C-19/74

KALI UND SALZ AG, a company incorporated under German law, having its head office at D 3500 Kassel, 1, Friedrich-Ebert-Straße 160, represented by its directors Ernst Denzel and others, assisted by Wolfram Dörinkel and

Wolfgang Bache, Rechtsanwälte of Wiesbaden, with an address for service in Luxembourg at the chambers of Joseph Guill, 23 rue Seimetz,

KALI-CHEMIE AG, a company incorporated under German law, having its head office in Hannover D 3000, at 20, Hans-Böckler-Allee, represented by Philip von Bismarck and others, its directors, assisted by Rolf C. Galler, Joachim Meyer-Landrut and Fritz Georg Miller, Rechtsanwälte of Düsseldorf, with an address for service in Luxembourg at the chambers of Jacques

Loesch, 2 rue Goethe,

applicants

v

THE COURT

composed of: R. Lecourt, President, J. Mertens de Wilmars and A. J. Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P. Pescatore, H. Kutscher, M. Sørensen and A. O'Keeffe (Rapporteur), Judges,

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

gives the following

JUDGMENT

Facts

K & S, joint subsidiary of the companies allocation having regard to Article 2. Salzdetfurth AG, Wintershall AG and They shall agree on the conditions

Burbach AG, which make up the BASF relating to the varieties and delivery group, had a production of 2 265 000 periods.

metric tonnes in 1973 and was (iv) The prices to be paid for the responsible for 88·9 % of the German quantities delivered to K & S by KC shall production. be fixed annually. KC shall receive

KC, the principal shareholder in which is instalments on account of the prices

the company Deutsche Solvay Werke, of payable for quantities sold. the Belgian Group Solvay et Cie, was (v) This article relates to the marketing responsible in 1973, with 282 000 metric

for 11·1 % the German of kieserite produced by KC. tonnes, of

one of the main nutritive substances countries, KC's production accounting in necessary to obtain the best harvests in 1971 for only approximately 125 000 agriculture. The crude salts are obtained metric tonnes (approximately 90 000 from underground mines and subjected metric tonnes in 1973) of the total

to different refinement processes and quantity exported.

treatments for the purpose of obtaining In France there is a legal monopoly for either powdered, non-powdered or the sale of potash fertilizers enjoyed by crushed varieties. SCPA, whose production is considerably The potash is supplied as fertilizer either in excess of the national consumption.

directly to farmers for the purpose of its But the monopoly of imports as regards straight or as straight use as potash intra-Community trade must be potash fertilizer or to manufacturers of abolished as a result of the recommenda­

compound fertilizers for the purpose of tion of the Commission of 25 November processing. 1969. Figures provided by ISMA of London The United Kingdom, a large importer, show that in all European countries will rapidly become an exporter thanks straight potash fertilizers are being given to the opening of installations with a up and replaced by compound potash capacity of 600 000 to 900 000 tonnes fertilizers. This phenomenon is explained per annum. on the one hand by the fact that As for imports into the Community from compound fertilizers, which require only third countries, they are quantitatively one spreading,save labour, and on the less than imports from France and the other hand by the considerable reduction Federal Republic of Germany. in available Thomas-Kali from the

(b) refused 'the application for an (a) Dismiss the application as un­

exemption under Article 85 (3)'; founded;

(c) ordered the said undertakings to (b) Order the applicants to pay the

bring the infringement to an end. costs.

IV — Submissions and ar­

par­ guments of the II — Procedure ties

President of the Court on 8 July 1974. compound fertilizers are nothing other

than a mixture, ready for use, of straight At the request of the Court the fertilizers. Their interchangeability and applicants and the defendant replied to a their keen competition inter se are certain number of questions. corroborated by the movement of sales

in recent years and everything points to

this movement continuing.

III — Conclusions of the The Commission on obviously relies

only two facts, that is that 12·5 % parties of the

The Commission claims in both cases activities on the development of the that the Court should: compound fertilizer RHE-KA-PHOS.

KALI UND SALZ UND KALI-CHEMIE v COMMISSION

'surplus' The delivered to K&S Ronnenberg would in any case have diminished from about 200 000 metric been short since its reserves are limited. tonnes in 1968 to 129 000 metric tonnes The deposits from the mine at in 1973. Friedrichshall will be completely required To determine KC's potential participa­ for KC's own commercial needs, thus

tion in the German it is in making it impossible to potash market sell them the

appropriate to rely on the relationship form of straight potash fertilizer. between the quantities it produces and According to the applicants KC could K&S sells in the Federal Republic of sell its production only if it were able to Germany and the total figure of sales deliver in the whole of the Federal made by K & S, that is 3·5 % in 1973. territory and in the neighbouring As for KC's potential participation in the countries and this is ruled out by Community market of the six original reason of the substantial transport Member States it is appropriate to rely costs. Deliveries to Italian and Irish on the relationship between the total pro­

manufacturers of compound fertilizers duction and the volume of KC's 'surplus', must be ruled out. As regards British and that is 2·8 % in 1973. French manufacturers, there is potash

capture the abovementioned shares of easily supply them by reason of

the market, but this would be possible long-term delivery contracts. Further, all only after a long initial period. producers of compound potash fertilizers are in competition with RHE-KA-PHOS. Moreover, KC's two potash mines at 'non-powdered'

Friedrichshall and Ronnenberg, which They increasingly sell

have been worked since the beginning of varieties 'with a minimum content of

60 % which KC does not produce in the century, have, for geological reasons, life. sufficient quantity. For these reasons KC a naturally limited duration of

Three-quarters 'surplus' must concentrate its efforts on straight of the comes

working duration of the mine at and more in the form of compound

JUDGMENT OF 14. 5. 1975 — JOINED CASES 19 AND 20/74

fertilizers but there continues to exist in could be said that products are not

the Federal Republic of Germany a large interchangeable so long as they are still clientele in favour of straight potash in competition, but only when one of the fertilizer such that it is possible to state two is almost ousted from the market.

that there is a 'market for straight potash Moreover, the peculiarities of use of fertilizer' the size of which varies from straight potash and compound fertilizers 'Lander' one 'Land' to another. in the various are due

The Commission rejects the argument of exclusively to the difference in prices of

If its out restriction of a territorial nature. the applicant sold surplus on its any

own, there could be competition with KC it says that cannot concentrate regard to price in the areas favourably exclusively on these areas since the situated from the point of view of economic consequences of cut-throat 'sensitivity' transport costs. The alleged limited competition by price reductions of potash in this respect must in any case territorially would be much less serious be doubted, by reason of the fact that, for the than more powerful competitors for example, K & S succeeds in exporting for low KC. The transport costs to to Poland some 80 000 tonnes per Poland are due to the fact that transit annum. through the German Democratic K & S in reply says that since the two Republic is paid for by means of

markets in question form a single entity Comecon 'clearing', and in any case the

the sale of KC represent only 130 000 sporadic nature of such sales prevents

metric tonnes of a total of 4 750 000 Poland from being regarded as a certain tonnes that is to say about 2·5 %, which sales outlet.

is insufficient for KC's production to In 1971/1972 German imports of potash have 'a noticeable effect'

compound potash fertilizers may not be possibilities can therefore in no way be substituted for another. Otherwise it regarded as substantial.

KALI UND SALZ UND KALI-CHEMIE v COMMISSION

In its rejoinder, the Commission says the applicants'

allegations, is thus

that the farmer theoretically has the distributed jointly with phosphated

choice between two kinds of fertilizer, potash fertilizer) free at station does not but, in spite of the indisputable signify that another system could not be advantages of compound fertilizers, adopted for straight potash fertilizer. certain criteria may lead him to use

straight potash fertilizer by the exclusive powdered varieties which are less in agency of K & S. In 1972, the latter demand and in respect of which demand exported 77 143 metric tonnes of potash is declining. The granulating plant, to Denmark, which could have been which it would be necessary to acquire, done by KC and all the more so since would cost some DM 10 million. The the use for which it was intended was expert opinion from the Research not known by the seller. Institute for Economic Policy of the As regards the Commission's claim that University of Mainz given in October there was a single market constituted by 1973 stressed this difficulty. the domestic market and the export The Commission does not understand market, it should be stated that the why it would be indispensable to alter Federal Republic of Germany represents this range by widening it, since the an important section of the market in smallest price concessions should potash and thus a market section to produce a revival of interest in the which Article 85 should be applied. In is smooth varieties and allow KC to sell otherwise as regards the policy pursued the relatively modest quantities which it in the sale of potash. In itself selling its could not process itself. own production KC would have Contrary to what the defendant claims available not only the domestic market KC has never maintained that it had but also the export market. The 'complete' to offer the most range appreciable nature of the restriction on

competition appears indisputable when of varieties possible. However, the, 'surplus' independent marketing of it is observed that K & S, which already would involve in any event substantial occupies a clearly dominant position on investments to improve quality in order the market, is making sure of the part of to be able to offer varieties and qualities the market of the only other German meeting the requirements of the market. producer. Without disputing the The applicants claim that KC would not sensitivity of potash to transport costs, 'powdered'

in months of KC's production, which not succeed selling its powdered

K & S has done service is paid for by KC. varieties, since so until

now in respect of KC's production In reply to this argument K & S which it had taken over. If maintains that since potash is in Thomas-Kali, which is relatively cheaper competition with finished products of 'price' thate the other potash fertilizers, sells in high quality, the of inducement to spite of its 'powdery' nature, this shows stock potash would be prohibitive

that the 'powdery' is not reductions. Moreover this would require quality 'flexible'

necessarily an obstacle to sale. It should a delivery since purchases are

be not spread out equally over the different noted that since 1968, new methods months of the year. of spreading have been used for these

3. The economic impossibility of 4. The costs involved by a sales in salts of potash stocking

The applicants observe that in order to KC states that it has never had, either in do its have to the Federal Republic Germany or in marketing KC would own of

begin, at considerable expense, by the Community, a sales agency capable

the its installing the necessary storage facilities, of taking care of sale of salts of

which it does not possess at as potash, since this was done before 1970 present, does K & S. by VDK. KC claims that wholesalers practically Since the potash contained in straight

do not stock and retailers prefer to stock fertilizer and in the compound fertilizers expensive fertilizers, nitrogen or is in competition with RHE-KA-PHOS it phosphates and by reason of this straight would not be reasonable to seek to

10 million whereas its turnover is only in annum an moreover would seriously the order of DM 30 million. increase the transport costs it had to

KALI UND SALZ UND KALI-CHEMIE v COMMISSION

meet, for the sector includes transport the Netherlands NKIM sells practically costs in its prices. Since the transport no compound fertilizers and in France costs of RHE-KA-PHOS amount at SCPA has two completely different sales present to DM 30 per metric ton and agencies. Moreover, Rhenania-Phosphat, those of K & S for straight potash sold by the same agency as

fertilizers to DM 17 per metric ton only, RHE-KA-PHOS represents only 3 % of

KC would have to provide for an the sales of compound fertilizers of KC additional than DM 10 and is therefore insignificant. Compari­ charge of more

per metric ton for transport costs, that son with the vendor of radio sets is not

merchant. Moreover in the Federal According to the Commission, if the Republic of Germany there is a sales of RHE-KA-PHOS have fallen well-organized network of wholesalers since 1966, the reason is perhaps bad and retailers, central cooperatives and management on the part of VDK, and agricultural distri­ cooperatives, which this is not a reason for saying that it is bute straight potash fertilizers of impossible successfully to organize such whatever type is required. VDK, in its combined sale. The fact that sales of time, distributed straight potash fertilizer dealt different potash are with by two and RHE-KA-PHOS simultaneously in SCPA managements confirms the with quite satisfactory results, and what defendant's argument. As to the the applicants consider impossible is reference to the simultaneous sale of practised in France by the sales Rhenania-Phosphat and RHE-KA- organization of SCPA, in the PHOS, it is right to recall that the first is Netherlands by NKIM and in the astraight fertilizer. Finally, the seller of Federal Republic of Germany by KC radio sets would also prefer to sell a itself as regards Rhenania-Phosphat. more expensive article, but this does not In reply KC says that since sales fell as prevent him from likewise offering from 1966, in 1968, that is two years simple and cheaper sets.

before the agreement of 6 July 1970 K & S does not define its position on the came into force, it decided to take existence of a network of wholesalers, charge once again of the sale of retailers and cooperatives in the Federal RHE-KA-PHOS. Further, VDK, which Republic Germany. of Straight potash had two different sales agencies for fertilizer is imported also into that straight potash and RHE-KA-PHOS, country without any 'special sales nevertheless had difficulties in selling apparatus'. RHE-KA-PHOS in the Federal Republic of Germany and abroad, since its (b) The applicability of Article 85 (1) customers could not readily accept that

Common Market; Commission likewise gave negative

clearances in respect of horizontal (b) that it gives KC the right to sell to cooperation agreements which allowed K & S on a long-term basis its entire be the market to opened to the potash production for the purpose involved (Decisions 17 companies of of re-sale; although under the Tools'

July 1968 'Machine and of 5 agreement KC is not literally bound December 1969 'Pirelli-Dunlop'. to sell its potash exclusively through KC has never had any direct access to K & S, it in fact hands over the the market since it formerly sold its whole of its production to K & S production through the sales agency. with the exception of such quantities The agreement thus opens a market to as it uses itself; KC which it would lose if the agreement (c) that this is similar to the situation were nullified.

which existed previously with VDK; KC denies that there is any question in the present case of an agreement within (d) that the agreement practically the meaning of Article 85 (1), and that concentrates in a single body the imposes the agreement an obligation on whole of the Federal Republic of KC, since it remains free to decide for Germany's available straight potash itself the amounts it will entrust to fertilizer and thus excludes all K & S. competition between the only two

German producers of potash as The agreement did not have the effect of restricting competition within the regards the sale of their products to

farmers and makers of Common Market. On the contrary it compound KC's inability to compete which fertilizers; was

achieved; account in its Decision of the fact that

KC was in the position in 1970 of having (f) that in consequence it is covered by to abandon the exploitation of the prohibition in Article 85 (1). Ronnenberg if it could not ensure K & S states that on the expiration of fluctuation the sale of the whole without the agreement the available potash will of the maximum production of this be limited to K & S's production and as mine. The aforementioned report from a result the agreement connot restrict Research Institute 'the the points out

competition or affect trade between danger of (KC) reduce its seeing Member States. in future production and being content

It is right to observe the absence in the with extracting only the potash

agreement of 'any obligation to sell'

and necessary for its own PK fertilizer'. of prohibition on export. any The agreement in no way affects trade

enables K & S 'to concentrate the least three-quarters of the 'surplus of

in its hands'. is not assured. potash'

national sales

The Commission's statement that a The Commission in its rejoinder says

'large part'

of the quantities made that the determining factor is not that, available to K & S by KC 'are exported undoubtedly, KC remains free to dispose to other Member States' is of the potash which it does not confusing require, but lies in the effective 'large' since it gives the impression that otherwise

come within the prohibition in Article 85 factories and potential purchasers and

(1) unless it affects trade more than the varieties wanted by the purchasers, insignificantly. The Commission has not deliveries by KC itself would be possible bothered about the requirement of an and it would thereby be free to fix the 'appreciable' obstacle to competition and prices.

to trade. It does directly cite KC's not A market in straight potash fertilizer position on the market. Assuming that well and truly exists, the still sizeable the other basic conditions required by part of the market in straight potash Article 85 (1) are met, to establish fertilizer that straight potash proving whether the agreement has prevented and compound potash are not simply KC from perhaps participating to an interchangeable. The contested Decision 'appreciable' extent in competing in the took into consideration the rightly only potash market, it is necessary to market in straight potash fertilizers. The determine what quantities it could sell if decisive question is not whether in it had to distribute its products itself. If certain circumstances the farmer has account is taken of all the objective recourse to compound fertilizer in factors which characterize the market, to preference to straight potash fertilizer 'reduce' the theoretical, potential or but whether, from the legal point of

maximum parts of KC's market to the as far as Article 85 (1) is concerned view, part of the market in straight potash it is possible to speak of a 'market in which it could probably hold per­ straight potash fertilizers'. It is not from manently, it will be found that left to an agricultural expert that a proper itself KC could not continuously sell the answer to this question should be quantities of potash for which K & S The at sought. submissions made by the present ensures a sale. This dispute is in applicant on the subject of the

of straight potash fertilizer. For soil autonomous attitude of the applicant, lacking in potash and intended for the the defendant has shown in its Decision cultivation of a plant using much potash, the reasons why it is convinced that the

the farmer must use a straight potash agreement is the decisive factor. fertilizer, which is the only way of As regards the alleged danger to which

manuring having regard to the precise the production from the mine at

properties of the soil and plant. For soil is defendant Ronnenberg subject, the

lacking lime, a straight lime fertilizer considers that it is entitled to refrain

complemented with a straight potash from giving any opinion since this fertilizer would be needed. In both cases argument was not put to it until now. it is that compound fertilizer clear a The legality of the Decision cannot be be appropriate. would not challenged by factors which have not Article 85 does been brought to the knowledge of the (1) not speak of

that the agreement 'has as its effect the Federal territory. restriction of competition within the In reply K&S that fact that says the Common Market'. Even without any straight fertilizers still make an up 'obligation sell'

to an agreement important part of may the market, in spite of have an effect restrictive of competition. an abundant of compound supply It is difficult to draw a comparison with fertilizers, proves that there is effective the Decision given by the Commission in in is in fact competition what a single the case of 'Comptoir français de market. The differences in the use of

l'azote', because the facts there were straight potash fertilizers and compound different. The objective of the said fertilizers in the various 'Lander' are not Comptoir was limited to selling jointly due to the nature of the but to the soil, on the French market and on the fact that the prices of Thomas-Kali markets of third countries. On the Lander. themselves vary according to the other hand exports of the various In that 'the recognizing course of the manufacturers and their partners to movement will depend on a series of other Member States could no longer be factors ... including the movement of carried out except on an individual basis. prices'

defendant the admits the The decision to give a negative clearance 'cross-elasticity' of prices, which consti­

was due to the facts of which the important index tutes an of the Commission had cognizance. By this functional interchangeability of products Decision the Commission did not in and the existence of a single market however intend to rule out that national the sphere dealt with. The Court has sales agencies might affect trade between given relevant and clear explanations of Member States. this phenomenon in its judgment in The comparison with VDK arises since it Continental Can. follows from Article 85 (1) that it is the KC in its reply says that it is significant effects of an agreement which are that the defendant in seeking henceforth important. to basically on Article 3 of the rely As to whether the elimination of agreement, which provides for a kind of competition, which apparently KC no provisional programme from which the

As regards the interchangeability of the There is moreover competition between products in question, the expert opinion systems of improvement, which com­

of Professor Welte concludes that from petition is made possible only by the

the point of view of the farmer, straight existence of compound fertilizers. This potash fertilizers and compound potash competition, too, constitutes competition

fertilizers may as a rule be substituted between various varieties of fertilizer for one another without restriction, that containing the same nutritive substance, there is therefore competition by way of but the most important effects of

substitution between these two varieties compound fertilizers also influence the of fertilizer and that it may be demand for varieties of fertilizer anticipated that the part of the market containing other nutritive substances'.

held by straight potash fertilizers within

view of interchangeability, these Wettbewerbsrecht’, 1974, paragraph 43, may IV). nevertheless be regarded in the same way

as straight fertilizers: each compound

fertilizer based on a particular nutritive In its rejoinder the defendant stresses

substance can technically be replaced by that the existence of the practice of the

another fertilizer containing the same 'provisional programme of quantities'

is nutritive substance. Competition by certainly settled and constitutes the basis substitution, which depends on the of collaboration between the two

with the other points of the agreement is effect.

due to a practical necessity and the

removal would change nothing. (c) The inapplicability of Article 85 (3) When KC alleges that K & S is capable In its decision, the Commission takes the of 'excluding it from the market without view that: lengths' having to go to great it provides proof that the competition to which it (a) K & S is a very important producer subjects K&S could be more than of potash and is able, even without

'appreciable'. The expert opinion from the amounts delivered by KC, to

Professor Welte stresses the use of adopt the said rationalization

straight potash fertilizer, but the measures in its own company; defendant's remarks are concerned with further, KC is part of the important the quantities of potash sold to farmers, Solvay group which has interests in whether as straight potash fertilizer or as the potash sector; KC could sell its fertilizer indepen­ a constituent of compound fertilizer. straight potash

opinion on the question of the viability improve on its strong position in the of the mine at Ronnenberg. As a result potash sector (87·5% of German the defendant declines to express a view production) by becoming the sole

on the question whether a scientific supplier of straight potash fertilizer appraisal of the position of the stocks at to the German market, a substantial Ronnenberg must be taken into account part of the Common Market; as in settling the dispute. It is moreover regards straight potash fertilizers only now that KC is taking it into its used directly in agriculture, although head to establish a relationship betwen the consumer theoretically has the

the mud and the functioning of its mine. choice between straight potash

The defendant would not hesitate, if fertilizers and compound fertilizers appropriate, to adapt its decision to a containing potash, special factors changed situation if it were convinced of appertaining to the mode of use and

the necessity of such adaptation, but it considerations of the nature of the

has not had until now any reason for soil, the availability of labour, taking any initiative in this direction. If atmospheric conditions and prices

farmers may in some years buy there is no market for straight potash

straight fertilizer and in others fertilizers and consumers regard

compound fertilizer does not alter compound fertilizers as substitutes for the view that the relevant market to straight fertilizers. take as the basis for the decision in In considering substitutes in competition these proceedings is that of straight the Commission is making the same potash fertilizer; mistake as in the Continental Can Case, where without any convincing reason it (g) accordingly the agreement cannot be divided the market into several exempted under Article 85 (3). sub-markets in order to be able to allege

K & S, on the other hand, claims that the that there was a dominant position in

cooperation between the two the sub-markets. As is shown by the companies movement in the volume of sales, contributes to improving the production and distribution of the goods. With the producers of compound fertilizers have been successful in achieving an upward help of the amounts produced by KC, K & S kan more meet the surge while sellers of straight fertilizers easily fluctuations in demand. The profitability are undoubtedly fighting a difficult of the requires that it battle. The agreement between KC and company should

function the whole year K & S constitutes a rationalization regularly through and that there should be measure assisting them in this and

Republic of Germany and in the balance the disadvantage, to conclude

JUDGMENT OF 14. 5. 1975 — JOINED CASES 19 AND 20/74

that the exemption cannot be granted freedom of international trade in goods

because the agreement gives the parties obtains, that the necessity of being able the possibility of eliminating competition to deliver in the whole of the territory of 'in a substantial part of the products in a Member State be invoked to justify question'. This change of attitude on the common marketing. In relation to

Commission's part can mean only one purchasers (especially markers of

thing, that is, that it is abandoning its compound fertilizers) who purchase

Such elimination cannot be alleged in so Article 85 it have under (3), should far as KC competes ever more and more adduced evidence of an 'appreciable with K & S with the competitive product According to this effect'

on competition.

whichmay truly be substituted, that is provision it had in the first place to RHE-KA-PHOS. examine whether the agreement

According to the Commission if every contributed to 'improving the … distribution of goods'. This considera­ economy made by an autonomous sales

organization were regarded as an tion led the Commission to answer in its 'improvement in the distribution of Decision that KC had the possibility of

products'

justify an agreement which excludes for without a

an indeterminate duration competition complete range of potash fertilizers. between the only two sellers on the Without the agreement, KC would itself German market. have to be responsible for the sale of its Moreover, it is not possible to concede, potash fertilizer and that would involve in a market where the principle of appreciable competition.

KALI UND SALZ UND KALI-CHEMIE v COMMISSION

In reply K & S says that the price of requesting, as a precaution, that the

potash has increased by only 11·8 % Decision of 21 December 1973 be set

during the course of the last 21 years, aside, alternatively that execution of the which is very much less than the average Decision be stayed for a initial period of increase in prices and thus customers three years.

part of the products in question. third countries, but the precise regions

where the powdered potash is used do not appear from the figures; it is thus

impossible to know whether these

Questions regions are near or not to the KC plant. V — put by the

Court to the parties 2. How do German importers of

straight potash sell their goods? (a) Questions on the amendment of the

were used as powdered, while in Britain lead a farmer to prefer a straight potash

on the other hand the proportion of the fertilizer. There are the different needs of former was only one-third. It may be plants for nutritive substances, the

assumed that the tendency for straight greater leaching in light than in heavy potash fertilizers to decline has soils, the need to improve soils which

continued so that these quantities have have been inadequately fertilized in the

become even more insignificant in these past, which requires an additional

countries and that they are now of no application of potash, and finally the

The has knowledge that summarized below. applicant no

foreign producers of potash have K & S completes the replies which it has organizations in the Federal Republic of given in and states that it writing Germany for the sale of straight potash disposes of the powdered potash which

to the farmer. It is the same as regards it manufactures throughout its market in German import undertakings. It is so far as KC's production cannot replace therefore possible that the imported it by reason of cheaper transport costs.

quantities are purchased by producers of For example, between Friedrichshall and

compound fertilizers, which would lead Denmark or the northern part of

one to think that the non-powdered Germany they were only DM 29·40 per variety of a minimum content of 60 % is metric tonne in 1973 whereas from involved. K & S's factory at Neuhof they were DM 39·10 per metric tonne. In the same way (d) Questions put to the defendant. between Ronnenberg and 'Chem. Fabr. Kalk' 1. What geological and atmospheric at Cologne they were DM 17·60 conditions justify the use of a straight per metric tonne whereas they would

obtained from KC nor stocked this which it obtained from KC nor stocked

potash. its potash. KC made no comment on this

The defendant stated that there was a information.

scarcity of potash on the world market The Advocate-General delivered his by reason of a greatly increasing demand opinion on 11 March 1975. and that prices were rising.

Law

1 By applications filed at the Court on 11 and 12 March 1974, the companies S' Kali- and and Kali Chemie (hereinafter called ‘K & -Salz and 'K') brought

allocation of this production.

According to the Decision challenged, this agreement has the effect of

concentrating practically the whole supply of straight potash fertilizer in the

JUDGMENT OF 14. 5. 1975 — JOINED CASES 19 AND 20/74

Federal Republic of Germany and thus restricting competition in the market of this product and affecting trade between Member States.

5 In order to find a restriction on competition the Decision challenged states

products which is effected by their prices and their intrinsic advantages for the consumer. The figures mentioned in the Decision show a considerable

increase in consumption of compound potash fertilizers which however has not eliminated straight potash. The Decision challenged stated, it is true, that such considerations as the state of the soil, the availability of labour and the weather, point in certain cases to the desirability of using straight potash, but it is not shown that the two types of fertilizers constitute

different markets. The Decision itself makes a point of the fact that a small

number farmers may in some years of buy straight fertilizer and in others compound fertilizer.

7 In these circumstances the conclusion of the Decision that 'the declaration of

inapplicability of Article 85 (1) must in any case be refused because the

has gone down from 173 500 metric tonnes in 1973 to 129 400 metric

tonnes in 1973, whereas that used in the processing of its compound

fertilizer RHE-KA-PHOS has increased form 119 700 metric tonnes in 1971 to 150 800 metric tonnes in 1973.

9 The fact that KC delivers its surplus production of straight potash to K & S is due to KC not possessing any sales organization making it possible to

market it. Before 1970 it sold this production via the sales agency which

then operated between all the German producers of potash for the supply of straight potash fertilizers. The agreement in question is intended to allow KC to concentrate its efforts on the manufacture and sale of the compound

this respect (they claim) neither during the administrative stage nor during

the course of the proceedings has it sufficiently taken into account KC's actual position on the market,

12 First, the quantities of straight potash sold by KC to K & S are constantly diminishing. According to the Decision challenged, KC was in a position to

set up an independent sales organization. The applicants have claimed that

the cost of such an organization would be prohibitive for KC having regard to its turnover in straight potash. The examples which the defendant quotes of a possible joint marketing of straight potash and compound fertilizer cannot be related to the position of KC, whose surplus production of

straight potash is constantly diminishing.

K & S.

15 Accordingly, insufficient reasons appear to have been given for the Decision challenged, at least as regards the rejection of the application for exemption.

Costs

16 Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs. Since the defendant has been unsuccessful, it is proper to order it to pay the costs.

On those grounds,

THE COURT

A. Van Houtte R. Lecourt

Registrar President