C-27/76

UNITED BRANDS v COMMISSION

with other trading parties, thereby meaning of subparagraph (a) of placing them at a competitive disad­ Article 86; this excess could, inter vantage is an abuse of a dominant alia, be determined objectively if it position. were possible for it to be calculated 9. Charging a price which is excessive by making a comparison between the because it has no reasonable relation selling price of the product in to the economic value of the product question and its cost of production, supplied may be an abuse of a which would disclose the amount of dominant position within the the profit margin.

In Case 27/76

UNITED BRANDS COMPANY, a corporation registered in New Jersey, United States of America,

and

UNITED BRANDS CONTINENTAAL B.V., a Netherlands company having its registered office at 3 Van Vollenhovenstraat, 3002 Rotterdam, represented and assisted by Ivo Van Bael and Jean-François Bellis of the Brussels Bar, with an address for service in Luxembourg at the Chambers of Mr Elvinger and Mr Hoss, 84 Grand Rue,

composed of: H. Kutscher, President, M. Sørensen and G. Bosco (Presidents of Chambers), A. M. Donner, J. Mertens de Wilmars, Lord Mackenzie Stuart and A. Touffait, Judges,

Advocate General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts, procedure and the arguments 1962 (Official Journal, English Special of the parties may be summarized as Edition, 1959-1962, p. 87 et seq.), to follows: initiate a procedure for infringement of Article 86 of the EEC Treaty against I — Facts and procedure UBCBV following complaints made to it by the Th. Olesen undertaking, Valby The "United Brands Company" (herein­ (Denmark) on 20 February 1974 and by after referred to as "UBC") of New the Tropical Fruit Co. and Jack Dolan York, was formed in 1970 by the Ltd. undertakings, Dublin and the merger of the United Fruit Company and the American Seal Kap Corpor­ Banana Importers undertaking, ation. Dundalk (Ireland) on 27 May 1974.

— applied to its distributor/ripeners The Member States of the EEC impon differing prices, the difference about a third of the total of world sometimes amounting to 138%; banana exports. In 1974 these imports amounted to 1 978 000 metric tons, of — refused to supply the Danish firm which approximately 30% went to Olesen with bananas of the Chiquita Germany, 25% to France, 16% to Italy, brand on the ground that this under­ 15% to the United Kingdom, 6% to the taking had taken part in an Netherlands, 4.5% to the Belgo-Luxem­ advertising campaign for bananas of bourg Economic Union (BLEU), 2% to a competing brand. Denmark and 1.5% to Ireland. There are different varieties of bananas In the same letter, it informed UBCBV that, in accordance with Article 19 (1) including "Gros Michel" and of Regulation No 17/62 and Regulation "Cavendish" produced by crossing No 99/63 (Official Journal, English "Gros Michel" with a Canaries variety Special Edition 1963-1964, p. 47 et seq.) out of which the sub-variety 'Valery- it could make known its views Cavendish" was born. In 1969, the concerning the complaints of which it "Cavendish" variety accounted for 85% had thus been notified. of world banana exports, as against only 30% in the early 1960's. All these UBC and UBCBV replied in a banana varieties are pre-packed in the statement dated 12 June 1975. The producer countries and now always parties concerned were heard and in the exponed while still green. They have to presence of each other during a hearing be ripened artificially when they arrive on 24 June 1975. in the country where they are to be consumed. Most of the ripening, which (2) The facts relied on in the decision and requires airtight ventilating and cooling during the administrative procedure. facilities is carried out by the importer/­ Statement of the reasons upon which wholesalers, although it is done the Commission's decision is based. sometimes by independent ripeners. Operative part of the decision Marketing these bananas under "brand The Commission at the end of the names" which means that each hand of procedure which it had initiated in this bananas and sometimes each banana in way adopted on 17 December "IV/­ the producer country has to be marked, 26.699 Chiquita" (Official Journal L 95 has expanded considerably. This sales of 9 April 1965) which it notified to policy was introduced by United Fruit UBC and its subsidiary in the Company in 1967 for the sale of its Netherlands. "Cavendish-Valery" bananas under the brand name "Chiquita". The other In order to explain the facts of this case undertakings only adopted this trend the Commission begins by describing much later. the structure of the banana market viewed as a whole and then describes (b) The position of the United Brands the position and conduct of UBC and Company its subsidiary on this market. On the world banana market most of A — The structure of the market the business is carried on by certain (a) The world banana market large American undertakings, inter alia: — United Brand Company of New Fresh bananas (heading No ex 08.01 in York, the Brussels Nomenclature) are a highly perishable product grown in the tropics — Castle and Cooke Company of San all the year round. Francisco,

— Del Monte Company of California. (c) UBC has a very solidly constructed distributive network in Europe where its UBC also carries on business in several operations are co-ordinated by three sectors such as agriculture, chemicals, wholly owned subsidiaries : packaging, transport, telecommuni (a) United Brands Continentaal B.V_, cations, etc. . . . Rotterdam, Bearing in mind that the banana (b) Fyffes Group Limited, London, for business alone of its predecessor, United the sale of bananas (and other Fruit Company, was restricted by the products) in the United Kingdom,

Economic Union (BLEU), the United UBC, the largest banana group in the Kingdom and Italy. world, owns more than 30 000 hectares In Germany it sells its bananas mainly of banana plantations and in 1974 sold to the Scipio Group which owns more about two million metric tons of than one-third of the ripening facilities bananas (35% of world exports). in that country. In those Member States UBC has formed a large number of sub where it does not own any ripening sidiary companies throughout the world facilities UBC invited a limited number which are run by its Central Board in of undertakings to ripen and distribute New York. its Chiquita bananas on condition that they had equipment meeting its own (a) The countries in which UBC is a technical specifications.

nican Republic. ripeners, prepare plans of the instal lations, determine the ripening methods (b) UBC is also very strongly placed in to be used, train personnel and make banana shipping. periodic checks. It owns or charters more than 40 refrig erator ships and its own vessels alone (e) The marketing policy of UBC is represent a capacity of nearly 10 million centred solely on the sale of its bananas cubic feet. under the "Chiquita" brand name and The main ports for unloading in the its guide-line is the need to see to it at EEC are Bremerhaven, Rotterdam, all times that their quality complies with Antwerp, Hamburg and certain ports in very high standards.

UNITED BRANDS v COMMISSION

JUDGMENT OF 14. 2. 1978 — CASE 27/76

Société Castle and UBC Del Monte Alba Belhoba Geest Mercantile Bruns Various % of bananas sold Cook d'Oltremare

45% 13% 9% 15% 7% — 10% —

Germany —

The Netherlands 40% 18% 15% — 20% — — 2% —

BLEU 50% 22% 3% — 24% — — — —

U­ N­ 20% 24% 5% 1% Denmark 45% ITE­ — — — —

IO­ N

40% 30% — — 6% United Kingdom — — — —

9% 5% 5% 6% 6% 3% 3% 6% Community 45%

Onkel Sandrop Del Under brand name Dole and Geest Somalita Bajella Chiquita Monte Tuca Bonita

40 9 8 6 No of ships

JUDGMENT OF 14. 2. 1978 — CASE 27/76

UNITED BRANDS ν COMMISSION

It Th. Olesen took part in it in the same mentions as evidence of this view the way as it had co-operated with UBC in research carried out on the markets at September 1973 in the promotion of the Rungis (France), Frankfurt and London brand name "Chiquita". which showed that the effects of the On 10 October 1973 UBC informed prices and available quantities of other Olesen that it refused to continue to fruits are too brief, too effective and too supply it with bananas, giving as its sporadic to be regarded as forming part of the same market as bananas or as a reason that Olesen and participated in the campaign for "Dole" bananas. This substitute therefor.

without taking into account, to any sub reason why UBC has a share of about stantial extent, their competitors, pur 45 % of the market in question is that chasers and suppliers. Such is the case its marketing policy has been when an undertaking's market share, concentrated on the sale of bananas either in itself or when combined with under the "Chiquita" brand name its knowhow, access to raw materials, which it has adopted since 1967 and is capital or other major advantage such as based upon regular, intensive publicity brand loyalty, enables it to determine campaigns which were accompanied by the prices or to control the production a thorough reorganization of the or distribution of a significant part of arrangements for production, the relevant goods. It is not necessary packaging, carriage, ripening and sale for the undertaking to have total of the bananas. This policy has given dominance such as would deprive all and enabled UBC to maintain an other market participants of their appreciable advantage over its commercial independence, as long as it competitors who have not only had to is strong enough in general terms to face the high cost of mounting such

publicity campaigns but have also had Starting with this finding the considerable difficulty in supplying large Commission takes the view that UBC quantities of bananas of uniform has been abusing this dominant position quality. The loyalty of consumers to the in a number of ways : Chiquita brand puts UBC in a powerful position on a substantial part of the (a) First because it forbids its Community banana market. The fact distributor/ripeners to resell its bananas that it sells in all Member States enables while still green; now, the effect of this it to organize its distribution so as to be requirement is to prevent them — and more flexible and to divert supplies so they are frequently the main ripeners of as to take advantage of price differences bananas in the Member States as between Member Sutes. This ability concerned — from entering into to adopt such a marketing policy based competition at the resale level with UBC on the sales of bananas under the and the other importer/distributors on Chiquita brand is determined by the the banana market, since at that suge following facts: all trade has to be in green bananas — the very substantial control which only. The prohibition on the resale of UBC has over the sources of banana green UBC bananas therefore amounts supplies in tropical countries and on to a prohibition on exports and distorts the world banana market in which it the normal pattern of trade. Further­ controls about 35 % of the world's more it maintains a relatively effective entire banana exports; partitioning of the market, since it applies to all bananas sold by UBC to — the ownership of a very large fleet its customers in a part of the EEC and of refrigerator vessels which are may thus appreciably affect trade essential for the shipping of bananas between Member States. In answer to regularly; UBC's argument that this obligation — the extensive knowhow UBC has helps to guarantee the quality of the acquired compared with its products sold to the consumer the competitors, thanks to its research Commission calls attention to the fact into new varieties of banana less that the prohibition at issue not only prone to disease and wind damage; forbids the resale of green bananas to — the financial power and reduced risk consumers but all resales of green which UBC derives from its multi­ bananas at whatever the suge of national organization and status as marketing. In the notification of its a conglomerate; in 1973 the complaints the Commission stated that production, transport, distribution because of the risk of damage to yellow and marketing of bananas bananas this amounts in fact to a

for equivalent transactions and quan (c) Further UBC has also abused its tities of "Chiquita" bananas. These dominant position by charging certain differences can in some weeks amount of its distributor/ripeners unfair prices to as much as 30 to 50 % for equivalent resulting in differences in price which transactions and have been charged in cannot be justified objectively. The the case of Germany, BLEU and the lowest prices are those charged to its customers in Ireland and UBC still Netherlands since 1971, in the case of Denmark from the beginning of 1973 makes a profit from them as it itself and in the case of Ireland since acknowledges; they may therefore be regarded as at least reflecting the costs

distorted. It is true that, in order to prices in the area under consideration justify these price differences, UBC has less Ireland are excessive in relation to explained that it has adapted its prices the economic value of the product to what each part of the market could supplied. bear, since these differing prices are In these circumstances it would be justified by the fact that retail prices for sufficient if UBC were to reduce its ripened bananas vary between Member price level to prices at least 15 % below

market. Such a policy of differing prices (d) Finally, UBC has abused its accordingly constitutes an abuse of a dominant position by ceasing to supply dominant position, in that UBC is its "Chiquita" bananas to one of applying dissimilar conditions to its distributor/ripeners, the Danish equivalent transactions with other company Olesen, on the grounds that trading parties, thereby placing them at the latter had taken part in an a competitive disadvantage. In any advertising campaign for bananas of a event, since these differing prices may competing brand. Following the refusal encourage or discourage the export of on the part of UBC in October 1973 to bananas from one Member Sute to sell to it Olesen applied to UBC's other another according to the various price vendors in Denmark and also the Scipio levels in these two countries, they may group at Hamburg for green Chiquita appreciably affect trade between bananas. They all refused Olesen's Member States. request. Olesen thus lost several

customers and also suffered losses account of the fan that in their because part of this ripening rooms was economic and legal context they are suddenly not in use. The effect of this interrelated. withdrawal of supplies was to damage The Commission also took account of the business interests of this distributor/ the duration of the infringements: the ripener and consequently to discourage prohibition on the sale of green bananas it — and other distributor/ripeners — dates from January 1967 in the case of from selling bananas under a competing customers in Germany, the Netherlands brand name or, at least, from parti and BLEU, from January 1973 in the cipating in advertising and sales case of customers in Denmark and from promotion campaigns for such brands, November 1973 in the case of as is normally the practice in this field. customers in Ireland. In this way UBC succeeds in keeping its principal distributor/ripeners within its The course of conduct relating to the own marketing network and in pricing policy has been adopted since

position of UBC. Moreover the refusal infringement, the Commission finds that to continue supplies to Olesen which is UBC's' conduct is manifestly incon one of the largest distributor/ripeners sistent with the Treaty objectives of of bananas in Denmark affected integrating markets and establishing a appreciably trade between Member system where competition exists and States, because this refusal made it that it must also be borne in mind that impossible for Olesen, who could have all the acts of UBC are designed in the increased his business in other Member long term to strengthen and consolidate States, to carry on such business; the its dominant position.

UNITED BRANDS ν COMMISSION

JUDGMENT OF 14. 2. 1978 — CASE 27/76

(b) by, in respect of its sales of Chiquita to customers in the Belgo- bananas, charging other trading Luxembourg Economic Union, parties, namely distributor/ripeners Denmark, Germany, Ireland other than the Scipio group in the and the Netherlands. Member States referred to above, dissimilar prices for equivalent Article 4 transactions; In respect of each obligation set out in (c) by imposing unfair prices for the Article 3 (b) hereof a periodic penalty sale of Chiquita bananas on its payment of 1 000 units of account per customers in the Belgo-Luxembourg day shall be payable in respect of each Economic Union, Denmark, the day of delay from the dates stated therein. Netherlands and Germany (other than the Scipio group); Article 5 (d) by refusing from 10 October 1973 to This Decision shall be enforceable in 11 February 1975 to supply accordance with the provisions of Chiquita bananas to Th. Olesen Article 192 of the Treaty establishing A/S, Valby, Copenhagen, Denmark. the European Economic Community.

Article 6 Article 2 This Decision is addressed to United A fine of one million units of account is Brands Company, New York, United imposed on United Brands Company in States of America, and to its repre­ respect of the infringements of Article sentative United Brands Continentaal 86 of the Treaty referred to in Article 1 B.V., Van Vollenhovenstraat 32, hereof. Rotterdam 3002, the Netherlands, which shall be notified thereof." Article 3

In support of this application UBC of the President of the Court by virtue submitted several arguments and of the second paragraph of Article 85 pointed out that there were measures and the first paragraph of Article 11 of which had already been adopted in the Rules of Procedure after finding accordance with certain orders of the that: Commission. "The file shows that the application to As far as concerns the Commission's suspend the operation of the decision order to delete from their conditions of refers in practice to: sale the condition prohibiting the resale — the obligation to bring to an end the of green bananas the applicants stated prohibition on the distributor/ that on 30 January 1976 they sent a ripeners' reselling UBC bananas circular to all their distributor/ripeners while still green, and to inform all which clarified the clause at issue and the distributor/ripeners concerned

— the obligation to cease to charge the which are a highly perishable agri distributor/ripeners dissimilar prices cultural commodity, this order appeared for equivalent transactions (Articles to it to be "unintelligible, contradictory 3 (a) and 1 (b)); and unworkable", that its immediate and ruthless application would cause it — the obligation to cease imposing considerable irreversible damage and unfair selling prices (Articles 3 (a) would adversely affect the whole trade and 1 (c))." and especially the profit margins of its distributor/ripeners and all this would and taking note of the parties' place the latter in a difficult position statements concerning the amendment vis-à-vis their local competitors. of the clause relating to the resale of bananas while still green, made the

on 29 March 1976 the Commission decision;" challenged the arguments realting to the and reserved the costs. substance of the application, it left the matter to be determined by the Court. (b) Conclusions of the parties By an order of 5 April 1976 the President of the Second Chamber of the The applicants in their application Court of Justice of the European respectfully petition the Court to Communities, exercising the functions "1. Set aside the decision under review

and upheld their conclusions in their 1. The relevant market reply. The defendant in its defence and The applicants submit that in cases based on Article 86 the delimitation of the rejoinder contends that the Court should: product market in question is crucial, since the opportunities for competition " 1. Dismiss the application by UBC as can only be evaluated realistically with unfounded. reference to the features of this product 2. Order the applicant to bear the and of the areas in which it is marketed. costs". The defendant does not appear to object to this distinction which it adopts in its submissions. II — Outline of the submissions and arguments of the (a) The product market parties The applicants challenge the Com­ mission's argument that there is a Preliminary observation banana market which includes bananas The applicants do not agree with the sold under a brand name as well as Commission's decision and criticize the those to which no label is affixed. grounds upon which it is based. Their They maintain that the banana market application is founded upon various submissions which must be followed for is part of the fresh fruit market, since bananas are reasonably interchangeable the purpose of studying the arguments by consumers with other kinds of fresh of the parties in a rational way. fruit: for example, apples, oranges, 1. They challenge the analysis made by grapes, peaches, strawberries etc. and the Commission of the relevant these other kinds of fruit offered on the market, the product market as well as same stalls or shelves at comparable the geographic market; prices can be substituted for bananas at

relatively high prices). From two studies Now, bananas have special charac­ made by the FAO (Food and Agri­ teristics culture Organization) in 1969 and 1973, (a) physical (appearance, chemical upon which the Commission relies to composition, taste, softness, vitamin show that the banana market is a and mineral content) separate market, the applicants draw conclusions which are the opposite of (b) functional (easy and hygienic the Commission's and are confirmed by handling, convenience in eating, a more recent study by the FAO entitled special nutritional value, "Price Elasticity of Bananas at Retail" digestibility) and a study of the Belgian apple market (c) economic (constant level of by the Institut Économique Agricole production throughout the year, a Belge (Le marché de la pomme en fruit which lends itself particularly Belgique, Analyse globale de la fluc­ to advance planning of production tuation des prix à la production de 1950 and supply, marketing on lines to 1957 — Jansen (1969), pp. 58 to 59). normally associated with industrial products). The Commission points out in its defence that it has never stated that No other fruit possesses all these bananas and other fruit are never or characteristics. Bananas therefore are almost never interchangeable. particularly apt to satisfy constant Substitutability of products is almost needs. never total, but practically always a The banana is a fruit which is in season matter of degree. Therefore the problem throughout the year, consequently any in this case is not to decide whether investigation into substitutability should bananas can be replaced by other fruit relate to the whole year. but to decide what degree of substitut­ As far as prices are concerned, the two ability is required under competition FAO studies prove that bananas are law for two or more different products only affected by the prices of other to be regarded as constituting a single fruits (and only in the case of peaches "product market", for the purpose of and table grapes) to a limited extent and answering the question whether a only during the summer months, to be specific undertaking has a dominant more precise, in July (FAO Studies position or not on the said market. 1973, p. 1, paragraph 6). It is therefore fair to assume that the In competition law for two products to effects of the prices and availabilities of be treated as constituting a single other types of fruit are too brief, too product market, it is essential that there ineffective and too sporadic for such should be a high degree of substitut­ fruit to be regarded as forming part of ability between them (as a judgment of the same market as bananas, as a sub­ the American Supreme Court has held: stitute therefor.

In short, the Commission takes the view products which do not belong to it and that the banana is "only to a limited this is tantamount to saying that there extent interchangeable with other would have to be unlimited or at least a products" because it is "particularly very high degree of interchangeability in apt" to satisfy the constant needs of order to establish that there is a single consumen. market for the products in question. The applicants begin their reply, in Now the average consumer which they deal with the nature of the distinguishes between the banana and market under consideration, with an other fresh fruits; this is what the FAO interesting brief description of the world calls the "desire for variety in the banana trade and of the Chiquita consumption of fruits"; neither the banana in particular, that is to say with ordinary housewife nor the retailer a description of: disagrees with this.

. . tastes like a brand name banana!); — marketing and pricing having regard — appearance, softness, easy and to seasonal and geographic fluc hygienic handling, seedlessness, tuations (on the last point the work which make it a select food for all "The Banana Common Market" consumers and especially for certain proves that the German market is in categories of consumers; a privileged position and that it is impossible to treat the market — the chemical composition, vitamin considered by the Commission as a and mineral content, nutritional single territorial market) value and digestibility; — the resultant price levels. — production of a fresh fruit on industrial lines throughout the year, The Commission states in its rejoinder that the main difference between it and it must be inferred that the banana is the applicants is the question whether particularly apt to satisfy constant needs the relevant market is the fresh fruit and is only to a limited extent inter market or, as the Commission changeable with other products.

UNITED BRANDS ν COMMISSION

Studies by experts have proved three authorized to give a clear and authori­ points beyond doubt: tative statement of this organization's — there is no constant interchange­ point of view". ability between the banana and all The argument used in the note written other fresh fruits; by Perkins is that there are cyclical — there is no generalized cross­ seasonal variations of prices and in the elasticity between the banana and quantities of bananas sold. Although the other fruits which, like the these cycles are short-lived they exist banana, are available all the year and appear to indicate some seasonal round (FAO study of 1973); cross-elasticity. It can be concluded that "fluctuations in prices and quantities of — even among seasonal fruits a bananas are only to be taken into significant degree of cross-elasticity has not been established or could account in so far as they reflect a cross­ elasticity. This cross-elasticity by its only possibly be inferred in the case of certain fruits. irregular and short-term character cannot lead to a definition of the

relevant market is indeed the market in bananas whether the factual tests of — in the case of France, because "of European law or of American law (see the Cellophane and Brown Shoe Cases) State measures reserving the banana are adopted. market for the production of those countries which have special UBC produced as an annex to its relations with France; application and later to its reply, in order to counter this evidence, two — in the case of the United Kingdom, because it benefits from "Com­ papers by two officials of the FAO, Messrs Viton and Perkins, and it may monwealth preferences" ; be asked whether they express the — in the case of Italy, because the official views of their organization and State monopoly which regulated the have not read the pleadings (in the case market was abolished in the mid- of the second). The Commission asks sixties and replaced by import the Court: quotas on bananas coming from "that, if it has doubts as to the interpre­ countries which are not members of tation of those points in the FAO's the EEC; however bananas of the studies which it considers relevant to "Cavendish" variety as well as the this case, it should hear a representative "Chiquita" brand are sold on this of the FAO who is duly qualified "and market.

JUDGMENT OF M. 2. 1978 — CASE 27/76

In the absence of — the Common Customs Tariff, that is stabilizing measures agricultural to say 20%, in Benelux countries. commodities are characterized by wide and frequent price fluctuations. It Other equally significant factors follows that a supplier of agricultural differentiate these various markets, such products must be able to exercise a parti as their size, consumer habits (the cularly high degree of control over consumption of fresh fruit per capita in supplies in order to regulate supply to a Germany is 109 kg per year, that is to sufficient extent and to be in a position say 2.5 times that of beland and twice to influence prices substantially. that of Denmark, whereas it is 93 kg in the Netherlands and 76 kg in Belgium), Price instability is higher for perishable the concentration at various levels (a agricultural products which cannot be very high degree of concentration in kept in storage and have to be sold at Germany), and the different financial any price. Now, the banana is a highly points of view. perishable foodstuff — unsuitable for storage — with a life span from The applicants draw the conclusion from all these factors that the harvesting to the consumer's table of about 20 days; once this period has geographic market includesin areas elapsed, it cannot be sold. which the conditions of competition are so different that they cannot be In view of these special features of the considered as constituting a single product under consideration the vendor market and that the decision adopted by is under pressure to sell and the the Commission covering France, Great vendors' power to control prices is very Britain and Italy should also be applied limited. Thus it would be virtually to the six other Member States. impossible for any given firm to effectively determine banana prices The Commission points out that the unless it actually. controlled close to reason why it excluded these three countries from the "relevant market" is 100% of the production, prices being directly influenced by the quantities that their applicable domestic marketed. arrangements favoured bananas other than UBC bananas and that the latter And, even if one firm ever achieved were not on equal terms with the other such a degree of control, there is no bananas sold in these three States, absolute guarantee that it could impose whereas the market in Germany is its prices, in view of the high degree of entirely free and the other five Member substitutability and competition between States also constitute a free market, if bananas and other fruits (see 1 (a)

UNITED BRANDS ν COMMISSION

dominant position which it claims they — Bruns owns six reefers used for the have of the presence of strong and carriage of its "Bajella" bananas and aggressive competitors which guarantee accounts for 10% of the German that banana prices remain as low as market. possible, and they mention; — Van den Brink, a Netherlands — Castle and Cooke, a large diversified company, sells bananas under the company whose turnover in 1974 "Bonita" brand name in Germany amounted to $753 131 000 and and the Netherlands.

which employs more than 23 000 — Velleman and Tas, a Netherlands full-time employees and more than importer of fruit, started by distri­ 9 000 seasonal workers. It sells buting "Turbana" bananas and in bananas under the brand name 1975, in view of the severe "Dole" in the United States, competition which followed on the Canada, Japan and in Europe, and Netherlands market, prices reached under the brand name "Cabana" in an all-time low compared to those Southern Europe. In 1974 "Dole" of the other markets. was the No 1 brand in the USA and Canada with a 41% market share In order to demonstrate the

JUDGMENT OF 14. 2. 1978 — CASE 27/76

The same applies to Banacopera in substantial power of customers which is Belgium, a co-operative group com one more check on UBC's alleged posed of a number of ripener/distri power to set prices. butors. This is in particular the case of the These four customers who are not in applicants' main customer, the giant any way controlled by UBC and who German Scipio group, "the world's can distribute its competitors' products biggest combination of distributor/ account for some 73% of its sales in the ripeners", over which they have no area under consideration, excluding control and which purchases bananas sales to Spiers, the applicants' wholly from all suppliers in Germany except owned subsidiary in Belgium. "Del Monte" and even bought some cargoes of bananas from independent UBC points out that the prices quoted growers in Martinique. to Edeka and Van Wylick are not different from those quoted to the This group's f.o.b. purchases from UBC amount to about 250 000 metric tons smaller ripener/distributors which account for 72% of its sales in Germany per annum (the equivalent of twice the and which benefit consequently from total consumption in the Netherlands) the pressure exerted by the larger accounting for 80% of UBC's sales on

control prices. Since the customers have not entered Edeka, UBC's second customer, is into any long term contracts and since anything but a small sized company. Its they have access to competitors and do group comprises about 29 000 retail not only depend upon the banana trade, food outlets, specializing in the sale of they are not therefore under the control food and accounts for 17% of the of UBC. German grocery turnover. Moreover, in order to show how intense In 1975 Edeka purchased from the competition is on the banana market, it applicants 915 830 boxes, i.e. 26.2% of is only necessary to point out that, as its ripening capacity, 60% thereof being reports of FAO and UNCTAD show, allocated to "Onkel Tuca" bananas during the last 20 years banana prices

have decreased by 50% in real terms them to the market, the latter's previous and that, as opposed to a non­ market share is immediately lost to competitive market where prices are competitors. Thus, for example, the controlled by the monopolist, the main applicants' share in Ireland after seven feature of the banana trade is the wide months of absence which amounted to fluctuations in price on a monthly and 39% in 1972, dropped to 3% in 1973 even on a weekly basis. And the fact If the applicants' alleged market share that the applicants do not achieve the amounted to 45%, it would only same price in each of the national represent one-half of the market share markets in question confirms the view held by the Commission up to the that they do not have the power to set present to indicate a dominant position prices, because, if they were in a in the field of manufactured products. dominant position, they could fix their In this connexion UBC mentions the prices at a uniform level at which they five decisions in which the Commission would maximize their profits. has applied Article 86. In these five UBC concludes from all these specific decisions the firms concerned enjoyed facts, together with the fan that its an almost complete monopoly. This financial position during the last five does not apply in this case; furthermore, years has been more often characterized seeing that agricultural products are by losses than by profits, that it has not involved, the Commission has acted in a been established that it has a dominant reckless manner. It has applied a sub­ position on the banana market within stantially lower standard to measure the meaning of Article 86 of the Treaty. control whereas it should have done In these circumstances the question even exactly the opposite, since banana arises whether the applicants' market importing companies are in an entirely shares warrant the conclusion that they different situation from that found on could occupy a dominant position. other product markets. It should have A preliminary observation is necessary therefore proved that the applicants namely that in the agricultural sector have particularly large market shares market shares are much less relevant merely to raise a presumption that they than in the industrial sector and that in occupy a dominant position. the case of perishable agricultural The applicants' alleged market share of commodities these market shares 45% should be reduced to 20% because indicate nothing more than the f.o.b. transactions should be excluded. quantities brought to a given market. The relevant f.o.b. transactions are

Luxembourg: 42.5% been carried out since 1920; the Denmark: 43.5% 1967 advertising campaign was not designed to monopolize the banana market but to inform the consumers UBC reviews the various national of the changeover from the "Fyffes" markets where it is supposed to have to the "Chiquita" brand name for made use of its dominant position and, reasons found in the brand names' with figures in support, emphasizes two programme for the United States factors: Market. Standard Fruit moreover — on each of these markets the launched a similar advertising competing firms' share of the market campaign when it decided to replace was larger than its share; its Cabana brand name by the Dole — on most of these markets the brand name; the applicants point out that between 1971 and 1975 their competing firms since 1970 have advertising budget for Germany, the increased their market share at the Netherlands and the BLEU, which expense of UBC's market share. was on average in the order of $1.1 million per annum, was usual in the This fact and this trend are "all but an sector of the fruit business and not indication of dominance". And UBC very high compared with the other makes use again here of its argument sectors.1 concerning the product market which has to be taken into consideration, and Moreover, the applicants' competitors relating to substitute products; their also carry out similar advertising existence reduces proportionally the campaigns and the use of brand names ratios and percentages calculated for the has been beneficial to consumers in banana market alone. giving to banana importers a strong UBC considers that it has next to call incentive to sell only fruits of the best attention to two mistakes made by the quality. Commission: A further contention of the Commission — The one concerns the new is that the applicants' competitors would marketing policy as from 1967, for allegedly have difficulties in supplying which the Commission maintains large quantities of bananas of uniform UBC was responsible, and which quality, but, all the official reports are relates to the systems of production, unanimous in recognizing that the packaging, transport, ripening and world banana production is charac­ marketing, whereas in fact this reor­ terized by a surplus supply position. ganization of production and UBC goes on to say and asserts that — packaging was forced upon the whatever the Commission may say on applicants by the ravages due to the this point in page 13 of the Decision — Panama disease caused by a it has never adopted a policy of mushroom which killed the "Gros diverting supplies so as to uke Michel" banana plant, and by the 1 — In 1974 a budget of 3.0 million units of account was universal adoption of the allocated by the EEC authorities to an advertising "Cavendish" variety, which is the campaign to promote the consumption of meat.

The applicants are no more vertically For this reason the banana is a fruit integrated than their two major which lends itself particularly well to competitors: Standard Fruit and Del production and marketing on industrial Monte, and even less integrated than lines. Only the production stage could Alba and Bruns and UBC's know-how possibly be affected by the inelasticity of is shared by its competitors. <apnote>1</apnote> supply and even in this connexion it must be borne in mind that UBC culti­ The applicants point out again that during the period 1971-1974 they ac­ vates directly in a number of separate cumulated a total loss of $24 548 000, countries only about 50% of the while Castle and Cooke and Del bananas which it sells, but that it is Monte's aggregate profits during the primarily an importer and distributor of same period were $92 871 000 and bananas. $110 243 000 respectively. <apnote>2</apnote> The importer is in a strong position since he is in full control of the initial On the question of its alleged dominant position, UBC's conclusion is to call distribution of a highly perishable attention to the fact that the commodity, and is therefore in a Commission position to control the volume of the supply to the importing markets. "has failed to adduce conclusive evidence that applicants would have the In these circumstances the perishability of bananas does not have the same power to control prices to a substantial degree as required by Article 86, but has implication for him as it does farmers also failed to take into account who have succeeded in disposing of numerous factors negating applicants' production which they do not control. alleged dominance, such as the special In other words the perishability of nature of the product, the competition bananas would only be seriously harmful to UBC if it erred in assessing 1 — The graving of the Cavendish variety which constitutes close to 100% of world banana exports what the market will bear and this may was firn developed by Standard Fruit. explain why the amounts transported 2 — The applicants have not paid any dividend during the are nearly always lower than the orders last three years on its common stock, whereas in 1974 Castle and Cooke and Del Monte paid dividends given by UBC's customers. amounting to $12 200 000 and $15 300 000 respectively. (b) Prices

Furthermore, through advertising, the Community countries it can apply a supplier can increase the relative more flexible distribution system, inelasticity of demand. able to profit from the price differences existing between (c) UBC's market share Member States (and to profit from UBC's market share has been calculated the different prices that the market specifically by the Commission at 45%, can bear in different Member because in order to establish the States). existence of a dominant position, it is necessary to assess the extent of the (d) Vertical integration firm's power; it is therefore unnecessary UBC cannot deny that it is vertically in this case to exclude in the calculation integrated to a high degree and, for the of the market share the sales f.o.b. to assessment of its dominant position, it is Scipio and sales of unlabelled bananas 1 indeed necessary to bear in mind that and this share unquestionably has this vertical integration affects every one evidential value so far as UBC's power of the links in the chain of distribution on the banana market is concerned. which brings bananas from the plan­ The Commission has never claimed that tations to the consumer. competition had been eliminated; in order to establish the existence of a Only a tiny number of competitors benefit from such integration and never dominant position there is no need to quite on the same scale as UBC. show that the firm has impeded effective competition; it is sufficient to UBC also derives advantages from show that the firm has been in a "know-how" and from the results of its position to impede effective competition research. on the relevant market. Finally the reason why the Commission 1 — Under German law "it is presumed that ... an referred to UBC as a multinational enterprise is market-dominating ... if it has a market share of at least one-third for a specific kind of goods company carrying on operations typical or ...". of a conglomerate is that it considers Under English law a market share of 25% is required. that this advantage contributed, along

customers the Commission denies that Similarly UBC's practice of charging this power exists because Scipio is unable to do without the sales of different prices for equivalent transactions (and prices which were "Chiquita" bananas the quality whereof sometimes excessive), confirms the is undeniable and which is maintained extent of UBC's power. by its advertising and sales promotion. Scipio does submit to technical control The Commission regarded UBC's by UBC, is subject to the ban on dominant position as proved by the pre­ reselling green bananas and for the last ponderance of its market share taken 30 years has never sought to act together with a whole series of independently of UBC. advantages of which UBC is not always the sole beneficiary, nor in certain cases (f) Profits and performance even the main beneficiary, but from all The Commission points out that it of which, taken together, only UBC can cannot be maintained that UBC's profits profit. on its activities as a whole or on its The applicants in their reply point out banana operations alone have been that since this case is concerned with abnormally low or non-existent over a allegations of abuse of a dominant substantial period. position contrary to Article 86 of the However it must be added that this does Treaty, it is for the Commission to not matter much, because in defining establish in the first place, as a matter of monopoly the first question, which is fact and not as a matter of assertion, crucial, is whether there is a dominant that the applicants enjoy a dominant position and not whether the use made position in what is properly to be of it is reasonable. Any test claiming to regarded as the relevant market. Unless assess an undertaking's power according that is established, no question of abuse to its performance is of limited value. can arise.

necessary in the first instance to fruits so clearly impact upon the ascertain from the context what is the volumes of bananas which any given concept which the phrase encapsulates. market will absorb and the prices which The context of Article 86 shows that bananas can command. Bananas have what is meant is such a position in the no doubt some characteristics, for market as enables an undertaking to example, bananas are an "industrial engage in unfair and anti-competitive fruit" and produced all-the-year-round, practices. which are not shared at least in the same degree by other fruits and even Accordingly, a "dominant position" "industrial" fruits. But it is sophistical to assumes that a market in which a dwell upon such differences, and particular undertaking operates lacks irrelevant in the context, unless as a that degree of competitiveness which result other fruits exert substantially no could be relied upon to exercise competitive pressures upon bananas, restraint upon the activities of the under

Per figure 45% of the banana market alone contra, if on analysis the relevant market is therefore irrelevant). is seen to be competitive, that situation excludes a finding that an undertaking Even if that submission were rejected and bananas were held to be the operating in the market occupies a dominant position. relevant product market, it still remains that there is an inherent improbability in In seeking to establish that the the view that the applicants have a applicants occupy a dominant position dominant position in that market. the Commission has embarked upon Bananas are an agricultural commodity, something which is inherently and what is more, a perishable one improbable, for what the applicants are which cannot be stored, and the supplying is one variety of fresh fruit to demand for which cannot be met from a the market for fresh fruit as a whole, in previous surplus. Since the demand for all its varieties. It could not sensibly be this product is inelastic in the short- denied that the fresh fruit market is term, it does not permit a price policy intensely competitive, with suppliers of on the part of the suppliers. With such a the different varieties competing for a commodity it is not possible to secure share of consumers' total expenditure such product differentiation as will on fresh fruit. effectively insulate the brand from In order to escape from that situation, market pressures. Therefore in principle the Commission seeks to define the a dominant position could only be product market more narrowly as achieved by a supplier to a particular market if either he had "cornered" the bananas, for which, as they allege (second paragraph of Section II 12 of greatest part of the available supplies or he had such control of the distribution the Decision) there is a "separate

UNITED BRANDS v COMMISSION

attributes, the applicants are by the Commission's own definition in a Apart from the peculiarity of the dominant position. A company in a Commission's reasoning, the fact dominant position, it declares, is the remains that a firm may have one that has the largest individual share competitive advantages and a market of the market; that operates in all share higher than that of any other Member States; that advertises competitor, without the market being throughout the Community; that is other than intensely competitive and vertically integrated; that conducts thus providing its own regulation research activities; and is a against any significant anti-competitive conglomerate. In other words, the behaviour. To establish dominance it is Commission defines a dominant necessary to go further and to show position by describing the applicants, that the firm in question can determine

JUDGMENT OF 14. 2. 1978 — CASE 27/76

competitors to a substantial degree. The regard to the opportunities available to Commission does not condescend to the interested parties to react or to their any particulars of how that obstruction capacity to do so. is to be achieved by the applicants. The If the criteria for determining a Commission's assertion does not dominant position are added together it proceed from any analysis; it is no more may often be found that when taken by than ipse dixit. In truth and in fact the themselves they are not necessarily applicants are in no position to determinative; as was done in the "obstruct" the competition of other Continental Can decision the existence suppliers to the market otherwise than of a dominant position can be deduced by themselves offering effective from a combination of the various competition in terms of price, quality market factors (market share, technical

position. Commission in the field of competition, makes it possible, by the application of The Commission in its rejoinder believes such criteria when making an that it can point to certain evaluation, to see to it that the general contradictions in the conception which objective laid down by Article 3 (f) of UBC has formed of its dominant the EEC Treaty is attained. position. The Commission stresses that a In order to achieve such a result the monopoly does not presuppose absolute market power and that Article 86 Commission considers it necessary: moreover only mentions a dominant — to take into account, when defining position; it refers to "a competitive the degree of power which gives rise position so much stronger than that of to a dominant position, the seri any competitors that it gives the holder ousness of the hindrance on the

normal market play that the UBC's behaviour, whatever the level of enterprise is capable of producing; its prices, is the behaviour of an under­ — to include in the concept of a taking in a dominant position: discrim­ dominant position such scope that a inatory and unfairly high prices, refusal dominant position is disclosed when to sell/penalty; and as a complement of an enterprise through the exercise of that the negative behaviour — the its power creates a substantial absence of any reaction — of the hindrance to the free play of the ripener/distributors who have to accept market; different and sometimes excessive prices and prove to be incapable of finding — to detect the existence of a alternative solutions. dominant position not only on a priori consideration of the char­ This latter point deserves to be acteristics of the market but also considered. The distributor/ripeners are under the influence of a dominant through the manifestations of the enterprise's market power and the position having wide-ranging effects : anticompetitive effects of such mani­ — they must see that they have festations". continuous supplies of bananas in the quantities which they need for This approach which enables a general resale ; and coherent idea to be formed of the amount of competition which has to be — they must obtain supplies of high generated is set out clearly in Paragraph quality bananas; 25 of the Continental Can judgment. — they must have "Chiquita" bananas. Therefore, bearing in mind these objectives which have first to be The effects of this dominant position attained, one can proceed to consider are all the more serious because the the particular features of this case. national markets are sealed off by the prohibition on the resale of green (a) The degree of competition and the bananas. elasticity of the market The Commission then proceeds to UBC's arguments in favour of the refute the applicants' arguments. It existence of a competitive market are makes first of all a number of detailed the seasonal variations in price — which observations: have been mentioned under I (a) — and low banana prices. The Commission — the transportation even under refrig­ acknowledges that prices remained the eration of ripe bananas is impossible same, fell and then recovered to some over long distances; extent. This situation is due to UBC's — it is not only UBC which introduces long-term policy of seeking to expand unlabelled bananas onto the relevant the total consumption of bananas, market; endeavouring in the long term to — the channels of distribution for maximize profits by maximizing sales. bananas only have a distributive By keeping prices low UBC has been process comparable to that of the able to discourage competitors from fruit trade in general downstream of expanding or entering the market, or importation; the function of the make it impossible for them to enter the ripener and the process of ripening market in a big way by discouraging are typical of this particular trade ; them from attempting any high degree of vertical integration, which would be — UBC does not reduce its price a costly investment, with the object of according to the requirement of the selling a relatively cheap product. market;

— the risks of the banana trade are not in marketing which is organized incurred by the importer; rationally by UBC and can produce — UBC only defines its position — short-term forecasts, followed up — which in its view is not a dominant if that is necessary — by immediate one — with reference to the world action by UBC which unloads its market. products three times each week. — a supplier who only has 45% of the The Commission then mentions some market may have a dominant more important points which relate to position if the remaining 55% share the actual concept of a dominant thereof is divided up among a position: number of suppliers whose oper­ — the fact that there is still a certain ations are widely spread over that degree of competition on the market market; does not mean that there can be no — the graph showing elasticity of dominant position; demand is meaningless unless it — a dominant position is the power to covers a long period; and the prevent effective competition or inelasticity of demand has been (and not Â">"and") to control prices; proved by FAO; — comparative law allows dominant — the fact that prices fluctuate is not positions of 25 to 40% to be taken proof that there is no dominant into consideration; position if the dominant undertaking — the dominant position may not be fixes these prices and if all the parti­ uniform on the market which has to cipators in the market have to accept be taken into consideration; the fall in such prices; moreover it may decrease for a time — there must be included in UBC's without ceasing to exist from the 45% share of the market sales by moment when the principal UBC to Scipio, even if UBC does competitors do not benefit not abuse its power vis-à-vis this therefrom. group, and unlabelled bananas, because labelled and unlabelled With regard to the banana market it bananas are interchangeable since states: the difference between them is not — the banana is produced all the year one of quality but of presentation round in sufficient quantities to meet and because the prohibition on the demand; resale of green bananas applies to bananas whether a brand name is — the elasticity of demand and the affixed to them or not (the perishability of the product were taken into consideration; difference in the percentage of the market share would moreover be — UBC's production accounts for only minimal); 10 to 12% of the economic value of its banana interests; — the impact of advertising the "Chiquita" brand name would admit — the risk of having to make purchases of a very sharp and computable in an emergency to alleviate a difference in price between bananas production shortage is offset by the bearing the label Chiquita, on the geographic spread of the sources of one hand, and bananas to which supply; other brand names have been affixed — the remaining banana growers and unlabelled bananas on the other produce bananas but do not engage hand.

vertical integration which controls the as a test for assessing the existence quality and development of its product of such a position; as the Continental Can case held, what from growing to final distribution and forces its customers to submit to this matters is that it is possible to control. eliminate competition on the market under consideration. — In the first instance UBC controls its own sources of supply either because — Such vertical integration could only it owns very large plantations or be called in question by the conversion of customers into because production is greater than market requirements, that is to say competitors; the only customer of the volume of exports. UBC large enough to play such a part is the Scipio group, which does — UBC owns packaging factories and not seem too keen to do so, as it railways in the growing areas and benefits from the use of the also an infrastructure which even "Chiquita" brand name; since includes the manufacture of UBC's customers derive benefit fertilizer. themselves from the integrated system already described they in any — UBC has a large fleet of refrigerated case have in practice to sell their vessels, a good number of which are bananas at a higher price than that modern; UBC owns some of them of the competing suppliers. and charters others; UBC's 1971 annual report mentions the fact that it has built up for itself a very 3. The alleged behaviour amounting to competitive transportation cost an abuse in relation to excessive pnces structure.

in 1973, the difference corresponding to Thus assuming — for the sake of a 50% reduction in real terms. The argument — that the average Irish price logical conclusion to be drawn from this in 1974 was equal to the applicants' cost is that the whole of the Commission's price, their average profits in 1974 argument culminating in the conclusion would have been in the order of: that the applicants have abused a dominant position is wrong, because it — 14.42% in Germany and Denmark is based on a letter of 10 December — 21.60% in the Netherlands 1974 from UBC pointing out "that it sold bananas to Irish ripeners at prices — 23.55% in the BLEU allowing us a considerably smaller margin than in some other Member The same method of calculation applied States" ... whereas this wording of this letter which was written before the end to the year 1975 would give the following figures: of the financial year had been denied on two different occasions by the — 2.3% in Germany applicants, and a document annexed to — 6.9% in Denmark the application shows that the prices charged in Ireland produced a loss. — 1.5% in the Netherlands It follows from this that the — 8.4% in the BLEU Commission has based its decision on wrong assumptions although the correa facts were comunicated to it in time and Yet, these figures, as reasonable as they that the extrapolation of the applicants' may appear, are "still well above cost structure from the situation in reality", since the prices which the Ireland (which only represents 1.6 % of applicants obtained on the market did the total volume of bananas imported not allow it to make any profit during during 1974), is arbitrary and reckless; the last five years, except for 1975 (see there is therefore no justification for the Annex I, annexed to the application). Commission's conclusion (page 15 of the decision) that "the prices c.i.f. The applicants protest again against that Dublin charged to Irish customers part of the Commission's decision (p. reflect ... UBC's costs for the bananas 16) which concludes that the price of in question", just as it is unreasonable Chiquita bananas compared with that of bananas to which no brand name has to take the prices and profits calculated for one year alone, without any been affixed (the difference being on measure of inquiry, and deduce from average of 30 to 40% amounts to an them the calculation for the following abuse and they show in detail that the year. precautions taken from cutting to sale to the consumer more than justify this Nor is it reasonable to decide that difference since unbranded bananas are prices charged to customers of the bananas being short of waste. market in question (other than the Scipio group) are considerably higher, They do not either accept the sometimes by as much as 100 %, than Commission's assenion that the the prices charged to customers in competing brand names are "of a Ireland and accordingly produce a very quality comparable with Chiquita substantial profit, because this bananas". With reference to the conclusion wholly ignores the volatile applicants' Quality Control Manual character of banana prices and the fact which contains a listing of all possible that such a difference in price is not quality factors, they show that there are permanent. real differences in quality between

"Chiquita" and the other brand names Monitoring the applicants' prices as and that the price difference, averaging provided for in the Commission's 7.4% between 1970 and 1974, is pro decision appears to be also unwarranted portionate to these quality differences. and contrary to Article 3 (1) of Regu ladon No 17/62 which certainly does Finally to end this chapter on "excessive not create an obligation to inform the prices" UBC takes the view that "the Commission of particulars of the prices order to reduce its prices by 15% to be charged in the future.

However in date fore the implementation of this view of the sheer distance separating decision and that it must be borne in Ireland (the only country which would mind that prices vary from one week to derive any benefit from fair prices) from another. the other countries, and the high perish ability of bananas, such trading is Furthermore it calls attention to the fact inconceivable. that at the time when the decision was adopted, in December 1975, the According to the Commission the tables Commission was unaware of the giving the prices charged each week for applicants' prices during the whole of sales at Rotterdam and Bremerhaven on

At all events should be resorted to only in in 1975 the profits were again large exceptional cases and be reserved to after the unfavourable trend of 1974. markets where competition has totally The losses which UBC claims it made in ceased to function. Europe are clearly contradicted by the

letter of 10 December 1974 in which and proves that the different sales UBC informs the Commission that sales disclose in certain cases excessive prices. in Ireland in conditions which were more unfavourable than elsewhere had As far as the amount of the price enabled it to make a "considerably reduction suggested is concerned, UBC smaller" profit margin. UBC's incon does not deny that the bananas which sistency is due to the fear of an are not labelled Chiquita are sold at investigation into allegations of prices some 30 to 40% less than labelled dumping in Ireland and of a possible Chiquita bananas. A difference in the vague or dubious breakdown of UBC's presentation of the product could not losses, profits and internal transfers. In justify such a price difference.

Now the The sequel was what UBC calls the "order to reduce prices" by 15% and Commission's power to order under which it regards as merely an indication takings to give it information in order — and not a mathematical formula — to ensure that the Treaty is observed is of the way of satisfying the well established by the case-law of the requirements of the Treaty; in this sense Court (Transocean Marine Paints the grounds of the contested decision Association ν Commission [1974] ECR

take over UBC's responsibilities in the has not fixed a maximum "fair" price matter of fixing prices. In fact UBC but has reserved the right, by giving an remains free to fix its prices in indication of this price, to initiate accordance with its costs. another administrative procedure in the future, if it thought it appropriate. UBC What therefore is the effect of unfair remains free to reduce its prices as it prices on trade between Member States? likes choosing the times and places. UBC rarely charged the same prices for Adjustments are possible; a rapid exami bananas going to two different Member nation of costs on the Irish market States.

UNITED BRANDS v COMMISSION

The order, and it is useless, for the purpose demand, which is relatively inelastic of a legal defence, to attempt from now over the long term, is not inelastic in the on to interpret it otherwise and to insist short term and cannot be controlled. on treating it as a mere indicator or a suggestion. It is therefore most unusual to impose a price reduction upon them based on In its rejoinder, the Commission calls data which are out of date or have not attention to the fact that unlike its been produced by the applicants. And it principal competitors UBC charges is strange to continue to base one's different prices from week to week and argument on a single sentence in the gives its distributor/ripeners relatively letter of 10 December 1974 relating to constant profit margins.

Moreover the so-called those produced by UBC itself. The difference of price between bananas to Commission calls attention again to the which brand names have been affixed three reasons which led it to adopt the and those which are unlabelled is not decision: from 30 to 40% but was in the final analysis 8% in 1975, owing to an error — f.o.r. prices at the ports of Bremer in selecting the reference price! And haven and Rotterdam are wide and these differences are differences of cannot be justified objectively; quality relating also to the appearance as well as to the edible nature of the — the prices for bananas unloaded at product as has been admitted in Rotterdam to be sold c.i.f.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

The Commission was obliged to work The Commission has never attempted to on these data since most of UBC's impose or justify a uniform price either financial records are outside the for a time or at the place of final distri­ Community or have not been produced. bution. When all the customers benefit from the same f.o.r. price and from the Can Article 86 be applied to agricultural right to resell green bananas, there will in fact be differences between them commodities? Article 86 applies from the moment that there is a dominant which however will be objectively position (even if this dominant position justified. is not used in such a way that the prices charged cannot be paid). The Suiker The Commission then repeats that UBC Unie ν Commission case, (Joined Cases occupies a dominant position on a non­ 40 to 49/73 ERC 1663) proves that competitive market, yet is not subject to Article 86 applies to those products any price control, even if the unfair listed in Annex II to the Treaty and prices are taken as evidence that it has which are the subject-matter of an agri­ exploited its dominant position. A "fair" cultural regulation. Finally the very fact price does not mean a "fixed" price; if that Regulation No 26/62 of 20 April the prices had been fair it is difficult to 1962 (Official Journal, English Special se why UBC went out of its way to Edition, 1959-1962 p. 129 et seq.), only prevent diversion of trade and this can grants partial exemption of agricultural only be explained by the wish to retain matters from Article 85 indicates that the benefit of prices which are too high. And it is the difference between the Article 86 applies to all agricultural products. UBC, appreciating the prices charged which has drawn objective nature of the criticisms made attention to the excessive nature, first of of its price system, prefers to state that some and later of all of them.

UNITED BRANDS v COMMISSION

UBC itself admits, the difference for 1974 are now known and enable the

between them is due to their pres­ following table to be compiled, which entation and not to their quality, is completes Annex V to the defence: evidence of an unfair price. The figures

Price in dollars Germany BLEU The Netherlands Denmark per box (f.o.r.)

Chiquita 5.14 5.06 4.77 4.76

Unbranded 4.16 3.82 3.86 3.78

These are price differences which market forces. If a farmer puts his consumers are charged without any jus­ products on a market, to which regu­ tification. And the criteria for quality lations do not yet apply, and which is cover just the non-edible part of the therefore wholly governed by the law of banana. This explains why the economic supply and demand, he has no other value of the Chiquita banana to which a option, in so far his product is brand name is attached has been exag­ perishable and subject to seasonal varia­ gerated. tions and fluctuations of supply and demand, but to sell the latter at the price which he can get from a purchaser 4. The alleged behaviour amounting to without taking into account the relation an abuse in relation to discriminatory which this price bears to his costs; in prices other words, prices at every level of the distribution chain are worked back from the anticipated price the consumer is The applicants do not admit that they willing to pay at a given moment of have abused an alleged dominant time, and in the banana trade the prices position "by charging differing prices of green bananas are similarly worked for equivalent transactions without back from the market (see graphs on objective justification". They show with p. 125 and 126 of the application). the help of graphs that on average prices between the various markets do The pricing policy developed by UBC is not differ to any great extent, since the governed by the special features of the average difference in the prices for banana market: prices in any given week are calculated so as to reflect as "Chiquita" bananas between the much as possible the anticipated yellow markets concerned only amounted to 5% in 1975; whereas the Commission market price in the following week. based its price comparisons on the Thanks to its organization, to that of highest and lowest prices. most of its. important customers on a national scale with branches throughout Now even these slightly differing prices the country, UBC quotes a single are objectively justified, because unlike weekly price — not for each local manufactured products the prices of wholesale market — but for each agricultural products are determined by national market.

If the applicants were to quote uniform bear is not a reason justifying the weekly prices for all the ripener/distri­ application of different prices. butors in Germany, Belgium/Luxem­ bourg, the Netherlands, Denmark and This price discrimination puts distribu­ Ireland, as the Commission has ordered tor/ripeners at a competitive disadvan­ them to do, such prices would be bound tage compared with other ripeners and to be discriminatory and arbitrary being UBC. A dominant undertaking is not unrelated to the market, whereasprice free to charge discriminatory prices differences are in fact due to fluctuating while prohibiting the resale of green market factors: weather, different avail­ bananas, because this distorts ability of seasonal competing fruit, competition. These two courses of consumer behaviour, holidays, strikes, conduct to which exception is taken Government measures, currency cannot therefore be severed for the denominations, etc. ... purpose of determining their scope. And when the Commission maintains The applicants in their reply submit that that the applicants' pricing in fact puts the abuse referred to by the distributor/ripeners at a competitive Commission is that UBC, both at disadvantage, since they cannot sell Rotterdam and Bremerhaven, charges their bananas while still green, it totally its ripener/distributors in the Member fails to understand the function of the States concerned different prices for ripener/distributor which is primarily to Chiquita bananas for equivalent trans­ use his ripening rooms to satisfy a local actions without any objective justi­ demand and overlooks the perishable fication (p. 14 of the decision). The nature of bananas which do not lend Commission's view in this connexion is themselves to speculative transnational clearly stated on page 99 of its defence. trading. "The Commission considers that UBC According to the Commission's defence is obliged to regard as 'equivalent the prices are not only unfair in globo transactions' (Article 86) the sales which but the impact of their geographic it makes in Rotterdam and Bremerhaven application is also inequitable, that is to and that UBC is not 'entitled to avail say they are discriminatory. itself of the differing levels of retail The Commission asserts that the price prices in the different national markets differences between the various national from time to time".

All the consumers on the various situations in the various countries markets have therefore been discrimi concerned, and the other characteristics nated against including the Irish. of their markets, supply an objective justification for different prices. It It is important to understand what is would certainly be too narrow a view in really involved in the Commission's the case of a product such as bananas, argument that the applicants have to treat transactions, as the Commission committed an abuse in this respect. contends, as equivalent merely because What it amounts to is that it is the duty the purchasers are in the same category of an undertaking in a dominant and that the supplier's costs of position to create a single market out of supplying are the same, or to regard the the existing national markets and that if supplier's costs as determinative of an it fails to act accordingly it is guilty of objective justification. This is parti an abuse.

. . price, nor to applicants did not create partitioned prohibit UBC from charging different national markets for bananas and it prices if there is objective justification could not seriously be contended that its for doing so, e.g. reducing its price in green banana clause is responsible for any area where it was subject to price their continuing partitioning. Even if the competition." (p. 100) applicants had a dominant position they would not abuse it by taking those This statement in the defence is markets as they find them, setting, as important from two points of view.

The this position. Either the transactions consequence will be that wholesale having regard to their total economic prices for bananas in Denmark will fall. context (see application pages 133 and That will reflect back on green banana 134) are not "equivalent transactions", prices and the applicants' competitors, or the differing supply/demand free to charge different prices, will

follow the market down. The applicants single market for bananas (but only also will be free to do so in order to then) different prices will disappear. But meet that competition. There will so long as the various markets remain therefore be different prices for the national or regional in scope and applicants' bananas sold in Denmark character and respond to their and those sold in the other national individual supply/demand situations, markets, but there will be "objective differences in prices between them justification" for the difference. cannot avoid emerging. In such a Precisely the same situation will obtain situation, as the Commission now in every national market at any given recognizes, it would be wholly time except in that which happens to be unrealistic and impracticable to require the highest priced one. In each market the applicants to charge a uniform price. the applicants' competitors will price If it were to remain competitive in all according to market conditions and the the national markets, that uniform price applicants will be entitled to reduce would necessarily have to be set at the their prices below those they charge in level which would enable sales to be the highest price market because of the made in whichever of the national price competition of their competitors. markets happened to be for the time Accordingly the situation will be being the lowest priced. This situation precisely as now obtains. The applicants could only be ruinous for the applicants. will be charging different prices in each But failure to adopt the lowest price as market to the same extent as they do the uniform price would have now — and with objective justification. consequences equally or more There is no difference in the objective disastrous. In those markets where the justification in a case where the competitive price was below the uniform applicants are meeting the price price, the applicants would be bound to competition of competitors who are lose sales; the could never effectively responding to market conditions and in plan the volume of their shipment for a a case where the applicants are particular market and they would be themselves directly responding to those likely to incur substantial wastage of conditions. their perishable product.

circumstance. A local price war could be The applicants take the view that they one, and so could holidays, weather, are unable to comply with this order strikes, availability of other fruits. But "because it is unreasonable and this kind of circumstance is entirely unwarranted", since the contraa which different from a permanent general they concluded with the ripener/distri­ policy based on unit prices fixed butors is that they ripen the bananas according to each Member State and first and then distribute the ripened strengthened by the partitioning product. brought about by the clause prohibiting Furthermore the clause only applies to the resale of green bananas. green bananas bearing the trade name UBC states that it takes what the "Chiquita" and not to unlabelled green bananas. In addition they told the market "can bear". The market price is Commission that they were willing to a combination of forces only one of exempt sales between the "Chiquita" which is controlled by UBC; moreover banana ripeners from the prohibition on discrimination can only be unilateral. It sales. is not clear in such a case why UBC should partition the market ... except However that is as far as the applicants for the purposes of obtaining a can go, because, if the restrictive clause maximum price in each of the domestic were deleted, they would no longer be markets thus constituted or able to guarantee the quality of the reconstituted. bananas to the consumer.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

transportation to a ripening installation exemption under Article 85 (3) cannot as soon as they are taken out of the be regarded as an abuse within the refrigerated holds of a vessel, and the meaning of Article 86. ripening installation must be as close as possible to the consumers. This explains The Commission in its defence develops why the ripening installations are spread two arguments. On the one hand it throughout the whole of the relevant alleges behaviour amounting to an market and why their capacity is prop­ abuse within the meaning of Article 86 ortionate to the population of the area of the EEC Treaty and, on the other which they cover. hand, it endeavours to reject the parallel procedural objection based on the Virtually all ripeners are fruit possible application of Article 85. wholesalers and bananas account for 10 to 20% of the total volume of their As far as concerns the behaviour

Furthermore, assuming, without making It is perfectly natural for a ripener to any admission to that effect, that the ripen bananas. But it is a restraint on clause at issue did affect competition, it competition for him to contract that he has been duly notified to the will not resell them until he has ripened Commission which should have them and that he will confine himself to considered whether it met the selling only to retailers. This is true even conditions of exemption under Article though the perishable nature of bananas 85 (3). Now this is what it should have limits the extent to which they can be done, since a practice qualifying for resold in practice.

UNITED BRANDS v COMMISSION

It has never been argued in economic theory that a originally included an export clause in conditions of sale can be prohibition can be explained only by its regarded as an indication of monopoly intention to forbid ripeners to resell across the frontiers of the Member power. Furthermore a condition of sale States where UBC from time to time aiming solely at ensuring the quality of the ripening, which has never been was charging higher prices. applied and has never been the subjea- With regard to the possible exemption matter of any complaint, can scarcely of the clause under Article 85 (3) of the prove that monopoly power has been EEC Treaty the Commission repeats used. that UBC pointed out that, since the clause at issue was notified to the Similarly, the Commission refers to the Commission, the latter should have recommendation not to export made by examined it to see whether it complied the applicants in 1967; this was a with the conditions of exemption in temporary measure adopted because the two varieties which were then on the

JUDGMENT OF 14. 2. 1978 — CASE 27/76

. . any more than the capable of bearing. If the Commission Commission had been during the wishes to establish that the clause has preceding seven years. This such a meaning that can only be done "prohibition", aiming at a high standard by producing evidence that the clause, of ripening, has moreover never had notwithstanding its terms, was any effen on the competitive position of understood by Chiquita ripeners to have such a fruit which must be ripened the meaning attributed to it. The

The which the onus of proof lies — does not Commission accepts (p. 70) that the offer to adduce evidence proving that applicants "are in principle entitled to there had in fact been trade in green bananas between Member States at this have a system which reasonably ensures the quality of their labelled bananas stage of the commercial cycle; transit or provided it does not restrict competition transportation do not amount to a sale. more than is necessary in order to do Finally, if the Commission, which had so." The Commission has not shown been duly notified pursuant to Article that the applicants' sales conditions 85 of the clause relating to the resale of exceed that limitation. green bananas had to act, it has made The Commission repeats and develops in UBC's situation worse by its failure to its rejoinder the arguments put forward act since 1968 (the date when the clause in its defence and points out that the was notified by UBC) and especially prohibition was aimed at horizontal as since 1971 (the date it was examined by well as vertical sales; the only proof of the Commission). All the consequences this is the express wording of the of this examination — which turned out contracts and the way it was understood to be negative — have to be considered or explained by UBC (letter of 11 of its own by the Commission. December 1974, Annex III (i) and of 13 The language used in the Belgian, February 1975, Annex III (i) to the Dutch and Danish conditions (which defence); it appears that this clause has are the only written conditions) is such been strictly complied with.

UNITED BRANDS v COMMISSION

There — the prohibition on sale applied to is not only interference with the transit unlabelled as well as to labelled trade; there is a restriction on the bananas; destination of consumer products and on the choice of wholesalers. — a comparison with the systems The Commission emphasizes that it first introduced by UBC's competitors is considered the possible application of scarcely relevant since the organi Article 85 (3) when it took account of zation of sales is entirely different; the clause as worded and then as — UBC's reticence with regard to amended. The clause in its original trading in green bananas, supposedly version was not satisfactory having out of respect for the interests of regard to Article 85 (1) & (2).

JUDGMENT OF 14. 2. 1978 — CASE 27/76

stopping supplies of "Chiquita" bananas It is probable that the same facts also to Th. Olesen, a Danish ripener/­ explain why in October 1969 Th. distributor, its decision is vitiated by Olesen became Standard Fruit's errors of fact and law. exclusive importer/distributor, thus The applicants maintain that their distri­ regaining the importer's preponderant bution policy is more liberal than that of status which the applicants had refused to endorse. their competitors some of whom work in the relevant market through exclusive In 1973 Standard Fruit declared war distributors. against UBC at its press conference in The applicants' ripeners are not only Hamburg by announcing that the free to sell products bearing competing "Dole" banana was going to replace the brand names but also to advertise these "Chiquita" banana in all the countries products. If they happen to disagree of the world. with the price quoted they may reduce or cancel their orders and obtain Consequently Th. Olesen sold less and supplies elsewhere. They can determine less Chiquita bananas deliberately their relationship with UBC at any time. pushing the sale of "Dole" bananas. Further Th. Olesen did not take the Even in the very limited number of same amount of trouble when ripening cases where the applicants have lent the applicants' bananas as it did when money to ripeners, such loans had "no ripening bananas bearing other brand strings attached" in that none of the names.

UNITED BRANDS v COMMISSION

It is the essential ripening facilities. this right which UBC violated by In fact in Denmark a substantial over refusing Olesen further supplies. Consequently this violation is an capacity exists. In fact the effect of infringement of Article 86. UBC's decision to terminate supplies to Th. Olesen combined with the loss — The refusal to supply Olesen has which the latter suffered at that time — affected trade between Member States, of København Frugtauktioner as a since Olesen has been forced to customer, far from being the distortion purchase bananas from another supplier, of competitions was that the Danish and this has interfered with the natural market experienced fierce competition flow of trade and moreover has which brought about a fall of 40% in prevented Olesen from developing its two weeks at the end of 1974 in the business in the other Member States. retail price of Chiquita bananas. UBC replies that the Commission's Finally the refusal to sell to Th. Olesen argument on this aspect is vitiated from did not have an appreciable effect on the start by a fundamental error in its trade between Member States, since the reasoning. In its defence (p. 105) does it "Dole" bananas only pass through not say that "The question is whether Germany ex Hamburg, just as the there was sufficient legal justification "Chiquita" bananas do ex Bremer for an otherwise illegal act"?

its procedure — a compromise was agreed between Th. Olesen, which Commission to establish affirmatively withdrew its complaint, and UBC that, in the particular circumstances of a which resumed the delivery of supplies specific case, the refusal to supply does to it. amount to an abuse and has the further quality of effecting trade between According to the Commission the fourth Member States to a perceptible extent. abuse of the dominant position is the refusal to supply bananas to Th. Olesen.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

The existence of a dominant in fact, since mere discrimination is position cannot disentitle an under prohibited under the Treaty, a fortiori, taking in that position from having its refusal to supply is also forbidden. own reasonable commercial interests taken into account when its conduct is Moreover if Olesen had not complained to the Commission UBC would have under scrutiny, and it must be accorded possibly been able to interfere with the reasonable latitude to take such steps as freedom of other ripeners to advertise it deems appropriate to protect them. other brand names; UBC's acts vis-à-vis The applicants did not act arbitrarily or Olesen havebeen compared by the unreasonably in all the circumstances in Danish Monopoly Authority with an withdrawing supplies from Th. Olesen. incident which occurred in 1973 when It must be noted that in law the refusal UBC terminated its supplies to another to supply as such is only punished under Danish ripener/distributor København French law and that in the Commercial Frugtauktioner which had taken part in Solvents case (Joined Cases 6-7/73) the a publicity campaign for the brand Court did not find that this was an name Onkel Tuka belonging to the

Moreover it Olesen, a customer who was moreover was after the termination of supplies difficult, sacrificed the sale of Chiquita that UBC endeavoured to justify in this bananas to other sales and, it is curious way the punishment meted out to to note, the refusal to supply by UBC Olesen. In any case it is not for UBC to was able to open up the Danish market deny its competitors access to ripening to competition. Olesen in this matter facilities; and it is not the fact that these has only lost one customer and has not acts have not been given the force of experienced any decline in its business law by being incorporated in con

UNITED BRANDS v COMMISSION

This does not mean that UBC had to open up its own Unie case ([1975] ECR 2089) there is ripening facilities to competitors; what here the threat of a weak undertaking it had to do was not to prevent them being placed under an economic disad from using those which were available. vantage — an abuse of a dominant position. The proof of this in this case is There remains the argument relating to that UBC "insists" even when dealing the decline in sales of Chiquita bananas with such powerful ripeners as Olesen, sold by Olesen which took part in the who seems since then to have reassured promotion of Dole bananas. Olesen did UBC .

— The assessment of the extent of the But could UBC insist on a "loyal selling damage may be relevant in effort"? determining the amount of the fine Regulation 67/67 does not apply but has no relevance to the because: definition of the infringement of

Article 86 and the consideration buy bananas other than Chiquita of the objectionable conduct bananas outside Denmark from sources (Commercial Solvents v Commission, other than UBC and import them into Joined Cases 6-7/73, [1974] ECR, Denmark". (Rejoinder, page 158) paragraph 26, p. 251); If UBC's argument was valid, none of — At all events an investigation by its European business dealings in goods officials of the Commission helped from third countries would be governed by their Danish colleagues made it by Community law. In the case of a possible to confirm that Olesen lost concertation the Frubo judgment held completely its customer FDB which that Article 85 applies to anti purchased 50% of its bananas, a competitive agreements relating to very substantial amount of business products imported into the Community and its position as the principal ([1975] ECR paragraphs 35 and 38, p. supplier to a number of its 584). A number of other cases provide customers (see the annexes on this consistent rulings on this point (EMI in point).

The Commission takes the view that unjustified interference with the running refusal to supply has an effect on intra- of Olesen's business, which damaged Community trade. UBC submits the Olesen and tended to discourage UBC's opposite argument that all the bananas ripeners from selling or at least from come from Latin America and simply advertising competing brands. The pass through the countries of the decision therefore was fully justified in Common Market before they arrive in concluding that UBC had infringed the State where they are to be Article 86 by refusing to supply

33). But Professor Waelbroeck's theory that they were in a dominant position is not confirmed in this case because : and that in any case they have abused "When Olesen was deprived of supplies, this position intentionally or through it was unable to purchase Chiquita negligence. In fact the way the bananas in Bremerhaven and to expand Commission has already applied Article its business in other Member States and 86 cannot be forgotten. was unable to impon the same All the companies which thus far have quantities of bananas as before into been held to be in breach of Article 86

UNITED BRANDS v COMMISSION

The this fine relates to the application of a applicants' conditions of sale were notified to the Commission on 15 clause (the prohibition on the resale of November 1968 and the Commission green bananas) which had been duly notified to the Commission. Moreover never adopted the decision provided for how can a fine be fixed on the basis of by Article 15 (6).<apnote>1</apnote> profits which are supposed to be illegal As far as concerns the amount of the and which it turns out cannot be fine, the applicants compare it to the computed and when the administration fine which the Commission imposed on proved to be incapable of advising and other companies (in the cases of Inter warning the undertakings concerned in national Quinine Cartel, Commercial good time? In any event the publicity Solvents, Dyestuff Manufacturers, given to the case by the authority which Pittsburgh Coming Europe, Formica imposes the fine should finally induce it Belgium — Hertel) and they place on to show moderation when fixing the record — although the field (that of amount of the fine. prices) in which the fines are imposed is uncharted territory — that it is more The Commission replies that UBC than five times higher even though all cannot argue that its acts are lawful under Article 86 because it claims that it international organizations competent in was unaware that it was in a dominant the banana sector agree that the constant rise in quality has gone position; such a defence would allow together with a decrease in prices. every anti-competitive act to be forgiven if there was no intention to infringe. According to the Commission this is the Fines are imposed for intentional or first case in which an enterprise has been found to have committed four negligent infringements under the case-law of the Court and the separate abuses, each contrary to Article provisions in force (Article 15 (2) of

JUDGMENT OF 14. 2. 1978 — CASE 27/76

The Commission deprived of their right to be heard. Thus states that it has given a sufficient expla the charges and the criteria applied have nation of its views on the question of changed since the four short paragraphs excessive prices and repeats that the devoted to the question of unfair prices reduction of 15% of the prices which it in the Statement of Objections and recommended is not an order but an accordingly there has been a switch indication of the attitude which it is from the straightforward difference in likely to adopt in the future. relation to the Irish price to an exami nation of the economic value of the

Court. It has even had to admit that the UBC was rushed through the various clause relating to the resale of green administrative procedural stages which bananas, as explained in the circular of turned the safeguards laid down in the rules governing this procedure into a 30 January 1976, was satisfactory, which should mean that any charge of mockery. conduct amounting to abuse in this UBC's conclusion is that the cumulative matter should be dropped. Therefore effect of these matters is such that the the Commission has not exercised the proceedings before the Commission judicial functions which devolve upon it were irregular and it asks the Court to in such proceedings impartially:

At the time of Commission to take no action. The the hearing UBC raised no objection carefree way in which mention was concerning the procedure adopted until made of substantial profits, of the unfor then.

The Commission claims that the "1. The relevant market submissions put forward by UBC in this connexion are arguments which go to (a) The product market the substance of the case. Thus, for The Commission is requested to specify example, the fact that its hearing is said the current state of development of any to have been invalidated because it draft regulation concerning the banana failed to understand an essential phrase sector, such a draft being mentioned on is tantamount to reopening the page 120 of "Marché Commun de la discussion on the price of branded banane" ("The Common Market in bananas compared with the price of Bananas"), a French Government unbranded bananas. If there has been document of 1973 which appears as a misunderstanding it is of no Annex Va to the application. consequence. (b) The geographic market 9. The applicants' claim for damages (i) The parties are requested, jointly if The applicants, on the ground of the possible, to have drawn up in irregular administrative procedure relation to the market in question a referred to in paragraph 8 above, ask map of ripeners indicating their the Court to award them damages, by location and, with the assistance of way of compensation for the moral suitable graphs, their ripening damage which they have suffered, in the capacity and their degree of amount of one unit of account. dependence on UBC. Furthermore there is to be added to the (ii) The Commission is requested to carefree attitude of the Commission the produce the complaint lodged on 27 inadequate publicity given to this matter May 1974 by Tropical Fruit Co., and the damage in the press to the Jack Dolan Ltd and Banana applicants' commercial reputation ... Importers of Ireland Ltd. (see the etc. ... which amply justify the award reference on page 125 of the reply). of nominal damages; such an award will remind the Commission that it must 2. Dominant position always act in the public interest. (i) The parties are requested to The Commission denies that it is guilty produce sub-Annexes XVI, XVII, of any administrative irregularity (see XVIII and XIX, which should be paragraph 8 of the draft) and answers joined to Annex III g to the the applicants' second argument by defence (replies of 13 September saying that, if there was any defamation 1974 from the applicant to the in the newspapers, that must be dealt letters of 5 and 12 August 1974 with in separate proceedings and is from the Commission). within the jurisdiction of another court. (ii) The parties are requested to clarify the situation or UBC (itself implicated in 1972) and of its pre­ III — Questions raised by the decessor the United Fruit Company Court which have both had to appear before the courts in the USA. By a letter of the Registrar of 20 May 1977 the Court requested a reply in (iii) The Commission is requested: writing, before 20 June 1977, to the (a) To produce the document questions, and observations on the mentioned in Note (1) on page documents, mentioned below following 9 of the Rejoinder (IRCA ν the order in which the headings are set United Brands, 358 F Supp. out in the pleadings: 1363 66-68 (1973)).

(i) To produce the agreement with The Commission is requested to state Scipio which is mentioned on page whether any action has been taken on 43 of the application; the procedure under Article 85 concerning the clause prohibiting the (ii) With regard to the letter of 10 resale of bananas. December 1974 relating to the Irish market, to specify the closing date What stage has any such procedure reached? of the corresponding financial year. Has UBC applied for an exemption for 4. Discriminatory prices the new version of its conditions of sale? The applicant is requested to produce the different versions of its general 8. Denial of due process conditions of sale (if necessary with sup­ plementary explanations) for each (i) The applicant is requested to Member State and for those European produce the letter of 21 October countries which are not members, from 1975 from Thompson to the 1 August 1966 to 1 August 1976, and, if applicant (cf. application, p. 209). there are any, copies of the standard (ii) The applicant is requested to form contracts with ripener/distributors. produce their letter of 30 October 1975 to the Commission." 5. The clause prohibiting the resale of green bananas The parties supplied the particulars and produced the documents requested to (a) Are the parties aware that, by virtue the best of their ability. of the fact that certain ripeners are established near the frontiers, the clause in question could possibly IV — Summary of the argu­ have been avoided? ments submitted during (b) The applicant is requested: the oral procedure (i) To add to the Court's file the The oral procedure took place during different chronological versions the hearing on 12 July 1977. of the clause in question for UBC puts forward its arguments in the each Member State, from 1966 same order in which the Commission to 1976. presented its detailed reasoning in its (ii) To state what is the longest decision. period of time between the cutting and sale of green UBC repeated the main arguments bananas. Is it 20 days as in developed during the written procedure stated in the file? and stressed certain points.

On the subject of the relevant market it UBC shows that there has been a fall in emphasized that the value of the FAO the price of the Chiquita banana. Other reports used by the Commission had graphs show that there very definitely been called into question by one of the are fluctuations in the prices of the officials of that organization. different brands of bananas compared with the other fresh fruits offered for With regard to the dominant position sale on the market and prove that the UBC first of all produced a diagram sales of products which do in fact according to which it does not occupy a compete with each other are dominant position at the production and interconnected.

Court. Now these competitors also have put by the Court and compares them — or very nearly also have — as much with the assertions of the said power on a global level as UBC and Commission. There is strong and unre they showed how strong their striaed competition and it is clearly competition was during the price war, impossible to maintain any dominant when UBC sometimes came off badly position whatsoever on such a the existence of this competition rules competitive market. out the possibility of any dominant position according to the definition of As for the abuses for which it is blamed such a position in the judgment in Case UBC concentrates on the argument put 51/75 E.M_I_ Records Limited v C.B_S_ forward by the Commission that it United Kingdom Limited [1976] ECR discriminated; this argument is based on

JUDGMENT OF 14. 2. 1978 — CASE 27/76

everywhere? UBC puts forward three forward during the written procedure specific arguments in answer to the and stresses that there can be no Commission's reasoning: the contents of connexion between this clause and any the letter relating to the Irish market excessive prices since it has shown that have been contradicted by the final its prices are the outcome of market consolidated accounts and in this forces. connexion the confidential annexes to Finally, in connexion with its refusal to the application relating to the deficit sell to Olesen.

fresh fruits where differences of with insuperable difficulties. "grade" or "category" are accepted; the difference between the prices of UBC gives further support to its claim Chiquita and other bananas is according for damages based on the fact that the Commission has exceeded the limits of to the period of time between 5 and "the normal and reasonable exercise of 10% is due to a difference in quality. its discretionary powers especially when The higher prices charged in certain sectors of the relevant market are carrying out a "quasi-judicial task". caused by the operation of the law of The Commission developed most of the supply and demand which is all the arguments which it has stated in writing. more free because the banana market It can be noted that on the question of has not been regulated "by a common the dominant position the Commission organization of the market".

UNITED BRANDS v COMMISSION

figures which may show that there is a even if they were only temporary, of a dominant position do not necessarily ratio of 10 to 30% during certain weeks have to prove that there is a monopoly; which is sufficient to amount to a as far as the dominant position is breach of the rules laid down by Article concerned it is not seriously disputed 86. The Commission's requirements are that UBC controls 40% of the market. in no way connected with the control of Furthermore the existence of a prices and the Commission has not dominant position does not necessarily asked for harmonization of the prices of have to be established by a particular all sales. It repeats however that the price level but rather by showing how same product must be sold at the same effective the occupier of this position is price at the same place. on the market.

The Commission reiterates its argu­ Unfair prices must be considered at the ments relating to discriminatory prices consumer level. Although Irish prices and considers that it has proved that generally speaking cover UBC's costs, there is discrimination since the same even if there have been some small

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1976 petitioned the Court to set aside the Commission Decision of 17 December 1975 which was later published in Official Journal L 95 of 9 April 1976 to which the quotations in this judgment refer.

2 For practical reasons in the argumentation which follows the single expression UBC will be used to refer to the applicants.

3 Article 1 of the decision declares that UBC has infringed Article 86 of the Treaty establishing the European Economic Community:

(a) by requiring its distributor/ripeners in the Belgo-Luxembourg Economic Union, Denmark, Germany, Ireland and the Netherlands to refrain from reselling its bananas while still green;

(b) by, in respect of its sales of Chiquita bananas, charging other trading parties, namely distributor/ripeners other than the Scipio Group in the Member States referred to above, dissimilar prices for equivalent transactions;

UNITED BRANDS v COMMISSION

(ii) to inform the Commission by 20 April 1976 and thereafter twice yearly not later than 20 January and 20 July for a period of two years of the prices charged during the previous six months to customers in the Belgo-Luxembourg Economic Union, Denmark, Germany, Ireland and the Netherlands.

6 UBC's main claims in its application are that the Court should set aside the Decision of 17 December 1975 and order the Commission to pay UBC moral damages in the amount of one unit of account and, in the alternative, should, if the Decision be upheld, cancel or at least reduce the fine.

7 It puts forward eight submissions in support of its conclusions:

(1) It challenges the analysis made by the Commission of the relevant market, and also of the product market and the geographic market;

(2) It denies that it is in a dominant position on the relevant market within the meaning of Article 86 of the Treaty;

8 UBC, after bringing this action, by a separate document made an application dated 18 March 1976 for the adoption of an interim measure under Article 185 of the Treaty requesting the President of the Court to suspend the enforcement of Article 3 (a) and (b), paragraph 1 of the Decision until a decision on the application for annulment pending before the Court has been made.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

9 By an Order of 5 April 1976 the President took note of the parties' statements concerning the amendment of the clause relating to the resale of bananas while still green and made the following order:

"The suspension of the operation of Article 3 (a) and the first indent of Article 3 (b) of the Decision of the Commission of 17 December 1975 (IV/­ 26699) is granted until judgment is given on the substance of Case 27/76, in so far as the applicants have not already of their own accord brought to an end the infringements referred' to by the Commission in Article 1 of the said decision".

Chapter I — The existence of a dominant position

Section 1 — The relevant market

14 The statistics produced show that consumer expenditure on the purchase of bananas is at its lowest between June and December when there is a plentiful supply of domestic fresh fruit on the market.

15 Studies carried out by the Food and Agriculture Organization (FAO) (especially in 1975) confirm that banana prices are relatively weak during the summer months and that the price of apples for example has a stati­ stically appreciable impact on the consumption of bananas in the Federal Republic of Germany.

16 Again according to these studies some easing of prices is noticeable at the end of the year during the "orange season".

17 The seasonal peak periods when there is a plentiful supply of other fresh fruit exert an influence not only on the prices but also on the volume of sales of bananas and consequently on the volume of imports thereof.

18 The applicant concludes from these findings that bananas and other fresh fruit form only one market and that UBC's operations should have been examined in this context for the purpose of any application of Article 86 of the Treaty.

19 The Commission maintains that there is a demand for bananas which is distinct from the demand for other fresh fruit especially as the banana is a very important part of the diet of certain sections of the community.

25 Owing to this particular feature the banana is a privileged fruit and its production and marketing can be adapted to the seasonal fluctuations of other fresh fruit which are known and can be computed.

26 There is no unavoidable seasonal substitution since the consumer can obtain this fruit all the year round.

27 Since the banana is a fruit which is always available in sufficient quantities the question whether it can be replaced by other fruits must be determined over the whole of the year for the purpose of ascertaining the degree of competition between it and other fresh fruit.

28 The studies of the banana market on the Court's file show that on the latter market there is no significant long term cross-elasticity any more than — as has been mentioned — there is any seasonal substitutability in general between the banana and all the seasonal fruits, as this only exists between the banana and two fruits (peaches and table grapes) in one of the countries (West Germany) of the relevant geographic market.

29 As far as concerns the two fruits available throughout the year (oranges and apples) the first are not interchangeable and in the case of the second there is only a relative degree of substitutability.

30 This small degree of substitutability is accounted for by the specific features of the banana and all the factors which influence consumer choice.

Paragraph 2. The geographic market

36 The Commission has taken the Federal Republic of Germany, Denmark, Ireland, the Netherlands and the BLEU as the geographic market and it is in respect of this market that it is necessary to consider whether UBC has the power to hinder effective competition.

37 It takes the view that the economic conditions in this part of the Community allow importer/distributors of bananas to market their products there in the ordinary course without there being any significant economic barriers for UBC to overcome compared with other importer/distributors.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

38 The other Member States -of the Community (France, Italy, the United Kingdom) must however be excluded from this geographic definition of the market notwithstanding the significant presence of UBC in these States, because of the special circumstances relating to import arrangements and trading conditions and the fact that bananas of various types and origin are sold there.

39 The applicant points out that the geographic market where an undertaking's economic and commercial power is taken into consideration should only comprise areas where the conditions of competition are homogeneous.

UNITED BRANDS v COMMISSION

45 The Community has not established a common organization of the agri­ cultural market in bananas.

46 Consequently import arrangements vary considerably from one Member State to another and reflect a specific commercial policy peculiar to the States concerned.

47 This explains why for example the French market owing to its national organization is restricted upstream by a particular import arrangement and obstructed downstream by a retail price monitored by the Administration.

48 This market, in addition to adopting certain measures relating to a "target price" ("prix objectif) fixed each year and to packaging and grading standards and the minimum qualities required, reserves about two thirds of the market for the production of the overseas departments and one third to that of certain countries enjoying preferential relations with France (Ivory Coast, Madagascar, Cameroon) the bananas whereof are imported duty­ free, and it includes a system the running of which is entrusted to the "Comité interprofessionnel bananier" ("C.I.B.").

49 The United Kingdom market enjoys "Commonwealth preferences", a system of which the main feature is the maintenance of a level of production favouring the developing countries of the Commonwealth and of a price paid to the associations of producers directly linked to the selling price of the green banana charged in the United Kingdom.

55 Transport costs do not in fact stand in the way of the distribution policy chosen by UBC which consists in selling f.o.r. Rotterdam and Bremerhaven, the two ports where the bananas are unloaded.

56 These are factors which go to make relevant market a single market.

57 It follows from all these considerations that the geographic market as determined by the Commission which constitutes a substantial part of the common market must be regarded as the relevant market for the purpose of determining whether the applicant may be in a dominant position.

Section 2 — UBC's position on the relevant market

58 The Commission bases its view that UBC has a dominant position on the relevant market on a series of factors which, when taken together, give UBC unchallengeable ascendancy over all its competitors: its market share compared with that of its competitors, the diversity of its sources of supply, the homogeneous nature of its product, the organization of its production and transport, its marketing system and publicity campaigns, the diversified nature of its operations and finally its vertical integration.

59 Having regard to all these factors the Commission takes the view that UBC is an undertaking in a dominant position enjoying a degree of general independence in its behaviour on the relevant market which enables it to hinder to a large extent any effective competition from competitors who can

64 This article prohibits any abuse by an undertaking of a dominant position in a substantial part of the common market in so far as it may affect trade between Member States.

65 The dominant position referred to in this article relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.

66 In general a dominant position derives from a combination of several factors which, taken separately, are not necessarily determinative.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

67 In order to find out whether UBC is an undertaking in a dominant position on the relevant market it is necessary first of all to examine its structure and then the situation on the said market as far as competition is concerned.

68 In doing so it may be advisable to take account if need be of the facts put forward as acts amounting to abuses without necessarily having to acknowledge that they are abuses.

74 Furthermore several independent producers have links with UBC through contracts for the growing of bananas which have caused them to grow the varieties of bananas which UBC has advised them to adopt.

75 The effects of natural disasters which could jeopardize supplies are greatly reduced by the fact that the plantations are spread over a wide geographic area and by the selection of varieties not very susceptible to diseases.

UNITED BRANDS ν COMMISSION

76 This situation was born out by the way in which UBC was able to react to the consequences of hurricane "Fifi" in 1974.

77 At the production stage UBC therefore knows that it can comply with all the requests which it receives.

78 At the stage of packaging and presentation on its premises UBC has at its disposal factories, manpower, plant and material which enable it to handle the goods independently.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

85 It is acknowledged that at the stage where the goods are given the final finish and undergo quality control UBC not only controls the distributor/­ ripeners which are direct customers but also those who work for the account of its important customers such as the Scipio group.

86 Even if the object of the clause prohibiting the sale of green bananas was only stria quality control, it in fact gives UBC absolute control of all trade in its goods so long as they are marketabale wholesale, that is to say before the ripening process begins which makes an immediate sale unavoidable.

87 This general quality control of a homogeneous product makes the advertising of the brand name effective.

88 Since 1967 UBC has based its general policy in the relevant market on the quality of its Chiquita brand banana.

89 There is no doubt that this policy gives UBC control over the transfor­ mation of the product into bananas for consumption even though most of this product no longer belongs to it.

95 The effect of its sales networks only covering a limited number of customers, large groups or distributor/ripeners, is a simplification of its supply policy and economies of scale.

96 Since UBC's supply policy consists — in spite of the production surplus — in only meeting the requests for Chiquita bananas parsimoniously and sometimes incompletely UBC is in a position of strength at the selling stage.

Paragraph 2. The situation with regard to competition

97 UBC is the largest banana group having accounted in 1974 for 35% of all banana exports on the world market.

98 In this case however account must only be taken of its operations on the relevant market.

99 As far as this market is concerned the parties disagree as to the extent of UBC's market share in the Federal Republic of Germany and as to the applicant's entire share of the whole of the relevant market.

104 Consequently UBC and Scipio are not in competition with each other.

105 In the second place the Commission states that it estimates UBC's market share at 45%.

106 However UBC points out that this share dropped to 41% in 1975.

107 A trader can only be in a dominant position on the market for a product if he has succeeded in winning a large part of this market.

108 Without going into a discussion about percentages, which when fixed are bound to be to some extent approximations, it can be considered to be an established fact that UBC's share of the relevant market is always more than 40% and nearly 45%.

109 This percentage does not however permit the conclusion that UBC auto­ matically controls the market.

114 In this case there was in fact a very lively competitive struggle on several occasions in 1973 as Castle and Cooke had mounted a large-scale advertising and promotion campaign with price rebates on the Danish and German markets.

us At the same time Alba cut prices and offered promotional material.

116 Recently the competition of the Villeman et Tas firm on the Netherlands market has been so lively that prices have dropped below those on the German market which are traditionally the lowest.

117 It must however be recorded that in spite of their exertions these firms have not succeeded in increasing their market share appreciable on the national markets where they launched their attacks.

118 It must be noted that these periods of competition limited in time and space did not cover the whole of the relevant market.

119 Even if the local attacks of some competitors can be described as "fierce" it can only be placed on record that UBC held out against them successfully either by adapting its prices for the time being (in the Netherlands in answer to the challenge from Villeman et Tas) or by bringing indirect pressure to bear on the intermediaries.

124 That is another factor peculiar to a dominant position.

125 However UBC takes into account the losses which its banana division made from 1971 to 1976 — whereas during this period its competitors made profits — for the purpose of inferring that, since dominance is in essence the power to fix prices, making losses is inconsistent with the existence of a dominant position.

126 An undertaking's economic strength is not measured by its profitability; a reduced profit margin or even losses for a time are not incompatible with a dominant position, just as large profits may be compatible with a situation where there is effective competition.

UNITED BRANDS v COMMISSION

127 The fact that UBC's profitability is for a time moderate or non-existent must be considered in the light of the whole of its operations.

128 The finding that, whatever losses UBC may make, the customers continue to buy more goods from UBC which is the dearest vendor, is more significant and this fact is a particular feature of the dominant position and its verification is determinative in this case.

132 This abuse was brought into practice in January 1967 when UBC was endeavouring to launch in Europe the new "Cavendish Valery" banana under the "Chiquita" brand name which was taking the place of the Gros Michel variety known under the "Fyffes" label.

133 The prohibition on reselling of bananas while still green has been applied strictly since 1967, although it does not always appear in a written document, in all the Member States forming the relevant market to UBC's importer/ripener/distributors including the Scipio group.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

134 There was an example of this prohibition in December 1973 when UBC refused to sell to the Danish firm Olesen which found that all the distri­ butors (including the Scipio group) whom it had requested to supply it with green bananas turned down its requests because they were prevented from doing so under their contracts.

135 Apart from the fact that this obligation indirectly helps to strengthen and consolidate UBC's dominant position, it makes any trade in UBC's green bananas whether branded or not, either within a single State or between Member States, almost impossible. Thus this clause has a similar effect as a prohibition of exports.

136 The effect of this clause is further increased by the policy adopted by UBC of only supplying its customers with smaller quantities of bananas than those which they have ordered and this makes it impossible for them to take any competitive action against the difference in prices from one Member State to another and forces them to confine themselves to their role of ripeners.

142 The only purpose of this clause was to protect the brand name and therefore ultimately the consumers by ensuring that the quality of the products — selected and labelled in the tropics — is exemplary, by reserving them for experienced ripeners who have adequate ripening installations, apply advanced technical methods perfected by UBC's engineers and accept their supervision, and to bring "Chiquita" bananas on to the market when their quality is at its peak.

143 This clause has never been understood as being a prohibition of exports and has never been applied nor enforced as such.

144 The applicant never intended to impose sanctions in the event of non­ compliance.

145 Furthermore dealers in bananas sell an extremely perishable semi-finished product which owing to its nature must be ripened immediately rather than dealt in horizontally and trade in ripe bananas — if there was any — could only be marginal.

146 The ripener's function is only to ripen the bananas and distribute them to the retailers.

147 Moreover the ripener's gross profit margin is greater than the profits which he could make by speculating on the average price differences between the various markets except for some weeks each year and it is not therefore in his interest to effect horizontal sales of green bananas.

153 Since UBC thought it should state in the circular letter of 31 January 1976, which it sent to all ripener/distributors including those established in Germany, that the clause had not been put in writing for Germany, it thereby impliedly acknowledges that the said clause was in force on the German market, since it had clearly been implied or mentioned orally.

154 Under the terms of the clause UBC "required their customers to ensure forthwith that the bananas in their possession are not resold to foreign dealers; it had imposed the same requirement on its foreign customers as far as the Netherlands are concerned. It would not hesitate to take such steps as it deems to be necessary if the foregoing is not complied with in some way or other".

UNITED BRANDS ν COMMISSION

155 This wording implies that UBC, far from rejecting the idea of imposing sanctions on duly appointed ripener/distributors which do not comply with its directions, held out this possibility as a threat.

156 Moreover Olesen unquestionably experienced the harsh effects of this clause after UBC refused to supply it and it wanted to obtain supplies of Chiquita bananas from Scipio and the duly appointed Danish distributors.

157 To impose on the ripener the obligation not to resell bananas so long as he has not had them ripened and to cut down the operations of such a ripener to contacts only with retailers is a restriction of competition.

Paragraph 2. The refusal to continue supplies to Olesen

163 The Commission is of the opinion that UBC has infringed Article 86 of the Treaty by refusing to continue supplies of Chiquita bananas to Olesen from 10 October 1973 to 11 February 1975

164 According to a telex message of 11 October 1973 from UBC to Olesen these supplies were discontinued because the ripener/distributor took part in an advertising campaign mounted during October 1973 in Denmark for Dole bananas.

165 Following this discontinuance of supplies Olesen applied in vain to UBC's seven other ripener/distributors in Denmark and also to a company of the Scipio group in Hamburg for green Chiquita bananas.

166 It has suffered considerable damage as a result of this situation due to losses of sales and several important customers including l'Association des Coopé­ rateurs (F.D.B.) which bought 50% of its bananas.

167 On 11 February 1975 UBC and Olesen entered into an agreement under which UBC undertook to resume supplies of bananas to Olesen and the latter withdrew the complaint which it had lodged with the Commission.

173 When UBC refused to do so, Olesen became in 1969 the exclusive importer/­ distributor of the Standard Fruit Company.

174 In 1973 Standard Fruit announced at a press conference that the Dole banana was going to oust the "Chiquita" banana throughout the world.

175 Olesen then sold less and less Chiquita bananas and deliberately pushed the sale of Dole bananas. It did not take the same amount of trouble when ripening Chiquita bananas as it did when ripening bananas bearing other brand names.

176 The breach, which was not unexpected and unforeseeable, arose in these circumstances, punctuated by discussions spread over a long period.

177 This breach was therefore fully justified by the fact that if a firm is directly attacked by its main competitor who has succeeded in making one of that firm's most important long standing customers his exclusive distributor for the whole of the country, that firm in its own interest and that of competition has no option but to fight back or else disappear from this national market.

178 The applicant goes on to say that this refusal to sell to Olesen, which was justified, was not an abuse, because it did not affect the actual competition on the Danish market which recorded a fall of 40% in two weeks at the end of 1974 in the retail price of Chiquita bananas as a result of the competition between competitors which was generated by these circumstances.

184 It is therefore necessary to ascertain whether the discontinuance of supplies by UBC in October 1973 was justified.

185 The reason given is in the applicant's letter of 11 October 1973 in which it upbraided Olesen in no uncertain manner for having participated in an advertising campaign for one of its competitors.

186 Later on UBC added to this reason a number of complaints, for example, that Olesen was the exclusive representative of its main competitor on the Danish market.

187 This was not a new situation since it goes back to 1969 and was not in any case inconsistent with fair trade practices.

188 Finally UBC has not put forward any relevant argument to justify the refusal of supplies.

UNITED BRANDS v COMMISSION

195 The applicant's argument that in its view the 40% fall in the price of bananas on the Danish market shows that competition has not been affected by the refusal to supply Olesen cannot be upheld.

196 In fact this fall in prices was only due to the very lively competition — called at the time the "banana war" — in which the two transnational companies UBC and Castle and Cooke engaged.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

197 The applicant submits that the refusal to supply Olesen could not have any effect on intra-Community trade because in its view all those bananas coming from third countries (Latin America) and merely transiting the Common Market countries before they reach the Member State where they are consumed are not part of intra-Community trade.

198 If this argument was valid the whole of UBC's European trade in goods of third countries would not be governed by Community law.

199 In fact when Olesen's supplies were cut off it was unable to buy Chiquita bananas at Bremerhaven and therefore had to impon into Denmark the same quantities of bananas as it did before this step was taken.

204 All the bananas marketed by UBC under the brand name "Chiquita" on the relevant market have the same geogrophic origin, belong to the same variety (Cavendish Valery) and are of almost the same quality.

UNITED BRANDS v COMMISSION

205 They are unloaded in two ports, Rotterdam and Bremerhaven, where unloading costs only differ by a few cents in the dollar per box of 20 kilogrammes, and are resold, except to Scipio and in Ireland, subject to the same conditions of sale and terms of payment after they have been loaded on the buyers' wagons or lorries, the price of a box amounting on average to between 3 and 4 dollars and going up to 5 dollars in 1974.

206 The costs of carriage from the unloading ports to the ripening installations and the amount of any duty payable under the Common Customs Tariff are borne by the purchaser except in Ireland.

207 This being so all those customers going to Rotterdam and Bremerhaven to obtain their supplies might be expected to find that UBC offers them all the same selling price for "Chiquita" bananas.

208 The Commission blames the applicant for charging each week for the sale of its branded bananas — without objective justification — a selling price which differs appreciably according to the Member State where its customers are established.

— in 1973: 18% and 43%

— in 1974: 25% and 54%

and between customers in Denmark on the one hand and Belgo-Luxem­ bourg and Netherlands customers on the other hand:

— in 1973: 24% and 54%

— in 1974.: 16% and 12%

212 The price customers in Belgium are asked to pay is on average 80% higher than that paid by customers in Ireland.

UNITED BRANDS v COMMISSION

distributors must perforce take into account the different competitive context in which ripener/distributors in the different countries are operating.

219 It finds its objective justification in the average anticipated market price.

220 These price differences are in fact due to fluctuating market factors such as the weather, different availability of seasonal competing fruit, holidays, strikes, Government measures, currency denominations.

221 In short the applicant has been asked by the Commission to take appro­ priate steps to establish a single banana market at a time when it has in fact been unable to do so.

222 According to the applicant as long as the Community institutions have not set up the machinery for a single banana market and the various markets remain national and respond to their individual supply/demand situations differences in prices between them cannot be provented.

227 Although the responsibility for establishing the single banana market does not lie with the applicant, it can only endeavour to take "what the market can bear" provided that it complies with the rules for the regulation and coordination of the market laid down by the Treaty.

228 Once it can be grasped that differences in transport costs, taxation, customs duties, the wages of the labour force, the conditions of marketing, the differences in the parity of currencies, the density of competition may eventually culminate in different retail selling price levels according to the Member States, then it follows those differences are factors which UBC only has to take into account to a limited extent since it sells a product which is always the same and at the same place to ripener/distributors who — alone — bear the risks of the consumers' market.

229 The interplay of supply and demand should, owing to its nature, only be applied to each stage where it is really manifest.

230 The mechanisms of the market are adversely affected if the price is calculated by leaving out one suge of the market and taking into account the law of supply and demand as between the vendor and the ultimate consumer and not as between the vendor (UBC) and the purchaser (the ripener/distributors).

231 Thus, by reason of its dominant position UBC, fed with information by its local reprensentatives, was in fact able to impose its selling price on the intermediate purchaser. This price and also the "weekly quota allocated" is only fixed and notified to the customer four days before the vessel carrying the bananas berths.

236 The policy of partitioning the relevant market has enabled UBC to charge pirces for Chiquita bananas which are sheltered from effective competition and which, bearing in mind that bananas are a food product that is widely consumed, often amount to wide differences in price which cannot be justified objectively.

237 These price differences show that the highest prices are excessive compared with the lowest prices, more especially as the latter yield a profit.

238 Following a letter from UBC of 10 December 1974 it appeared to the Commission to be justifiable, without analysing UBC's costs structure, to treat the prices charged to Irish customers as representative and the differences between the prices c.i.f. Dublin delivered Rotterdam and the other prices charged by UBC for its sales f.o.r. Rotterdam or Bremerhaven show profits of the same order of magnitude as these differences.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

239 The prices charged by UBC to its customers in Germany (other than the Scipio Group), Denmark, the Netherlands and the BLEU are considerably higher, sometimes by as much as 100%, than the prices charged to customers in Ireland and produce for it a substantial and excessive profit in relation to the economic value of the product supplied.

240 The significance of these observations is accentuated by the fact that there is a 20 to 40% difference between the price of Chiquita and unbranded bananas, even though the quality of the latter is only sligthly lower than that of labelled bananas and by the fact that the price of unbranded bananas of similar quality sold by its principal competitors is lower even though their undertakings are running at a profit.

UNITED BRANDS ν COMMISSION

245 The applicant takes the view that the difference in the price of branded and unlabelled bananas is justified, because the precautions taken between cutting and sale to the consumer fully explain this difference.

246 It endeavours to prove by another way that there are genuine differences in the quality of Chiquita bananas and those bearing other brand names and that the price difference — averaging 7.4% between 1970 and 1974 — is justified.

247 It submits that the order to reduce its prices by 15% is unintelligible, since the prices in question vary each week on the whole of the relevant market, and unworkable, because a reduction of this size would cause it to sell a banana of a higher quality than its competitors below the prices which they charge for theirs.

248 The imposition by an undertaking in a dominant position directly or indirectly of unfair purchase or selling prices is an abuse to which exception can be taken under Article 86 of the Treaty.

249 It is advisable therefore to ascertain whether the dominant undertaking has made use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition.

255 In this case it emerges from a study by the United Nations Conference on trade and development of 10 February 1975 that the pattern of the production, packaging, transportation, marketing and distribution of bananas could have made it possible to compute the approximate production cost of this fruit and accordingly to calculate whether its selling price to ripener/distributors was excessive.

256 The Commission was at least under a duty to require UBC to produce parti­ culars of all the constituent elements of its production costs.

257 The accuracy of the contents of the documents produced by UBC could have been challenged but that would have been a question of proof.

258 The Commission bases its view that prices are excessive on an analysis of the differences — in its view excessive — between the prices charged in the different Member States and on the policy of discriminatory prices which has been considered above.

259 The foundation of its argument has been the applicant's letter of 10 December 1974 which acknowledged that the margin allowed by the sale of bananas to Irish ripeners was much smaller than in some other Member States and it concluded from this that the amount by which the actual prices f.o.r. Bremerhaven and Rotterdam exceed the delivered Rotterdam prices for bananas to be sold to Irish customers c.i.f. Dublin must represent a profit of the same order of magnitude.

UNITED BRANDS v COMMISSION

266 Although it is also true that the price of Chiquita bananas and those of its principal competitors is different, that difference is about 7%, a percentage which has not been challenged and which cannot automatically be regarded as excessive and consequently unfair.

267 In these circumstances it appears that the Commission has not adduced adequate legal proof of the facts and evaluations which formed the foun­ dation of its finding that UBC had infringed Article 86 of the Treaty by directly and indirectly imposing unfair selling prices for bananas.

268 Article 1 (c) of the decision must therefore be annulled.

JUDGMENT OF 14. 2. 1978 — CASE 27/76

Chapter III — Procedural validity

Section 1 — Complaints relating to denial ofdue process

275 The Statement of Objections satisfies this requirement since it sets out, summarily indeed but clearly, the principal facts upon which the Commission relies.

UNITED BRANDS v COMMISSION

276 In its communication of 19 March 1975 the latter clearly stated the principal facts upon which it based the objections made and indicated to what extent UBC is in a dominant position and has abused it.

277 It does not therefore seem that during the procedure before the Commission there was any breach of the principle of due process.

278 As far as the other objections are concerned they relate to the substance of the case.

279 Consequently this submission is unfounded.

JUDGMENT OF 1«. 2. 1978 — CASE 27/76

infringements had been proved, when in fact the parties concerned had not yet delivered their defences.

285 For this reason the Commission was no longer able to evaluate impartially the facts of the case and the arguments submitted by the applicant.

286 There is nothing on the Court's file to justify the presumption that the contested decision would not have been adopted or would have been different had it not been for these disputed statements which are in themselves regrettable.

287 However there is nothing to indicate that the Commission's conduct was such as to have an adverse effect on the way the procedure is normally carried out.

288 In these circumstances the claim against the Commission for damages must be rejected.

293 Furthermore during the procedure for the adoption of an interim measure on 5 April 1976 the Commission took note of the amendment of the clause at issue while expressing the view that it should have taken action earlier.

294 According to the Commission the refusal by UBC to continue supplies to Olesen lasted from 10 October 1973 to 11 February 1975 and the Commission states that it took account of the fact that UBC put an end to this infringement of its own accord.

295 The pricing policy has been applied since at least 1971 to UBC's customers in Germany, the Netherlands and the BLEU, since January 1973 to customers in Denmark and since November 1973 to customers in Ireland.

296 Finally according to the Commission the amount of the fine was fixed at one million units of account in the light of UBC's total annual turnover of about two thousand million dollars and its annual turnover in bananas of fifty million dollars on the relevant market and also of the high profits made as a result of its pricing policy.

297 Furthermore in order to compel UBC to put an end to these infringements, in so far as it had not done so of its own accord, the Commission ordered UBC, subject to a penalty payment, to inform all its distributor/ripeners in Germany, Denmark, Ireland, the Netherlands and the BLEU that it has ceased to apply the prohibition on the resale of green bananas by not later than 1 February 1976 and to inform the Commission twice yearly for a period of two years of the prices charged during the preceding six months to the same customers.

303 Account must however be taken of the partial annulment of the decision and the amount fixed by the Commission reduced accordingly.

304 A reduction of the fine to 850 000 (eight hundred and fifty thousand) units of account, to be paid in the national currency of the applicant undertaking whose registered office is situate in the Community, that is to say 3 077 000 Netherlands guilders (three million seventy seven thousand Netherlands guilders), appears to be justified.

Costs

305 Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs if they have been asked for in the successful party's pleading.

306 Under Paragraph (3) of this Article when each party succeeds on some and fails on other heads or where the circumstances are exceptional the Court may order that the parties bear their own costs in whole or in part.

307 With regard to the costs of the proceedings in the main action the Commission has failed on one of the complaints made against the applicant as a result of the annulment of the corresponding part of the decision.

1. Annuls Article 1 (c) of Commission Decision of 17 December 1975 "IV/26699 — Chiquita", (Official Journal L 95 of 9 April 1976).

2. Reduces the amount of the fine imposed on UBC and UBCBV to 850 000 (eight hundred and fifty thousand) units of account, to be paid in the national currency of the applicant undertaking whose registered office is situate in the Community, that is to say 3 077 000 Netherlands guilders (three million seventy seven thousand Netherlands guilders).

3. Dismisses the rest of the application.

4. Orders each party to bear its own costs including the costs of the application for the adoption of an interim measure.

Kutscher Serensen Bosco

Donner Mertens de Wilmars Mackenzie Stuart Touffait

1. The procedure leading up to the decision 210

2. The facts relied on in the decision and the operative part thereof 211

A — The structure of the market 211

(a) The world banana market. 211

(b) The position of United Brands Company (UBC) 211

(c) The competitors of UBC 213

3. Judicial proceedings following the decision 222

(a) Procedure for the adoption of an interim measure 222

(b) Conclusions of the parties 223

II — Outline of the submissions and arguments of the parties 224

1. The relevant market 224

(a) The product market 224

7. The fine 260

8. Denial of due process 262

9. The applicants' claim for damages 263

III — The parties' replies to questions raised by the Court 263

IV — Summary of the arguments developed during the oral procedure 264

Decision 267

Section 2 — UBC's position on the relevant market 276

Paragraph 1. The structure of UBC, 278

Paragraph 2. The situation with regard to competition 281

Chapter II — Abuse of this dominant position 285

Section 1 — Conduct vis-à-vis the ripeners 285

Paragraph 1. The clause prohibiting the resale of bananas while still green 285

Section 2 — The applicant's claim for damages 305

Chapter IV — The sanctions. 306

Costs 308

Operative part of the Decision 309