harmonious development of economic activities'. Thus the restraints on competition which the Treaty allows under certain conditions because of the need to harmonize the various objectives of the Treaty, are limited by the requirements of Articles 2 and 3. Going beyond this limit involves the risk that the weakening of competition would conflict with the aims of the Common Market.

that any serious chance of competition is practically rendered impossible. Such a diverse legal treatment would make a breach in the entire competition law which could jeopardize the proper functioning of the Common Market. If, in order to avoid the prohibitions in Article 85, it sufficed to establish such close connections between the undertakings that they escaped the prohibition of Article 85 without coming within the scope of that of Article 86, then, in contradiction to the basic principles of the Common Market, the partitioning of a substantial part of this market would be allowed. The endeavour of the authors of the Treaty to maintain in the market real or potential competition even in cases in which restraints on competition are permitted, was explicitly laid down in Article 85 (3) (b) of the Treaty. Article 86 does not contain the same explicit provisions, but this can be explained by the fact that the system fixed there for dominant positions, unlike Article 85 (3), does not recognize any exemption from the prohibition. With such a system the obligation to observe the basic objectives of the Treaty, in particular that of Article 3 (f), results from the obligatory force of these objectives. In any case Articles 85 and 86 cannot be interpreted in such a way that they contradict each other, because they serve to achieve the same aim.

28 The Commission based its decision, inter alia, on the thesis that the acqui­ sition of the majority holding in a competing company by an undertaking or a group of undertakings holding a dominant position may, in certain circumstances, amount to an abuse of this position. This is the case, according to the Commission, if an undertaking in a dominant position strengthens such position through a merger in such a way that real or potential competition in the goods concerned is in practice eliminated in a substantial part of the Common Market.

29 If it can, irrespective of any fault, be regarded as an abuse if an undertaking holds a position so dominant that the objectives of the Treaty are circum­ vented by an alteration to the supply structure which seriously endangers the consumer's freedom of action in the market, such a case necessarily exists, if practically all competition is eliminated. Such a narrow precondition as the elimination of all competition need not exist in all cases. But the Commission, basing its decision on such elimination of competition, had to state legally sufficient reasons or, at least, had to prove that competition was so essentially affected that the remaining competitors could no longer provide a sufficient counterweight.

30 In order to justify its thesis the Commission viewed the consequences of the disputed merger from various angles. In this respect a distinction has to be made in the statement of reasons for its decision between four essential elements:

(a) the present market share of the combined undertakings in the products concerned,

32 For the appraisal of SLW's dominant position and the consequences of the disputed merger, the definition of the relevant market is of essential significance, for the possibilities of competition can only be judged in relation to those characteristics of the products in question by virtue of which those products are particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable with other products.

33 In this context recitals Nos 5 to 7 of the second part of the decision deal in turn with a 'market for light containers for canned meat products', a ‘market for light containers for canned seafood', and a 'market for metal closures for the food packing industry, other than crown corks', all allegedly dominated by SLW and in which the disputed merger threatens to eliminate competition. The decision does not, however, give any details of how these three markets differ from each other, and must therefore be considered separately. Similarly, nothing is said about how these three markets differ from the general market

JUDGMENT OF 21. 2. 1973 — CASE 6/72

for light metal containers, namely the market for metal containers for fruit and vegetables, condensed milk, olive oil, fruit juices and chemico-technical products. In order to be regarded as constituting a distinct market, the products in question must be individualized, not only by the mere fact that they are used for packing certain products, but by particular characteristics of production which make them specificially suitable for this purpose. Consequently, a dominant position on the market for light metal containers for meat and fish cannot be decisive, as long as it has not been proved that competitors from other sectors of the market for light metal containers are not in a position to enter this market, by a simple adaptation, with sufficient strength to create a serious counterweight.

35 Since there are in the decision no data on the particular characteristics of metal containers for meat and fish and metal closures (other than crown corks) designed for the food packing industry, whereby these goods constitute separate markets which could be dominated by the manufacturer holding the highest share of this market, it is for this reason characterized by an uncertainty which has an effect on the other statements, from which the

EUROPEMBALLAGE AND CONTINENTAL CAN v COMMISSION

36 Besides, as far as potential competition from large consumers capable of manufacturing their own cans is concerned, the decision alleges in No 18 that such competition is out of the question due to the heavy capital invest­ ments involved and the technical lead of the Continental Group in this field, whereas in the last paragraph in J No 3 it is stated that in the Belgian market the Marie Thumas cannery through its subsidiary Eurocan makes metal containers for its own use and for sale to other consumers. This contradiction is a further indication of the Commission's uncertainty with regard to the definition of the market or markets concerned. In letter (e) of No 30 of the statement of reasons in the decision, it is stated that 'except for Marie Thumas/Eurocan, manufacturers of their own cans do not make more than they themselves need and are not suppliers of empty metal containers', while, on the contrary, under K No 2, second paragraph, it says that certain German firms who manufacture their own had begun to market their surplus output of metal containers. It can be concluded from all this that some undertakings which have begun to manufacture their own containers were able to overcome the technological difficulties, yet the decision does not contain any criteria for evaluating the power of competition of these undertakings. These con­ siderations show further contradictions which, likewise, affect the validity of the decision contested.

37 All this leads to the conclusion that the decision has not, as a matter of law, sufficiently shown the facts and the assessments on which it is based. It must therefore be annulled.

THE COURT

hereby:

1. Annuls the decision of the Commission of 9 December 1971 on a procedure under Article 86 of the EEC Treaty (IV/26.811 — Europ­ emballage Corporation)

2. Orders the defendant to bear the costs of the proceedings.

Lecourt Monaco Pescatore

Donner Kutscher