C-6/73

COMMERCIAL SOLVENTS v COMMISSION

In the Joined Cases 6 and 7/73

ISTITUTO CHEMIOTERAPICO Italiano SpA­ , represented by Mr J. J. A. Ellis, advocate at the Hoge Raad, the Netherlands,

and

Commercial Solvents Corporation , represented by Mr B. H. ter Kuile, advocate at theRaad, the Netherlands, with an address for service in Hoge

Luxembourg in the chambers of Mr Jacques Loesch, 2 rue Goethe,

composed of: R. Lecourt, President, A. M. Donner (Rapporteur) and M.

Sørensen, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher, C. Ó Dálaigh Dalaigh and A. J. Mackenzie Stuart, Judges,

Advocate-General: J. P. Warner, Registrar: A. Van Houtte,

gives the following

JUDGMENT OF 6. 3. 1974 — JOINED CASES 6 AND 7/73

JUDGMENT

—

dextro-aminobutanol to Istituto, which Board of Directors — (5 out of 10) and Esecutivo' processes it into bulk ethambutol. Most in the 'Comitato — Executive of this product is sold by Istituto to Committee — (3 out of 6). The other producers of specialities, and the President of CSC is also Chairman of the balance is used for the production of Board of Directors, has an additional Istituto's own speciality. casting vote.

At the end of 1970 Istituto informed Until 1970 Istituto acted as a reseller of CSC that Zoja had placed a new order aminobutanol produced by CSC in the A customer of for aminobutanol and asked whether United States of America. Istituto for aminobutanol was Laborato­ this intermediary product could again be Chemico Farmaceutico Giorgio Zoja supplied for resale to Zoja. CSC replied rio that none was available. SpA (Zoja), to whom Istituto began selling the product in 1966. Zoja used After further attempts to obtain supplies

the product in the manufacture of of aminobutanol on the world market

ethambutol-based specialities. In 1968 had failed as the search for the product Istituto started development of its own inevitably led to one possible source of ethambutol-based specialities. It ob­ supply, namely CSC, Zoja, by letter tained governmental registration for the dated 8 April 1972, applied to the manufacture in November 1969, thereof Commission for the institution of

and started production in 1970. proceedings against CSC and Istituto,

the present proceedings: Registry of the Court on 30 October and 5 November 1973. (a) under penalty of a fine of 1 000 units The parties presented oral argument at of account per day of delay, the hearing on 20 November 1973; the beginning 31 days after receipt of Advocate-General delivered his opinion the Decision, to supply 60 000 kg of nitropropane or 30 000 of aminobu­ at the hearing on 22 January 1974. tanol to Zoja, as its most urgent

needs, at a price not exceeding the maximum price charged for those

two products; III — Submissions of the

parties (b) under penalty of a second fine of

1 000 units of account per day, to Istituto (applicant in Case 6/73) submits submit to the Commission within that the Court should: two months after receipt of the

Decision, proposals for the (a) declare null and void the Decision of subsequent supply of Zoja. the Commission of 14 December

support of the Commission. By Order of founded, 11 April 1973 the Court granted the

application. (b) order the applicants to pay the costs.

JUDGMENT OF 6. 3. 1974 — JOINED CASES 6 AND 7/73

IV — Pleas and arguments 9. that there exists a relation between of the parties the prohibition under point 7. and the unsuccessful issue of the merger

The pleas and arguments of the parties negotiations under point 8. (Decision

may be summarized as follows: I C and II A).

Europe; 'Consiglieri-Delegati', Dr C. Vittadini and Eng. G. V. Vittadini still have full 6. that Istituto, besides its operations as power to direct the company, except in a manufacturer of chemical and relation to investments. Neither in the pharmaceutical products, operates or Board of Directors nor in the executive has operated as an exclusive Committee does CSC have majority distributor of several of in products representation. Only matters of

CSC; investment can CSC exercise a blocking 7. that CSC imposed CSC's According to a certificate of Arthur vote. on

distributors in Young & Company, Milan, submitted as certain countries a

prohibition its for evidence by the applicants, more than resale of products 75 % of Istituto's turnover is derived the manufacture of ethambutol and from the sale of products neither an export prohibition; produced by CSC nor based on raw

materials supplied by CSC. 8. that CSC must have controlled

Istituto's unsuccessful merger nego­ The Commission has failed to point out

and a subsidiary company documents of incorporation do not for the protection of the parent's derogate from the relevant provisions of creditors. It follows that the term 'controlled' Italian company law. It follows from in Article 2359, para. 2, has these provisions that the ownership of nothing to do with the question of the majority of the voting stock brings control of market behaviour which is, with it the right to manage a company according to the judgments of the Court (Article 2368 of the Italian Civil Code), cited above, the factor which determines both in a positive way by nominating the 'economic unity'. 'amministratori' managers — —

CSC deduces from the foregoing (Articles 2364 and 2383) and negatively, argument that no economic unity by preventing their replacement as well

between Istituto and CSC exists and that as by having them held liable for breach its only connexion with the Common of duty (Article 2393).

Market in this case is that it once sold In support of its opinion the nitropropane and aminobutanol into the Commission refers to Italian academic EEC and later made the policy decision writing on this subject (Pasteris, il to discontinue such sales. Therefore it 'Controllo' nelle società collegate e le could not have acted with respect to the partecipazioni reciproche, Milan, 1957, present matters within the EEC either by Chapters IX and X), to the relevant itself or through Istituto. provisions in the company law of

Istituto, also concludes that there exists Member States (in Germany, Article 16 no dependence on CSC with respect to (1) of the Aktiengesetz of 1965, in its market behaviour. Even on the France, Loi No 66-537, Article 354 and hypotheses —

majority of the voting stock of another is the Commission. In particular they allege by itself sufficient proof under that the defendant has altered its Community competition law, that it position in stating that CSC and Istituto controls the latter. The presence on the form an 'economic solely with unit'

Board of Directors and in the Executive regard to their relationship with Zoja. Committee of nominees of CSC, This constitutes an impermissible indicates that the power of control has alteration of the subject of the litigation. in fact been exercised in the present case According to the Court's judgments in as was set out in the Decision. In this the Dyestuffs Cases the only applicable respect it is significant that the President criterion is the complete dependence of of CSC who is also Chairman of Istituto on CSC in determining its Istituto's Board of Directors, has the behaviour on the market. The same

casting vote. Therefore CSC also has a criterion was applied by the Commission majority in the executive organ of itself in its Decision No IV/22-548 Istituto. Christiani et Nielsen (OJ L 165, The Commission refers once again to its 15.7.1969, p. 12). Decision in stating that it considers CSC The applicants reject once again the and Istituto as 'one economic unit'

for argument of the Commission that CSC's the purposes of applying Article 86 with holding of 51 % of the voting stock regard to their relationships with Zoja. allows it to control the management of As regards this relationship CSC's Istituto. This opinion is inconsistent with control of Istituto is evident: first, the the Commission's Statement in its decision to transform Istituto from a Proposal to the Council of Ministers distributor of ethambutol to a producer concerning a fifth Directive on the of this product is a type of decision harmonization of Company Law (COM implying investments — for which CSC (72) 887 of 27 September 1972) with has a blocking vote —

currently a CSC The Commission refers also to the executive — has a casting vote is Advocate-General's opinion in the virtually of no consequence, for up to

Dyestuffs Cases, 48/69 a.o. (Rec. 1972, now the president's casting vote has P. 619). never been used.

COMMERCIAL SOLVENTS v COMMISSION

It is stressed by CSC and Istituto that 2. it follows both from relevant

CSC cannot direct the latter's legislation of the Member States and

investments, as CSC, through its from their attitude towards the

product for the manufacture of the two criteria developed by the Court ethambutol. At the request of the in the Dye-Stuffs Cases had been entirely applicants Arthur Young & Company satisfied:

issued a new statement which leaves no 1. CSC has, by holding the majority of room for misinterpretation. Istituto's capital, power of control CSC and Istituto emphasize that there over ISTITUTO; exists no relationship at all between Istituto's decision to start the 2. certain factors confirm that the power manufacture of ethambutol and CSC's of control has in fact been exercised

refusal to supply Zoja with in the present case. aminobutanol: Zoja unilaterally termin­ In its Christiani & Nielsen Decision the ated the relations with Istituto and Commission considered that it was when, six months later, Istituto applied impossible for a wholly owned to CSC for a supply of aminobutanol for subsidiary to act autonomously. It does resale, CSC refused for technical and not follow that the Commission must commercial reasons. consider any subsidiary in which the CSC gives an extensive account of the parent company holds less than 100 per effects doctrine in relation to public cent of the capital as being autonomous. international law, in answer to the The applicants'

assertions regarding Commission's observation on the effects relevant Italian Civil Law (Article 2359 of CSC's conduct within the Common and 2362) are inconclusive because they Market. Its main conclusions are: do not refute the Commission's position 1. as, in contrast to Sections 1 and 2 of that in every case where Italian the Sherman Act, Articles 3 (f), 85 legislation attaches legal consequences to and 86 of the EEC Treaty do not the control of one company by another, cover trade with third countries, control is assumed to exist when one

Company. With respect to the production of ethambutol (Section II applicant's assertions on the manage­ B of the Decision). ment of the CSC-Istituto Group the Between applicants and the defendant Commission does import­ not consider there is a large measure of disagreement ant the fact that the Chairman has never as to the definition of the relevant used his casting vote; the mere position market. CSC and Istituto on the one of having such a vote matters in hand the relevant market to be assert determining the power relations within that of anti-tuberculosis drugs, the the group. The Commission considers Commission on the other hand alleges, that the distinction between veto power referring to its Decision, that the relevant and the power to command investments market is that of raw materials for the is scholastic and irrelevant. production of ethambutol, i.e. that of

The defendant rejects expressly the nitropropane and aminobutanol.

contentions that during the present In the applicants'

view the definition of proceedings it has changed the reasons the relevant must market start with it bases the existence of the on which determining the relevant market for the CSC-Istituto Group. Neither in i.e. end-products, ethambutol and

maintaining that CSC and Istituto derived from it. Only in specialities so constitute one economic unity, at least in far as ethambutol constitutes a separate their relations with Zoja, nor in stating market could there exist a separate

nitropropane and hand and Zoja on the other hand has to aminobutanol, be judged in the light of Article 86. (b) that at present it is not possible, CSC and Istituto reject this explanation, under competitive conditions, to asserting that it implies a change of the produce ethambutol from other position developed by the Commission intermediary products than nitropro­

in Notice of Objections and in the the pane and aminobutanol, Decision.

(c) that it follows from the foregoing The Commission admits that in the

data that the CSC-Istituto Groups Notice of Objections the group is found

COMMERCIAL SOLVENTS v COMMISSION

to enjoy a dominant position in a wider and Analytic Chemistry of the

USA, stating that a different know-how. Consequently cutting off the manufacturing process for aminobu­ supply of nitropropane and/or aminobu­

tanol, not based on nitropropane, has tanol would inevitably result in Zoja's been developed; disappearing from the market. Therefore the existence of other processes for 3. an offer made by Fallek Petrochemi­ manufacturing, from other raw cal (Europe) CV, Amsterdam, the materials, the same end-product is in this Netherlands, for thiophenol which, context irrevelant. Also the possibilities according to Fallek, is used in Eastern of obtaining ethambutol in bulk on the Europe as an intermediary in the market are not important. Speculations production of ethambutol; concerning the availability of such

4. the information that aminobutanol is processes, of such other raw materials

being manufactured by a different and/or other end-products do not alter

process (starting from butanone the fact that the industrially tied buyer rather than nitropropane) on an cannot switch to other suppliers of other

industrial scale in Italy by Polifarm raw materials, without changing the

The Commission reviews the memorandum of 13 November 1972, critically other alleged sources of aminobutanol the price of ethambutol in bulk was

38 000 Lira. This gives an indication and ethambutol: that the method of processing Ad 1.: aminobutanol from butanone is not

Professor Pietra's statement mentions competitive.

only a number of alternative methods Ad 6.: of manufacturing aminobutanol under The report of Professor Corbellini is laboratory conditions, which is quite a different thing from it on not pertinent, because — although it producing mentions the possibility of producing an industrial scale and in competitive aminobutanol from butanone — it conditions; does not consider the problem of the Ad 2.: costs of production involved in such a

the letter from International Business method. As to the report of Professor & Research Inc. only states that a Macchioni the Commission observes

process for the manufacture of that it is incomplete and inconclusive, aminobutanol not based on nitropro­ as it refers only to the last phase of

mercial practicability. This impression for the production of nitropropane.

was confirmed by the subsequent ex­ This plant, still working at a reduced

change of letters between Zoja and rhythm, allows, at the moment, the

Fallek. marketing of samples of a few kg.

Ad 4.: Ad 8.:

Regarding Polifarm the Commission Dr Martin examines the method for observes that manufacturing aminobu­ producing aminobutanol from alpha-

Zoja with ethambutol in bulk at prices one dollar per pound. Next he varying from 41 500 Lira to 67 000 examines how aminobutanol could be

COMMERCIAL SOLVENTS v COMMISSION

produced from this raw material. He The applicants declare this impermissible gives three possible methods with by way of procedure, and assert that

which laboratory experiments have dextro-aminobutanol is a more upgraded been carried out and which are intermediary product for the manufac­

published in literature dating from ture of ethambutol and does not

1940 and 1943. constitute a relevant market by itself. After The Commission, referring to the having indicated that there

entirely based on methods which so 2. this behaviour seriously affects the far have only been tested under maintenance of conditions of effective laboratory conditions. Here the competition within the Common Commission asks why it took CSC Market, as there are only five twenty years to perfect its method of producers of ethambutol within the producing nitropropane on an Community, three of them being industrial scale, if the method important (American Cyanamid described by Dr Martin, available Company by intermediary of its the since 1872, could have been applied subsidiary Cyanamid Italia; Zoja; and without any difficulty. since 1970 the CSC-Istituto Group);

The Commission summarizes its review 3. therefore CSC's behaviour constitutes of the different alternatives by stating an abuse of a dominant position; that none of them offers Zoja real

commercial possibilities to overcome the 4. for the purpose of establishing the

off of the of effects of the conduct in issue one is cutting supply entitled to consider the ethambutol aminobutanol and/or nitropropane by market as a separate market: the CSC-Istituto Group. Consequently Commission's ethambutol is one of the modern the assumption that the therapeutical components most fre­ CSC-Istituto Group has a dominant quently used in the treatment of position, if not a monopoly, is entirely tuberculosis; ethambutol is a justified. complement to rather than a

In its defence the Commission mentions competitor of other anti-tubercular

incidentally dextro-aminobutanol as a drugs; the maintenance of a high level raw material for the production of of sales of ethambutol on a

5. the offer for sale of a quantity of ities. The Decision does not give the ethambutol in bulk made by Istituto slightest information of the reason why to Zoja on 15 May 1972 does not put Zoja's patents in other Member States an end to the infringement of Article would become worthless. The applicants 86, for this move cannot undo the emphasize that Zoja is no more and no fact that Zoja was disappearing from less dependent for its supply, whether it the market as a manufacturer of buys aminobutanol or ethambutol in ethambutol (Sections I B and D, II C). bulk from CSC or Istituto. The Decision (a) CSC and Istituto submit that it was fails to make clear why it is an abuse to Zoja which in the spring of 1970 offer the latter intermediary product

unilaterally cancelled its current supply instead of the former. contract with Istituto. When CSC In its essence the Commission's position terminated its sales in the EEC of resolves itself into the obligation for aminobutanol, it reserved the quantities CSC to maintain Zoja as a competitive committed by Istituto for resale to Zoja firm, manufacturing and seeling until CSC was informed in April 1970 ethambutol and ethambutol based special­

that those quantities were no longer ities and to ensure that Zoja needs not desired by the latter. The applicants change its manufacturing operations. denv that the discontinuation of the

supplies to Zoja entails its elimination The Commission replies that Zoja's

from the market. This could only be true decision to cancel the supplies of

if there were no alternative ways to aminobutanol provided for in the

do be accepted. The such alternatives exist. Taking into cannot question,

account the large stocks of aminobuta­ however, whether Zoja's decision was

nol Zoja had at its disposal at the approved by Istituto or not does not

moment CSC cut off the this affect the definition of abuse, for there is supply, enterprise would have been in a position no relation between the alleged breach to continue the processing of of contract by Zoja and the

for discontinuation of supplies by CSC and aminobutanol a considerable time, thus having the opportunity to change Istituto: even if the alleged breach of

its methods of manufacturing ethambu­ contract had not occurred, this would in tol. The Commission is wrong in no way have prevented the action of

know-how have been affected by the and to become a mere packer and

discontinuation of the of distributor of ethambutol. In fact it has supply aminobutanol. As far as patents are been excluded from some of the stages

COMMERCIAL SOLVENTS v COMMISSION

Manufac­ The previously undertaken by it. leading anti-tuberculosis drug is not turing aminobutanol from raw materials ethambutol but rifampicine, as is other than nitropropane or ethambutol corroborated by statistical data collected from another intermediary product than by International Marketing Service. The aminobutanol or dextro-aminobutanol data also show that ethambutol is more

would have entailed with it an important and more being replaced by rifampicine and expensive adaptation of Zoja's both as a separate drug and as an system of manufacture. ingredient in complex drugs.

The Commission condemned only the As for the delimitation of the relevant

its existing stocks of aminobutanol, logicals 1972, 26th edition; disappeared from the market as a 4. The Journal of the American Medical nanufacturer of ethambutol. The fact 'Evalu­ Association, April 17, 1972, hat the company as such has, so far, ation of a new Antituberculosis Agent'. ;urvived does not alter this. The Commission disputes the analysis

(b) With respect to the ethambutol made by the applicants. First, it market, which is considered by them as emphasizes once again that in the

the only possible relevant market, CSC Decision the ethambutol market has and Istituto submit that contrary to what only been mentioned for the purpose of

is stipulated in the Decision, ethambutol the effects of the abusive establishing does not constitute a separate market. conduct. In general, it would be This drug is not the newest hazardous to speak of interchangeability antituberculosis agent and it does not when dealing with modern drugs whose have the largest share of the effects and specific contra-indications

anti-tuberculosis drug market. In fact require the physician to make a choice

ethambutol is only one of a number of dictated in each individual case by the

borne in insurmountable obstacle to Zoja's mind when interpreting the

data sales to those States. statistical advanced by the

applicants. CSC and Istituto submit that the market It follows from the previous reasoning for anti-tuberculosis drugs within the that the various drugs for the treatment EEC is a small because very one, of tuberculosis are used as components tuberculosis has become a very rare

of the particular regimens that are disease. Zoja's sales within the Common prescribed in the individual cases. So one Market are a small portion of its only has to assume that these drugs are most of it is exported to the production; complementary to each other and not world market. Moreover trade from interchangeable. The Commission is thus Member States is Italy with the other

entitled to consider the ethambutol blocked by patents in those States held market as a separate one. by American Cyanamid Company. These The have been in applicants'

arguments regarding patents never questioned

COMMERCIAL SOLVENTS v COMMISSION

the amounts sold are not very large in its disappearance as a competitor would

terms of value. It is, however, not seriously prejudice this trade. correct to argue, from the limited sales The applicants that the reply in terms of value which have been Commission's allegations with respect to

effectuated within the EEC, that trade the patent litigation between Zoja and between Member States is not being American Cyanamid Company are not

affected. Where ethambutol is used to correct. A instituted nullity proceeding combal a serious, but rare illness, the by Zoja before the German Patent Office amounts of exports as an offer, such, against Cyanamid's patent was rejected

insufficient criterion. in December 1971. The interlocutory The applicants'

has confirmed in its judgment of 1 Regarding the patent situation in Great February 1973 that the product Britain, Korea and Japan, mentioned by manufactured and sold by Zoja is not the Commission, the applicants state, the same as that which results from the first, that the Decision in issue was given at time when the United Kingdom was process patented by American Cyanamid a

Company. not a Member State of the EEC, Commission secondly, that the patent situation in Further, the mentions that

legal Korea Japan has nothing to do with pending in Great and proceedings are

Britain, Korea and Japan. intra-community trade. These references must therefore be regarded as irrelevant. The Commission does not consider The Commission is not entitled to make relevant the fact that CSC is prepared to conjectures about the potential

supply Zoja to the extent necessary for development of intra-community trade the latter's sales within the Common be into in ethambutol. It has to taken Market, as the offer of such a supply, account that pharmaceutical products made in May 1972, is subsequent to the are subject to constant evolution and abusive behaviour, which consisted in a renovation, so that such estimates can total cessation of supplies. Consequently only cover a reasonably foreseeable this offer does not provide a remedy for future. Cyanamid's As the validity of the infringement committed. The in EEC least patents the extends to at Decision by which the Commission has 1977 (Great Britain), no prejudicial effect imposed sanctions in respect of that on intra-community trade can be infringement would still be valid even if in the foreseeable future. assumed

Germany. The importance of the ethambutol in the Common Market at

interlocutory decision of the Landgericht their disposal, they consider that the

of Dusseldorf is that it refused to grant quantities required by the Commission Cyanamid the advantage as regards greatly exceed the annual quantities

burden of proof under Section 47 (3) of needed by Zoja for its intra-community the German Patent law, because the trade. CSC refers here again to its American Cyanamid product and the proposal to Zoja to supply it with the

Zoja product do not have the same amounts of aminobutanol required for characteristics. the production of ethambutol to be sold More the applicants' within the Common Market. generally, conclusion that ethambutol manufac­ The Commission has misused its powers, tured by Zoja cannot be exported to the therefore, by issuing injunctions which

countries of the Common Market is not can quantitatively be related to only correct, because Cyanamid patents have Zoja's requirements for the world

issue specific orders for delivery of Regulation No 17, and in particular to

products and for submitting to the the following clause: it may by decision Commission proposals for further require to ... bring infringement (of supply, both sanctioned by a daily Articles 85 and 86) to an end. This penalty for non-compliance. Competence Article, instead of summing up a list of to do this is not provided for in remedies which the Commission may Regulation No 17, nor in any other impose, establishes the goal to be regulation. It may be possible that attained by the Decisions, i.e. the end of Article 87 EEC authorizes the Council of the infringement. It follows that the

Ministers to vest such powers in the extent of powers vested in the Com­

Commission, but no measure to this mission can only be determined in re­

effect has yet been taken. lation to the goal laid down in Article 3. Since in the present case the behaviour Moreover, the Commission's order to which resulted in an infringement of supply 60 000 kg of nitropropane or Article 86 was that of ceasing to supply 30 000 kg of aminobutanol to Zoja the raw material, thus risking the constitutes a misuse of its powers. The elimination of one of the principal Commission's competences under Article manufacturers of the derived product, the 86 are limited to competition within the necessary remedy could only be the Common Market, only in so far as trade ordering of such supplies as to guarantee between the Member States is concerned. the economic survival of the Its injunction to deliver 60 000 kg of manufacturer in question. Hence the nitropropane or 30 000 kg of Commission acted within the com­

the Decision was issued, but rather from any measure it considers indispensable is the point of view that Zoja is the only implied in the authorization to give

American cease-and-desist orders. If the Com­ potential competitor of

Cyanamid Company. Consequently the mission considered it necessary to have Commission, in issuing the injunctions, larger powers, it could always propose

had to take into account the potential an enabling regulation to the Council. role of Zoja within the Common The applicants repeat that any Market. Commission in regulatory powers of the

With respect to the quantity which the the field of competition are strictly applicants were ordered to supply, the limited to measures to protect

Commission observes that it was not competition in intra-community trade.

(80 000 kg + 120 000 kg) X 7/24 = has obliged CSC to supply Zoja with

2 raw material of which, after being processed, about 90 % will be sold in 29 166 kg aminobutanol. 'life-line' third countries. This, clearly, constitutes Having by this insured the a misuse of powers. survival of Zoja, the Commission did CSC rejects the Commission's argument not intend to impose the supply of that the amount of immediate deliveries predetermined quantities in the future, but limited itself to on the ordered by the Commission constituted relying 'life-line' a for Zoja. The Decision does presentation of proposals. If the not mention Zoja's general economic applicants were able to show that the 'life-line' position, its financial and stock-position extent of the was excessive, and the possibility for Zoja to continue nothing would prevent the error in manufacturing specialities on the basis of evaluation from being taken into bulk-ethambutol or other intermediary account, when establishing future products. supplies. But the defendant stresses that

the criterion cannot be based on a simple The Commission, in its rejoinder, distinction between the actual sales of maintains its previous argument. Zoja within the Common Market and

those to third countries, because this 6. As to the procedure and the reasoning would ignore the necessity of Zoja's survival as a viable producer. An CSC and Istituto submit that the

important decrease in Zoja's turnover Commission has infringed the rules of

could not occur without seriously procedure in basing its decision on

relevant market, the dominant position Both alterations are correct because they of CSC-Istituto on the the based known market, are on accurate facts, to position of Zoja, and the trade between the applicants. Consequently the Member States in ethambutol and of the Decision is substantial reasoning ethambutol-based specialities. Further and sufficient. The Commission con­

the Decision infringes Article 19 of siders it superfluous to contest the Regulation 17 and Articles 2 and 4 of allegations made by CSC regarding Regulation 99/63, because it is based on violation of Article 190 EEC. a number of alleged facts which were

never communicated to CSC and Istituto in the Notice of Objections. Finally the V — Questions put to the Commission infringed the Court rules of parties by the procedure in imposing on CSC and

Istituto disproportionate injunctions. 1. Questions put to the applicants The applicants state that the

Commission has disregarded the (a) The Court understands that in 1970 CSC decided to discontinue deliveries to standards of impartiality needed to

fair the EEC of nitropropane and ensure proceedings by neglecting to

The Commission decision? applicants. admits that

there are two points on which the CSC answers that it has for many years Decision differs from the Notice of supplied nitropropane and aminobutanol

Objections: to customers in the United States and

elsewhere throughout the world. (a) by comparison with the Notice of Nitropropane is produced in CSC's Objections the Decision adds certain basic nitroparaffins plant, which produ­

facts, such as the presence of ces four basic products in generally fixed representatives of CSC in the proportions: nitropropane, nitroproite, executive organs of Istituto or the nitromethane and nitroethane. CSC's fact that CSC itself stated that production of nitropropane is limited to Istituto is its subsidiary; the capacity of its present plant. The (b) with respect to the non-replace­ expansion of its production capacity ability of ethambutol in the Notice of entirely depends on the possibility of

Objections the emphasis is laid on finding an outlet for all four basic the special characteristics of products, and not solely on its market

nitropropane as such, in order to have resale for pharmaceutical purposes

more raw materials available for sales of within the EEC.

derivatives of that product. It also (c) In May 1972 CSC offered to supply restricted its sales of nitropropane Zoja with sufficient quantities of derivatives for pharmaceutical end use, become aminobutanol to cover its production of so as not to too dependent on ethambutol for the Common Market. In one product market. Finally it started its Reply, CSC notes that for the world upgrading its product in the market of market Zoja could obtain ethambutol in antituberculosis drugs and emphasizing bulk from Istituto. sales of dextro-aminobutanol rather than aminobutanol. Does this mean that, as regards the

world market, there is close cooperation Istituto submits that, on the basis of its between the applicants? own research, it decided to go over to

the production and sale of ethambutol in CSC answers that its statement on the

powder form and of its own availibility of ethambutol in bulk was speciality based on ethambutol, mycobutol. only a statement of fact, and did not

issue was merely a non-recurring ethambutol. On the United States measure and regarding a single small market, ACC is supplied with relatively quantity of nitropropane. The purpose small quantities of aminobutanol, and

of this prohibition was to prevent the outside the United States CSC delivers export of nitropropane to third large quantities of dextro-aminobutanol countries. At the time the measure was to ACC. It is emphasized by CSC that

taken Istituto was engaged in efforts to the nature and extent of its sales outside

penetrate into the markets of a number the EEC are not relevant to these

of third countries with the sale of proceedings.

JUDGMENT OF 6. 3. 1974 — JOINED CASES 6 AND 7/73

monopoly; supplying bulk ethambutol would have — the refusal to sell applies to one of caused Zoja's elimination as a manu­

the principal users, previously a facturer of ethambutol, contrary to

The fact that applicants'

customer; the allegations.

without nitropropane or aminobutanol —

the refusal to sell gravely affects Zoja is no longer in a position to make maintenance of conditions of use of its technology would only own effective competition in the Common have been important if ethambutol could Market, and have been produced from raw materials — no objective justification is apparent, other than nitropropane or aminobuta­

important patents. patents? As regards the second part of question

The Commission states that one has to (b), the Commission refers to its consider separately the statement that rejoinder and concludes that it has

COMMERCIAL SOLVENTS v COMMISSION

sufficiently demonstrated that the In support of its view the Commission patents held by other companies (and in submits a decision of 2 October 1973 particular ACC) would not have adopted by the Landesgericht of

prevented Zoja from continuing and Dusseldorf dismissing the claim of increasing the volume of its own exports infringement brought by ACC against within the Common Market. Zoja.

Grounds of judgment

Commission found that CSC and Istituto had infringed Article 86 by stopping

supplies to Zoja of raw material for the manufacture of ethambutol from November 1970.

4 It therefore adopted the measures which it considered necessary to put an end to the infringement and imposed a fine of 200 000 units of account jointly and

severally on the applicants.

5 By applications filed at the Registry on 17 February 1973 Istituto and CSC applied for the annulment of this Decision. Since for the purpose of the

proceedings the two cases were joined by order of 8 May 1973, it is appropriate to give a single judgment in the language of Case 7/73.

committee for investments above a certain level.

7 CSC manufactures and sells among other things products based on

nitroparaffins, inter alia 1. nitropropane ('nitropropane') and a derivative thereof 2. amino-1-butanol ('aminobutanol'), an intermediate product for the manufacture of ethambutol. Until 1970 Istituto acted as a re-seller of

nitropropane and aminobutanol produced by CSC in the United States. At the beginning of 1970 CSC decided that it would no longer supply the Common Market with these products and informed Istituto that thereafter these

products would be available only in such quantities as had already been committed for resale. Since then CSC has changed its policy and supplied

Istituto exclusively with dextro-aminobutanol for processing into bulk ethambutol for sale in the EEC and elsewhere and for its own needs, since

(e) whether the applicants have in fact acted as an economic unit.

The complaints of infringement of the rules of procedure and insufficient

grounds for the Decision will be examined in this context.

COMMERCIAL SOLVENTS v COMMISSION

(a) Dominant position

9 The applicants dispute the findings in the Decision in question according to

11 Finally CSC produced a statement by an expert according to which there is at least one practical method of producing nitropropane other than the method used by CSC and at least three other processes for producing aminobutanol without using nitropropane.

12 During the course of the administrative proceedings the applicants adduced some of these particulars in support of a request that before taking a decision the Commission should obtain an expert's report to verify the alleged

monopoly of CSC as regards the production of raw material for the

manufacture of ethambutol. The Commission rejected this request, since it

considered that the particulars relied on, even if they were established, would

not effect the substance of its Notice of Objections. In the present proceedings the applicants renewed their request for an expert's report on the point at

enabling them to be marketed. The production by the two Italian companies mentioned is on a modest scale and intended for their own needs, so that the processes used do not lend themselves to substantial and competitive

marketing.

14 The Commission has produced an expert's opinion from Zoja according to which the production of aminobutanol based on butanone on a substantial

industrial scale would be possible only at considerable expense and at some

risk, which is disputed by the applicants who rely on two experts, according to whom such production would not present any difficulties or cause

excessive costs.

16 It is not disputed that the large manufacturers of ethambutol on the world

market, that is to say CSC itself, Istituto, American Cyanamid and Zoja use raw material manufactured by CSC. Compared with the manufacture and sale of ethambutol by these undertakings, those of the few other

manufacturers are of minor importance. The Commission was therefore

entitled to conclude 'that in the present conditions of economic competition it is not possible to have recourse on an industrial scale to methods of

manufacture of ethambutol based on the use of different raw materials'.

17 It was justified therefore in refusing the request for an expert's report.

for the manufacture of this product.

20 The Commission replies that it has taken into account the dominant position in the Common Market in the raw material necessary for the production of ethambutol.

21 Both in Section II-B and in the part of Section II-C of the Decision which

precedes the finding that the conduct of the applicants 'therefore constitutes 86' an abuse of a dominant position within the meaning of Article (II-C, fourth recital), the Decision deals only with the market in raw materials for the manufacture of ethambutol. In taking the view that 'the conduct in question limits the market in raw material as well as the production of

ethambutol and thus constitutes one of the abuses expressly prohibited by the Article' said the Decision in dispute considers the market in ethambutol only for the purpose of determining the effects of the conduct referred to.

Although such an examination may enable the effects of the alleged

infringement, even if the market for the derivative does not constitute a

self-contained market. The arguments of the applicants in this respect and in

consequence their request that an expert's report on this subject be ordered

are irrelevant and must be rejected.

(c) Abuse of the dominant position

23 The applicants state that they ought not to be held responsible for stopping supplies of aminobutanol to Zoja for this was due to the fact that in the spring of 1970 Zoja itself informed Istituto that it was cancelling the purchase of

24 It appears from the documents and from the hearing that the suppliers of raw material are limited, as regards the EEC, to Istituto, which, as stated in the

claim by CSC, started in 1968 to develop its own specialities based on ethambutol, and in November 1969 obtained the approval of the Italian

government necessary for the manufacture and in 1970 started manufacturing its own specialities. When Zoja sought to obtain further supplies of

aminobutanol, it received a negative reply. CSC had decided to limit, if not to completely to cease, the supply of nitropropane and aminobutanol certain

parties in order to facilitate its own access to the market for the derivatives.

25 However, an undertaking being in a dominant position as regards the

objectives expressed in Article 3 (f) of the Treaty and set out in greater detail in Articles 85 and 86, it follows that an undertaking which has a dominant position in the market in raw materials and which, with the object of

reserving such raw material for manufacturing its own derivatives, refuses to

supply a customer, which is itself a manufacturer of these derivatives, and

therefore risks eliminating all competition on the part of this customer, is

abusing its dominant position within the meaning of Article 86. In this

context it does not matter that the undertaking ceased to supply in the spring of 1970 because of the cancellation of the purchases by Zoja, because it appears from the applicants'

27 Finally CSC states that its production of nitropropane and aminobutanol

ought to be considered in the context of nitration of paraffin, of which

nitropropane is only one of the derivatives, and that similarly aminobutanol is

only one of the derivatives of nitropropane. Therefore the possibilities of

producing the two products in question are not unlimited but depend in part on the possible sales outlets of the other derivatives.

28 However the applicants do not seriously dispute the statement in the Decision in question to the effect that 'in view of the production capacity of the CSC plant it can be confirmed that CSC satisfy Zoja's needs, since Zoja can

Market and in particular in the developing countries and that constitutes a

much more important market for anti-tuberculosis drugs than the countries of

the Community, where tuberculosis has largely disappeared. The sales outlets of Zoja in the Common Market are further reduced by the fact that in many

Member States Zoja is blocked by the patents of other companies, in

particular American Cyanamid, which prevent it from selling its specialities

based on ethambutol. Therefore abuse of the dominant position, even if it

Treaty, which gives the Community the task of promoting 'throughout the Community harmonious development of economic activities'. By prohibiting the abuse of a dominant position within the market in so far as it may affect trade between Member States, Article 86 therefore covers abuse which may directly prejudice consumers as well as abuse which indirectly prejudices them by impairing the effective competitive structure as envisaged by Article 3 (f) of the Treaty.

33 The Community authorities must therefore consider all the consequences of the conduct complained of for the competitive structure in the Common Market without distinguishing between production intended for sale within the market and that intended for export. When an undertaking in a dominant

position with the Common Market abuses its position in such a way that a

competitor in the Common Market is likely to be eliminated, it does not

COMMERCIAL SOLVENTS v COMMISSION

matter whether the conduct relates to the latter's exports or its trade within

(e) CSC and Istituto as an economic unit

36 The applicants refer to the case law of the Court and in particular to

Judgments 48/69, 52/69 and 53/69 of 14 July 1972 (Rec. 1972, p. 619, 787 and 845), and dispute whether CSC effectively exercises a power of control over Istituto and whether these constitute an economic unit. The two

companies have always acted independently, so that CSC cannot be deemed responsible for the acts of Istituto nor Istituto for those of CSC. Therefore

even if CSC holds a dominant position within the world market in raw

materials for the manufacture of ethambutol, it has not acted within the

JUDGMENT OF 6. 3. 1974 — JOINED CASES 6 AND 7/73

part. The conclusion is reached that 'CSC holds the power of control of

Istituto and exercises its control in fact at least with respect to Istituto's Zoja' relations with and it is therefore proper 'to treat the companies of CSC

and Istituto as constituting in their relations with Zoja and for the purposes of the application of Article 86 a single undertaking or economic unit'.

It follows from the passages quoted that there is no foundation in the 3­ 8

complaint, which must therefore be rejected, that the Commission altered its position during the course of the present proceedings in that after having agreed in its Decision that the two companies constituted an economic unit in

prolong its production to a stage beyond finishing and Istituto, a former distributor of nitropropane aminobutanol, began its activities as a producer of ethambutol is highly significant. It is difficult not to associate the decision by CSC no longer to sell nitropropane and aminobutanol with the fact it made an exception in favour of Istituto, which was supplied with dextroaminobutanol for the purposes of its own production of ethambutol and specialities based on this product.

40 The fact, pointed out in Section III-A of the Decision, that Istituto bought quantities of nitropropane which was still available on the market for resale to paint manufacturers who were forbidden to resell for pharmaceutical

purposes outside the Common Market is likewise significant.

41 As regards the market in nitropropane and its derivatives the conduct of CSC and Istituto has thus been characterized by an obviously united action, which,

taking account of the power of control of CSC over Istituto, confirms the conclusions in the Decision that as regards their relations with Zoja the two

companies must be deemed an economic unit and that they are jointly and severally responsible for the conduct complained of. In these circumstances

42 The disputed Decision ordered CSC and Istituto under penalty of a fine to

supply Zoja within a period of 30 days with 60 000 kg of nitropropane or 30 000 kg of aminobutanol and to submit to the Commission within two

months proposals for the subsequent supply of Zoja, and imposed on them jointly and severally a fine of 200 000 units of account, i.e. 125 000 000 lire.

43 In the first place the applicants disagree that the provision of Regulation No 17/62 (3) whereby the Commission, where it finds that there is an

infringement, may require the undertakings concerned to bring such

infringement to an end, enables the Commission to order specific supplies.

45 As to the first submission, according to the wording of Article 3 of Regulation No 17, where the Commission finds that there is an infringement of Article

86, 'it may by decision require the undertakings ... concerned to bring such infringement to an end'. This provision must be applied in relation to the

infringement which has been established and may include an order to do certain acts or provide certain advantages which have been wrongfully withheld as well as prohibiting the continuation of certain action, practices or situations which are contrary to the Treaty. For this purpose the Commission

may, if necessary, require the undertaking concerned to submit to it proposals

with a view to bringing the situation into conformity with the requirements of the Treaty.

JUDGMENT OF 6. 3. 1974 — JOINED CASES 6 AND 7/73

48 As to the second submission, it has been established above that it cannot be inferred from the expression 'in so far as it may affect trade between Member States' that only the effects of a possible infringement on trade within the

Community must be taken into account when it is a question of defining the infringement and its consequences. Moreover the rather limited measure that

the applicants suggested would have resulted in the production and sales

outlets of Zoja being controlled by CSC-Istituto and in Zoja being in a position where its cost price would have been affected to such an extent that its production of ethambutol would have been in danger of being unmarketable. In these circumstances the Commission could well consider that the

maintenance of an effective competitive structure necessitated the measures

in question.

COMMERCIAL SOLVENTS v COMMISSION

50 This submission, therefore, also fails.

III — The penalty imposed

51 The disputed Decision imposes jointly and severally on the companies CSC and Istituto a fine of 200 000 units of account, that is to say 125 000 000 lire. Although the seriousness of the infringement justifies a heavy fine, the

duration of the infringement should also be taken into account, which in the Decision was calculated as two years or more, but it might have been shorter if the Commission, which had been put on inquiry by the complaint of Zoja on 8 April 1971, that is six months after the first refusal by CSC-Istituto, had intervened more quickly. Moreover the ill effects of the conduct complained

of have been limited by reason of the fact that CSC-Istituto have provided the supplies ordered by the Decision.

Upon hearing the oral observations of the parties; Upon hearing the opinion of the Advocate-General;

Having regard to the Treaty establishing the European Economic

Community, especially Article 86;

JUDGMENT OF 6. 3. 1974 — JOINED CASES 6 AND 7/73

Having regard to the Financial Regulation of 30 July 1968, especially Article 17; Having regard to Regulations No 17/62 of the Council and No 99/63 of the Commission of the European Economic Community;

Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community;

lire;

3. Orders the applicants to pay the costs.

Lecourt Donner Sørensen Monaco Mertens de Wilmars

Pescatore Kutscher Ó Dálaigh Mackenzie Stuart

Delivered in open court in Luxembourg on 6 March 1974.

A. Van Houtte R. Lecourt