C-8/72

JUDGMENT OF THE COURT 17 OCTOBER 1972 1

Vereeniging van Cementhandelaren v Commission of the European Communities2

Case 8/72

Summary

I. Community administration — Authorization to sign — Permissibility (Provisional Rules of Procedure of the Commission, Article 27)

2. Competition — Cartels — Price-fixing — Target prices — Clauses restricting other trading conditions — Interference with competition within the Common Market (EEC Treaty, Article 85)

Advocates of the Hoge Raad of the Netherlands, with an address for service in Luxembourg at the Chambers of Jacques Loesch, Advocate, 2 rue Goethe,

applicant, v

Commission of the European Communities, represented by its Legal Adviser, B. van der Esch, acting as Agent, with an address for service in Luxembourg at the offices of its Legal Adviser, Émile Reuter, 4 boulevard Royal,

defendant,

Application for the annulment of Decision IV/324 of the Commission of 16 December 1971 concerning a proceeding under Article 85 of the EEC Treaty,

THE COURT

CEMENTHANDELAREN v COMMISSION

several additional questions to the VCH The Court, after hearing the report of the to which the VCH replied by letter of 16 Judge-Rapporteur and the views of the November 1970. Advocate-General, decided to open the

JUDGMENT OF 17.10.1972 — CASE 8/72

oral procedure without any preparatory by dealers were no longer sent to the VCH inquiry. and that it had become impossible to The applicant however lodged certain exercise genuine control over prices. supplementary documents. Since the commission considered that the

The parties presented oral argument at the combination of imposed prices (for sup­ hearing on 14 July 1972. plies of less than 100 tonnes) and of target The Advocate-General delivered his prices (for supplies of larger quantities) opinion at the hearing on 21 September is incompatible with Article 85 of the EEC 1972. Treaty because of the effect of imposed prices on target prices, the abolition of the system of imposed prices prevents the III — Conclusions of the parties contested decision from being upheld. As me VCH could not Know the date on

I he applicant maintains that the market situation has made resale price maintenance B — Infringement of essential procedural impossible with regard to supplies of requirements quantities of less than 100 tonnes, es­ pecially because confirmations of orders The applicant points out that under

CEMENTHANDELAREN v COMMISSION

no way require a formal decision by the The Commission, in order to satisfy the Commission itself. That is why the Com­ requirements of Article 190 of the Treaty, mission gave its member responsible for should either have confined itself to stating competition authority to set out the objec­ precisely in the operative part of the con­ tions and had them formally communicated tested decision the infringement said to be by the Director-General for Competition. constituted by certain general or supple­ mentary provisions contained in the rules of the VCH, or should have specified in the recitals of its decision the reasons why C — Inadequacy of the statement of reasons it considers that the General Conditions upon which the decision is based of Purchase and Sale cannot be dissociated from the other rules laid down by the The applicant emphasizes that the con­ VCH. tested rules, which were laid down by an association of undertakings of a single However it appears from Article 1 of the Member State, apply only on a national contested decision that the infringement level, concern neither imports nor exports of Article 85 of the Treaty was established and make no distinction between national in a general manner and with regard to all products and imported products. There­ the rules of the VCH, considered as a fore the question arises whether the jurisdic­ whole. The Commission has not given a tion of the Commission extends to such sufficient statement of reasons for the need rules. In such a case the Commission should to extend the declaration of prohibition at least show, by means of a detailed state­ and nullity to the General Conditions of ment of reasons upon which the decision Purchase and Sale, when it was not is based, that the legal presumption apparent that these conditions by them­ capable of justifying an exemption from selves caused an infringement of the notification does not apply. provisions of Article 85(1).

(a) The contested agreements are con­ 1. Economic background to the dispute tained in the General and Price Provisions of the VCH. The specific agreements con­ The applicant maintains that the main cerning prices and conditions of sale are competitive factor in the distribution of laid down in the Prijsbladen (Price Lists) cement on the market is not price com­ and the Supplementary Conditions of petition but competition in services to Purchase and Sale. The General Provisions customers. For consumers cement is a refer continually to the latter documents product closely connected with brand so that they may be considered together to names. The relatively small changes in the form a whole. It is therefore perfectly prices charged on the market are not normal for Article 1 of the contested deci­ enough in themselves to break the 'his­ sion merely to mention those documents, torical links' holding a consumer to a since the recitals thereof are devoted more particular brand or to a certain type of especially to an examination of the cement. The risk involved in using defective contents of certain parts of that body of cement for building generally restrains the agreements. consumer from letting himself be enticed it is practically impossible to isolate the by small differences in price into favouring prohibited agreements. The situation held a cheaper product with which he is not to be incompatible with Article 85 (1) sufficiently familiar. Furthermore the cost follows from the combined action of all of cement represents only a fraction of the the clauses of the agreement and from its total cost of a building project. Not only general effect. is there little elasticity of demand for The General Conditions of Purchase and cement but relatively small variations in Sale are not at all neutral from the point price are not sufficient to alter trade pat­ of view of competition. Of the 13 condi­ terns at the distribution stage. tions laid down, 8 have an effect on the Furthermore, since it is produced in large rights and duties of a purchaser of cement quantities by a capital-intensive industry, and hence on the consideration for the cement encounters at the production stage supplies. Although they are usual business price competition which is as weak as at conditions they cannot be separated from the distribution stage. the main agreements. As principally loose cement is involved, the statement of the reasons upon which the delivery of a high quality product made the contested decision is based shows promptly to the desired place as well clearly which agreements are more es­ as the granting of credit and similar services pecially incompatible with Article 85(1). to customers are of great importance. A Because a cartel is involved which is based trader's facilities for storing cement play upon a large number of agreements limit­ for example a more important part than a ing competition which are complementary variation in prices. to one another the operative part of the The defendant emphasizes that the agree­ decision may merely give the names of all ments made within the VCH constitute a

cartel between traders on the prices and In these circumstances, it matters little in conditions of sale applied to the trade in relation to Article 85(1) of the EEC which goods are offered for sale in bulk and Treaty that the obligations imposed by the reveal few differences in quality. The VCH relate to a product of which a third number of grades according to quality is comes from other Member States. This also small and corresponds to standards quantitative criterion cannot be used as an which differ little from country to country. independent factor. In order to determine The only competition from the economic whether trade between Member States is point of view is therefore that of price; liable to be affected, the quantity of im­ differences in price, even small, may be a ports, in the absence of other information decisive factor for purchasers. concerning economic data and the market Furthermore fixed investments play a situation, is irrelevant. On the other hand leading part in the cement trade and give it is essential that imports of cement into rise to high fixed costs. The result of this the Netherlands from other Member is, at the production stage, incentive to States should not encounter obstacles or use existing capacity to the full and as long distortions caused by private law. as possible and, if there is a fall in demand, The defendant mentions that the total to sell part of the production at less re­ figure for sales of cement by the VCH munerative prices. A depression stimulates represents approximately two-thirds of the in a competitive system competition in consumption of cement of the Netherlands. prices at the production stage as well as at One-third of such consumption is ac­ the marketing stage. counted for by imported cement. If it is There is no doubt that the opportunities accepted that at least three-quarters of for competition are not limited exclusively sales concern quantities exceeding 100 to prices. The quality of the product, the tonnes, the agreements which are still speed and regularity of deliveries and applicable at present concern, as a percent­ loyalty to a specific brand also play a part. age, at least 16.5% of Netherlands cement But where the services given are on a par sales. Taking account of the threshold of in these spheres differences in price have an 5% which the Commission applied in its unquestionable influence on customer communication of 27 May 1970 concerning behaviour. agreements of minor importance, it is Price competition must furthermore in­ clear that the system of target prices must crease as a result of the recent prohibition still come entirely under Article 85(1). by the Commission of the joint-selling The principle of the unity of the market agency for the Benelux countries set up by requires in fact that the direction and the German cement manufacturers. volume of trade patterns within the Com­ munity should be determined by supply and demand as expressed by the individual 2. Influence on trade between Member decisions which producers, traders and States consumers consider they should take.

prevents the members of the VCH from the VCH and non-members as regards coordinating their pricing policies on the both home-produced cement and freely internal market. Another obstacle to imported cement. this is the fact that all traders, whether or According to the dejendant, the fact that not affiliated to the VCH, agree to different the agreements of the VCH do not concern prices for the purchase of the cement which imports of cement is irrelevant in the pre they order, which leads to differences in sent case: here again, in order for Article selling prices and divergences from the 85(1) to be applicable it is enough that the target prices of the VCH. agreements 'may' affect trade between It is therefore incorrect that the obliga

Article 85(1). The Commission must Netherlands market are compelled to use assume that the parties to a cartel abide the much smaller network of 'outsiders' by their agreements, especially when the affects trade between Member States. agreement in question is, as in the present Although the cartel created by the VCH case, worded in a particularly imperative does not totally bar the way to a large manner and when compliance with its proportion of Netherlands consumers, it terms is strictly supervised. nevertheless makes access to them more Furthermore it must be borne in mind difficult. that Article 85(1) merely requires, for its application, that agreements 'may' affect (d) The foreign producers' share of the trade between Member States.

they import freely. Since the rules of the sumption in small quantities (individuals; VCH do not impede imports of cement, the 'do-it-yourself market), which are members and non-members alike may im generally bought at the imposed prices. port freely at entirely free purchase prices. The demand for cement ordered in large In view of the great shortage of cement in quantities is not elastic, since a reduction in the Netherlands it is impossible to expect the selling price does not bring with it a this product to be exported in appreciable proportionate increase in demand.

CEMENTHANDELAREN v COMMISSION

This prohibi with the statement that the number and tion, in conjunction with other additional size of the undertakings is irrelevant with obligations, is intended to prevent real regard to the question whether it is pos price competition. sible to satisfy the demand for cement on the market adequately and effectively. It is 3. Influence on competition within the unimportant with regard to the efficiency common market of the part played on the market by trading undertakings whether they are numerous or The applicant complains that the Com whether thev are large or small. mission wrongly considered that the Furthermore, even if the effect of the rules target prices recommended by the VCH of the VCH is to divert the cement from to its members had the object or effect of the channel it is naturally intended to restricting competition in a manner equiv follow in competition between manu alent to concerted practices and to the facturers and dealers, that is unimportant fixing of a compulsory minimum price. for the purposes of deciding whether trade between Member States may be 'affected'. (a) The target prices of the VCH are not Since they are rules which are concerned in fact adhered to by its members because exclusively with trade transacted entirely of the competition on the market from within national frontiers and do not relate non-members. With regard to packed to imports they are not such as to impede cement variations of up to 12% below the the latter. target price have been recorded and with The defendant is of the opinion that a regard to loose cement, variations of up cartel between traders the effect of which to 4.5%. is to make penetration of the national market more difficult than it would be in (b) In any case, the Commission has the absence of such a cartel comes under misunderstood the nature of target prices.

JUDGMENT OF 17.10.1972 — CASE 8/72

price may clearly differ from one case to The target prices of the VCH are based mother and from one undertaking to on an agreement made between the traders mother. who are parties to the cartel. They are These exclusively national rules draw no fixed by means of a majority decision which distinction between home-produced cement is binding upon all the members. They and imported cement. Their purpose is only are therefore in no way target prices such to forestall any dumping on the national as those used by producers which are used market or to prevent cement from being as recommended prices for the subsequent used as a loss-leader when it is sold to­ marketing stage and do not actually involve gether with other building materials. any duty either in fact or in law. It is conceivable that traders do not or at The fixing of target prices by the VCH is least do not fully pass on to the consumer intended to restrict competition and results the benefit of a price advantage which they in such a restriction in every case. Traders have made. Even in such a case a producer who are party to the agreement have a legal may consider offering his product in large duty towards the other parties thereto to use quantities at low prices, while traders have these target prices as a basis and to make to be careful to resell this cement cheaply their decisions with reference thereto. This in order to prevent the accumulation of constitutes a clear restriction on the free­ large stocks. The trader has in any case an dom of the parties to the agreement to fix interest in purchasing cheaply. It is for him their selling prices themselves in complete to decide freely to permit this more independence. Such a restriction on free-

of the VCH that the starting. point for The mere existence of target prices restricts any specific transaction cannot be the price competition between the parties to the which the trader fixes himself in the light cartel and leads foreign suppliers rightly of his own judgment of the market situation to doubt whether any reduction in prices and of the relationship between the forces can result in an increase in their sales. The of supply and demand but, on the con­ respective shares of the market of the trary, the target price fixed by the cartel. parties to the cartel are stabilizing. Inter­ the tact mat this restriction is mitigated penetration of the market is prevented and by the opportunity of selling at a lower the consumer at the final stage is deprived price does not change the situation at all. of the advantages which normally follow The price trend imposed on the market from the abolition of customs barriers. by the target price is not altered because of this and that trend continues to have as (c) The prohibition on the members of its object or effect the restriction of com­ the VCH from supplying to building petition. There is an agreement to en­ undertakings quantities of cement greater deavour to attain the agreed target prices than those necessary for the site in ques­ jointly and individually. The fact that tion also hinders the development of trade every variation from the target price does of a competitive nature. This prohibition not constitute a formal breach of the prevents not only block orders but also the provisions of the cartel does not rescind creation of a stock intended for resale. the agreement as such or the related objec­ The object of the duty imposed on the tive of a restriction on competition. members of the VCH, where cement is Further, the provision that a demonstrable supplied to dealers who are not members profit must be made is an obstacle to the of the VCH, to make them subject to the adjustment of prices. The members of the main agreements restricting competition cartel may not sell 'at a loss' in order to which are in force within the VCH, the keep a customer. That prohibition elimi­ duty not to set up subsidiaries or depots nates the pressure which consumers may without a special authorization and the exert on prices at the final stage in a system duty of the members of the VCH to obtain of free competition and constitutes per se prior authorization to make alterations to a restriction on competition. their undertaking, especially as regards sale or hire is to make the main agreements (b) The fact that the target prices cannot is effective as possible. These supple­ always be adhered to is of little importance: mentary agreements throw into relief the it is impossible to acknowledge that the nfringement of Article 85(1) contained in imperfect achievement of a cartel is of the main agreements.

4 Because of the connexion between that system and the fixing of 'target prices' for supplies of cement of 100 tonnes or more, the decision is said to have become purposeless.

3 The contested decision was taken against the internal rules of the applicant associa­ tion which were notified by the latter for the purposes of the application of Article 85 (3), and were the subject-matter of the notification of objections and of the administrative procedure.

5 At the time when it abolished imposed prices for supplies of less than 100 tonnes, the applicant knew that, as the procedure had ended, a decision of the Commission was imminent.

7 It should have informed the Commission immediately of the alteration to its internal rules so that the Commission could, if necessary, draw from this the appropriate conclusions.

8 In those circumstances, the applicant cannot rely on that alteration, which was made on its own initiative, to call in question the decision of the Commission.

9 The complaint must therefore be dismissed.

14 The submission based, in opposition to the contested decision, on an alleged formal defect in the notification of objections cannot therefore be upheld.

The substance of the case

(a) Adverse effect on competition within the Common Market

15 The applicant maintains that after the abolition of the system of 'imported prices', which was applied only to a small proportion of transactions, there remains only a system of 'target prices'.

16 According to the applicant these target prices, moreover, rarely adhered to in practice, far from constituting a constraint on members, in fact only represent a basis of calculation which leaves largely untouched the freedom for each of the members of the association to calculate its prices in accordance with the facts of each individual transaction.

17 In any case since the variations in production prices are slight in the sector in question, competition is said to be exerted mainly over other factors of the trans­ actions, such as product quality and services to the customer.

23 Apart from the fixing of prices properly so-called, the agreement to which the contested decision relates contains in addition a body of restrictive clauses con­ cerning other trading conditions.

24 This applies especially to clauses the object of which is to prevent the sale of cement to traders other than members of the association or resellers approved by the association, to prevent the creation of stocks of cement by third parties who are not subject to the discipline of the association, to limit strictly the commercial benefits which may be granted to purchasers and to prevent any services being provided for customers which fall outside the framework of what is regarded as 'normal'.

25 Thus an examination of all the rules to which the contested decision relates shows

these to be a coherent and strictly organized system the object of which is to restrict competition between the members of the association.

(b) Influence on trade between Member States

26 According to the applicant association, the Community nonetheless has no juris­ diction to appraise the cartel to which the contested decision relates because it is a purely national cartel, limited to the territory of the Netherlands, which does not apply in any way to imports or exports and which consequently has no influence over the patterns of trade between Member States.

32 It follows from the foregoing that the complaints based on an alleged infringement of the rules of the Treaty must be dismissed.

Inadequacy of the statement of reasons upon which the decision is based

33 The applicant also raises the complaint that the statement of reasons upon which the contested decision is based is inadequate.

34 This criticism relates in essence to the fact that, although the operative part of the decision concerns a body of rules comprising the General and Pricing Provisions (Algemene Bepalingen en Prijsvoorschriften der VCH), Price Lists I-VI (Prijsbladen I-VI), the General Conditions of Purchase and Sale (Algemene Koop- en Verkoop­ voorwaarden 1955 FGB-RBB) and the Supplementary Conditions of Purchase and Sale (Aanvullende Koop- en Verkoopvoorwaarden van de VCH), it is im­ possible to identify from the statement of reasons, which expressly refers to the first of these documents, the reasons why the Commission also objected to the 'General Conditions' and the 'Supplementary Conditions of Purchase and Sale'.

is Although it is true that the 'General Conditions' and the 'Supplementary Condi­ tions of Purchase and Sale' include common commercial clauses, which in them­ selves are unconnected with the subject-matter of the cartel, none the less several provisions are capable of assisting the functioning of the latter.

36 Furthermore the 'General and Pricing Provisions', in which the main provisions found to be contrary to the competition rules of the Treaty are concentrated, con­ tain an express reference to the said 'General Conditions' and 'Supplementary Conditions of Purchase and Sale'.

41 Under Article 69(2) of the Rules of Procedure, the unsuccessful party must bear the costs.

42 The applicant has failed in its submissions.

43 It must accordingly be ordered to pay the costs.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 85, 173 and 190; Having regard to the Protocol on the Statute of the Court of Justice of the Euro­ pean Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities,

CEMENTHANDELAREN v COMMISSION

Delivered in open court in Luxembourg on 17 October 1972.

A. Van Houtte R. Lecourt

Registrar President