C-28/77

JUDGMENT OF THE COURT OF 20 JUNE 1978­ 1

Tepea BV v Commission of the European Communities

"Cleaning devices for records"

Case 28­ /77

1. Competition — Cartels — Undertaking situate in a non-member country —

Application ofArticle 85 (1) — Conditions (EEC Treaty, Art. 85 (1)) ■

In Case 28/77

"­ Tepea BV (formerly known as THEAL NV"), a Netherlands limited liability company, having its registered office af The Hague, represented by J. F. A. Verzijl, Advocate at the Bar at The Hague, with an address for service in

Luxembourg at the Chambers of Ernest Arendt, 34/B/IV Rue Philippe II,

applicant,

v

Commission of the European Communities , represented by its Legal

J. D.Wilkes, Leeuwarden, and All Wave B. V., having its registered office at Delft, represented by L. Wichers Hoeth and C. J. Grul, Advocates at A.

the Amsterdam Bar, with an address for service in Luxembourg at the Chambers of J. Loesch, 2 Rue Goethe,

interveners,

APPLICATION for the annulment of the Commission Decision of 21 December 1976 relating to a proceeding under Article 85 of the EEC Treaty (IV/28.812 Theal/Watts; Official Journal L 39 of 10 February 1977, p. 19) and also for the cancellation of the fines imposed by that decision,

THE COURT

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

parties may be summarized as follows: as "Watts") which was enforceable

under Article 192 of the EEC Treaty. Article 1 of that decision found that

I — Facts and procedure there had been two infringements of the

Community rules on competition: On 21 December 1976 the Commission 1. An exclusive oral distribution took a decision directed against the agreement between the two

undertakings Tepea BV (hereinafter companies including the grant of the

TEPEA v COMMISSION

imposed under Article 15 (1) (a) of granted it the exclusive right to use the

Regulation No 17 of the Council of trade-marks affixed to all his products. 6 February 1962. 3. In 1960 Mr Watts incorporated his The decision went on to refuse the business as a company which took over

application for a declaration under the above-mentioned rights and

Article Article 85 obligations. 85 (3) that (1) was

inapplicable. It also ordered the under­

4. On 24 January 1963 Theal/Tepea takings to bring to an end without delay infringement referred in Article 1 notified the oral agreement of 8 the to September 1956 to the Commission; the thereof and stated that they were to

decision was supported by the following to make available to him the best facts: possible service in the event of any defects in the appliances."

1. In 1954 Mr Cecil E. Watts invented The inapplicability of Article 85 (1) was

and then manufactured and sold four justified in this way: types of products for cleaning and main­

"The agreement in question does not taining gramophone records of which exclude free competition within the the most important are: Member State concerned or between — Watts "Dust Bug": an automatic Member States but its sole object is to

record cleaner for transcription turn­ make available to the consumer the best service."

tables. possible

of the grant of the exclusive conditions specified in Regulation No officially right to use the Watts trade-marks until 67/67, which exempts certain

11 July meeting with Theal/ 1975 at a agreements by categories, you are

Tepea and Watts. Both parties moreover advised to make the necessary to it to hearing amendments adapt regu­ 23 that stated at the on February 1976 that the agreement of 8 September lation. In that case your agreement

1956 had never been amended. might be exempted as provided for in Article 1 of the said regulation as from In the meantime the Commission sent the date of any such adaptation. Theal the following letter on 18 April 1969: If you wish to make any comments on

the conclusions drawn from this pro­

"The Commission of the European visional examination of your file I Communities adopted on 22 March would ask you to let me know and to 1967 Regulation No 67/67/EEC state in particular whether and for what (published in the Journal Officiel des reasons you consider it advisable that Communautés Européennes No 57 of the Commission should take a decision 25 March 1967) which provides that agreement."

which restrict competition other than Since 1954 Mr Watts had entered orally those referred to by that regulation. In into exclusive distribution agreements particular the parties must not in distributors in any with other Belgium, establish absolute territorial way Denmark, France, Ireland and Italy protection either by a formal agreement which had been continued in force by or by any other method; this means that the company which he formed in 1960. they cannot limit the opportunities In theFederal Republic of Germany on available ot intermediaries or consumers the hand he had concluded an other to obtain the products referred to in the oral agreement with two non-exclusive

agreement from other vendors within distributors. In United Kingdom the the Common Market; the contracting Watts supplied mainly about twenty parties not either grant each other may wholesalers on the basis of a standard reciprocal exlusive rights to market price list and on its own admission since

competing products. May 1972 at least on the express

The Commission decided on 17 July condition not to export. This is proved

1968 to take no anion with regard to by the fact that Watts stopped supplying notifications of exclusive dealing a United Kingdom wholesaler who in

TEPEA v COMMISSION

Kingdom's entry into the EEC it had in the name of that and undertaking discontinued the prohibition on exports bearing the words "Een Theal­

which had been intended to protect the produkt".

home market. 8. According to the Commission in However, on 23 July 1976 Mr Wilkes —

1972 the company Audiogram BV of one of the interveners — produced

evidence that the products were still Leeuwarden, the Netherlands, bought a quantity of Watts's products direct from being sold in the United Kingdom with a wholesaler in London who had leaflets bearing the export prohibition. himself obtained them from Watts. There was a similar occurrence in June 1976 in the case of products manu­ The company resold the said products

factured and packaged after 11 July to Netherlands traders including J. D. 1975. Wilkes, also of Leeuwarden, Partimex- In for Holland BV, of Bussum, Willem de the case of products sold export

registered in the United Kingdom. following passage: " Watts has obtained similar trade-marks ... It has come to our notice that

in Denmark, Germany and France your shareholder Mr A. Norden either directly in its own name or (Intermezzo), is marketing Watts through a subsidiary. In the Benelux applicances ... which we have not

countries the trade-marks relating to supplied and to which trade-marks

Watts's products are now registered on registered by us have been affixed

the Benelux trade-marks register under without our consent. Such conduct on

JUDGMENT OF 20. 6. 1978 — CASE 28/77

"My client, Theal NV, is the proprietor dissementsrechtbank, Leeuwarden. In of trade-marks in respect of the words the second stage Mr Wilkes invoked the 'Parastat' 'Dust Bug', and 'Disc EEC rules on competition which, he Preener' and in respect of the pictorial claimed, forbid the prohibition of mark 'Watts', all of which relate to parallel imports. The Amsterdam court appliances for cleaning gramophone delivered interlocutory judgment ...

an on records. 14 May 1975 and it is appropriate to

These trade-marks have all been entered record its finding: in the Benelux trade-mark register so '... To the extent to which Watts in that my client is the sole proprietor. fact imposes on its English customers a

It has come to my client's notice that prohibition on exports to the

you are still marketing identical Netherlands and the other Member products under these trade-marks. States this prohibition must be regarded

Although has as being in breach of the condition my client on several

passing through Theal come from —

several summary decisions in its favour, Watts and have been properly imported founded on its exclusive right to use its from England in ...

registered trade-marks, particular

against Wilkes of Leeuwarden and All The Arrondissementsrechtbank hereby Wave of Delft who were later to grants the plaintiff leave to produce

intervene in these proceedings. evidence: that the articles at issue ... —

TEPEA v COMMISSION

for example by a letter of 25 October Upon hearing the report of the Judge- 1972 to the newspaper RTH — the Rapporteur and the views of the

judgments against the vendors and Advocate General the Court decided to

announced that it would institute open the oral procedure on 19 April proceedings against any infringers; this 1978 after the parties had been invited letter ended with the sentence: to answer certain questions. It asked

them: "We request you to inform the retail

trade of the risks involved in such sales (a) Whether or not Tepea manufactures rights." in breach of trade-mark itself in the Netherlands products

Furthermore Theal, on the strength of bearing its own trade-marks; the difficulties which had arisen in its (b) Whether the trade-mark Theal is trade relations with Mr Wilkes, seems affixed to the products actually to have refused from April 1973 to sell manufactured by Watts at the manu­

a Commission decision of 21 December add to the Court's file the

JUDGMENT OF 20. 6. 1978 — CASE 28/77

correspondence between the and why it has never been able to say Commission and Tepea during the anything to the contrary. In particular Preener" administrative procedure (with special "Parastat", "Disc and "Dust Bug" reference to the letters quoted in the are all trade-marks established

written procedure). and registered by the applicant after the The replies reached the Court Registry sole agency agreement and not by before 30 March 1978. Watts, who subsequently used and

registered the third in the United Kingdom, but after Theal's registration

II — Conclusions of the parties in the Netherlands. Watts and the

The defendant contends that the Court the actions involving Mr Wilkes and All Wave. Thus the Arrondissementsrecht­ should: bank, Amsterdam, invited Mr Wilkes to — "Declare that the application is produce evidence that the goods which

unfounded; and he sold came from Watts and actually — Order the applicant to bear the were properly imported; Mr Wilkes did costs."

not manage to adduce such proof.

The defendant points out that the The interveners submit that the Court applicant, using its own terminology, should: "agreement" when it speaks of the

Confirm decision, the contested if refers only to its appointment as Watts's need be after perfecting and completing exclusive agent whilst at the same time

the statement of the reasons on which it it considers that it has a right of its own

The defendant gives the reasons why it rights which we may have to your

came to the conclusion that there was company, or to the company, person

an agreement covering the trade-marks: or persons designated by you or successors."

your — The appointment as sole agent for branded articles, in this case the This letter makes it clear that the Watts articles, presupposes that the applicant had an interest in removing applicant's trade-mark rights were "by" Watts's registration from the Benelux acquired an agreement register in order to be able to prevent (judgment of 18 February 1971 in parallel imports and to gain credence Case 40/70, Sirena S.r.l. v Eda S.r.l "own" or the idea that it had its rights and Others [1971] ECR 84 over the trade-marks referred to. paragraph 1 (a) of the operative part Moreover light has been thrown on the — In the United Kingdom Watts was contents of this letter by particulars "words" the first to use the Dust obtained recently by the Commission of Bug, Disc Preener and Parastat. the contacts between Watts and Theal — Various facts (conversations, an which preceded the despatch of the said

Watts letter: Watts's registration was an admission, letters) prove that

always consented to the applicant's embarrassment in the proceedings

within the meaning of Article 85 (1). (b) The Parastat and Disc Preener trade-marks, registered on the — The applicant's position as a

derivative Benelux register in the name of concessionaire of rights Watts on 23 December 1971, were in the four trade-marks in question

been in fact struck off on the application has also confirmed by a letter of Watts following the above- which two of its directors wrote to mentioned exchange of letters. The Watts on 10 October 1973: fact that accordingly the exclusive "We acknowledge that your agency agreement is in theory company is the proprietor of the independent of the agreement trade-marks Bug, Dust Disc covering the trade-marks does not Preener, Parastat and Watts. in any way alter the fact that the

If you agree to withdraw the legal relationship between the

registration of these trade- marks in partiesin its entirety may be taken your name on the Benelux register into consideration for the purposes or your application for registration, of Article 85 (1). as the case may be, we undertake to take at any time, at your request, Finally the defendant points out that the the necessary steps to assign any applicant has not only used its trade-

JUDGMENT OF 20. 6. 1978 — CASE 28/77

trade-mark rights in the Netherlands whether Tepea was proprietor of the

with the consent of Watts. The letter of trade-marks at issue as regards Benelux.

10 October 1973 has been This is proved by the minutes of the wrongly considered as a confirmation of an hearing.

existing state of affairs because the The so-called implied agreement has no

question of the trade-marks was not foundation at all; the decisions of the

until then raised for the first time Netherlands courts on the Court's file between Watts and Tepea. As soon as do not mention it. Any declaration to

the form of a vignette in the have been regarded as a breach of the Netherlands it points out that: provisions of Article 85 et seq. of the

"This vignette was stamped on products Treaty and for this reason the letter was bought from Watts superseded by the letter of 19 October which Tepea has but in its 1973 after Tepea's auditor had looked since 1965 actions against into the matter."

third parties Tepea never availed itself of this trade-mark; it relied on its trade­ Moreover the so-called declarations of

marks Dustbug and Disc Preener. The the Board of Tepea contained in a

trade-mark Dustbug, written in one report by Watts of 18 October 1973

word, was moreover used by the cannot be used unless they are produced

supplied a reference to general agreement entered into by products which were not genuine; there Watts and Theal in 1956. Since that has not been moreover any reaction agreement is oral it is necessary to take showing that the products at issue in into account the statements of the fact came from Watts, which, under the parties, the correspondence, the provisions of the EEC Treaty, would documentation and even the conduct of have put a stop to Tepea's action. No the parties. The defendant calls evidence has since then been produced

in this connexion. attention to the following facts:

With law (a) The manufacture by Watts from regard to the applicable the 1955 of products under the Watts applicant states: and Dust Bug trade-marks and their "Industrial property rights are governed sale in the Netherlands before the by national law. This applies in appointment of Theal as exclusive particular to the right to a trade-mark distributor; which was originally governed by the

Law on trade-marks of 1893 and then (b) The exclusive distribution

Benelux Law of 8 September 1956 governed by the uniform agreement

relating to trade-marks. There is still no notified by Theal; EEC trade-mark law with the result that (c) The admission of 11 July 1975 by a claim by a proprietor that he has a Watts and Theal that Watts allowed right to a trade-mark must be based on Theal in to use the said trade-marks Benelux law. The Court of Justice has the Netherlands and Theal's letter given only one specific decision in of 3 November 1975 approving the relation to such rights but the facts are account of the interview in different in this case as is shown question; moreover by the decisions of the

JUDGMENT OF 20. 6. 1978 — CASE 28/77

(f) Watts's and Theal's acknowledge­ The evidential value of the letter of 10 ment that the agreement has not October 1973 is not called in question

been amended; by the letter of 19 October 1973 of the dispatch whereof there is no evidence (g) The conduct of the parties

concerned with regard to parallel since Watts did not receive it. This first

imports in 1972: letter is moreover in keeping with the

earlier correspondence. — The prohibition of exports

double registration should not original agreement and the two parties

produce any unfavourable laid stress on the faa that that

impression on the Netherlands agreement was never amended. Theal, court — after Theal had agreed by registering the trade- marks in the

to assign its rights to Watts at Netherlands in 1969, acknowledges that the latter's request (letter of 10 it has used them for many years (from October 1973). 1955 in the case of Dustbug, from 1958 in the case of Parastat, from 1962 in the All these factors have led the defendant case of Disc Preener and from 1964 in to the conclusion that as far back as the case of Watts). 1956 the agreement was planned and Moreover the date of notification was performed for the purpose of providing 31 January 1963; furthermore the absolute territorial protection; there was Commission's warning of 18 April 1969, therefore an agreement within the to which Theal made no response refers meaning of the Sirena judgment. clearly to the prohibition of absolute Watts, unlike Theal, has never retracted territorial protection. The Commission the statements made in 1975 and has did not have any inkling of the claims therefore never shared the applicant's put forward by Theal relating to the point of view; it no longer claims that trade-marks until 30 January 1974 as a the agreement does not exist since it result of Mr Wilkes's complaint. also takes the view that, since Theal has now ceased to be an exclusive The Commission tenders statements and

distributor, it has to reassign the trade­ invoices of a British export wholesaler

evidence — but this did not prevent Watts's registration which can therefore

Theal from continuing to send warning only be explained by the faa that there letters even after the opening of the was a joint attempt to provide Theal administrative procedure before the with absolute territorial protection.

Commission. A trade-mark right only The interveners recall their legal allows the prevention of passing off and disputes with Theal/Tepea and the the burden of proof must lie on the judgments obtained by the latter against proprietor of the trade-mark; to ask for other undertakings. These judgments evidence that there is no passing off were obtained by Theal on the strength would impose a burden of negative "its" of trade-marks: proof which is difficult to discharge; burden "In the circumstances described by shifting the of proof would

make it easier to prevent parallel Tepea in its statement of the facts in

imports infringe which it states that Watts has affixed and consequently to

Treaty. these trade-marks to the articles with its the Proving any passing off —

Netherlands and then on the Benelux put forward by Theal/ Tepea and Watts but enforced it against parallel before the Netherlands courts is wrong: register

importers (letter from Theal to "It is unreliable because Tepea entered

Audiogram of 5 September 1972; into an exclusive distribution agreement

judgments obtained against Wilkes). with Watts similar to those which Watts also concluded with certain vendors As to the parallel imports it does not

matter much whether pass from other countries in respea of its very they hands fewer articles. That is inconsistent with the through the of more or

be statement that Watts affixed the trade­ intermediaries; they must not

by use alone. The reason why Watts cancellation of its trade-marks in used the trade-marks in England before Benelux in favour of Tepea's Theal used them in the Netherlands is registrations subject to the condition

simply that he manufactured products that Tepea undertook to reassign them

himself and affixed the said trade-marks to it as soon as it calls upon Tepea to Theal." to them before selling them to do so. Tepea's view is also wrong in

JUDGMENT OF 20. 6. 1978 — CASE 28/77

law. Before 1 January 1971, the date Tepea in the Netherlands except unter

when the Benelux Law on trade-marks the terms of an exclusive distribution into force, the right to a providing for the the trade­ use of entered agreement

such as this, was to be regarded as the case of Parastat) in the name of Watts first user and consequently proprietor of and also of Theal/ Tepea. These simul­

the trade-mark in the Netherlands. taneous registrations are also evidence

Accordingly on the basis of first use in of a concerted practice. The same

the Netherlands the rights in the four procedure was adopted after the entry trade-marks vested in Watts and not in into force of the Benelux law. The Tepea. The registration by Tepea of removal from the register, after Wilkes these trade-marks under the Benelux had complained, of the registrations in Law of 1971 was accordingly mala fide. the name of Watts in accordance with

Tepea did not acquire any rights to Tepea's request and the acknowl­

these trade-marks either in 1971 or edgement by Tepea of Watts's before. before 1971 on the ground ownership Tepea in fact realized later on that it of first use (letter of 10 October 1973) was futile to advance the claim that it are thus explained.

which did originate from Watts. The statements are untrue and this is proved

Arrondissementsrechtbank, Amsterdam, by a statement of the patent agents who made a proper assessment of the effected the registrations.

situation and found that there was a The defendant observes that the wrongful interference with competition interveners are supporting the within the Community. arguments it has put forward. It also

The trade-marks themselves, used in the points out that in the meantime, on 5 first place by Watts in England in 1954 August 1977, Watts's manager

and then in the Netherlands in 1955, confirmed that the parallel imports were could not have been used also by Theal/ products manufactured by Watts.

TEPEA v COMMISSION

trade­ was no agreement to the relating The applicant in its application "does marks, so that such an agreement could not clearly understand — and this is not not be notified in 1963 and that it had apparent either from the Commission's not at that time been supplied with decision — in reliance on what facts or, inten­ incorrect information either as the case may be, on what statements tionally or negligently. Tepea moreover the Commission reached the conclusion did not object until 1972 and not before that the notification of the agreement in to the unlawful use of the trade-marks. 1963 was incorrect, misleading or incomplete." The defendant makes use of the It points out that this

notification was drawn up in close co­ argument relating to the period during which Theal registered the trade-marks operation with the Amsterdam Chamber in the Netherlands (1955 to 1964) to of Commerce. For this reason it does Regu­ draw the conclusion that the agreement not consider that Article 15 (1) of

lation No 17 applies in this case. concerning the use of the trade-marks did in fact exist at the time of the The defendant joins issue with the is 31 notification, that to say January applicant on its view that it can sever 1963. The Commission reiterates that

the agreement relating to the trade­ due notification must be accurate and

marks from the exclusive distribution It that complete. stresses according to agreement and that it was entitled only the of the Theal wording reply to mention the second in its emphasizes that it objects to the only notification; the relations between fine imposed for the incorrectness of its Watts and Theal had to be considered notification in 1963; the Commission, "as a whole and with due regard to while pointing out that this wording their interrelationship", especially as the assumes that Tepea no longer seems to

The applicant in its reply states that even "Since Tepea — from 13 April 1976 —

if the letter of 10 October 1973 — has concentrated exclusively on the

JUDGMENT OF 20. 6. 1978 — CASE 28/77

manufacture inter alia of transformers, The defendant's reply: rectifiers, battery chargers, feeder instal­ "The answer to this question must be in lations and emergency lighting the affirmative. The officers of the equipment, it has always affixed the Commission responsible for this case Theal trade-marks to its own products able to see this for themselves were or where appropriate, at the request of Watts's latters' during their visit to factory in trade­ third parties, applied the London This on 11 July 1975. also marks to their products. from emerges extract of the minutes of

"In 1975 Tepea was a trading under­ thatmeeting approved by Watts on 3 although under its statutes it was November 1975 and set out in taking, empowered to had in paragraph (e) on page 5 of the manufacture and rejoinder. faa previously done so (cf. extracts

from the Trade Register annexed The English manufacturer affixes the

Parastat Watts 1976 set out at the bottom of page 5 of Preener, and are the rejoinder". concerned, the Commission has no infor­ interveners' mation indicating that Theal or Tepea The reply:

manufactures these products in the "From 1960 onwards or thereabouts the Netherlands or elsewhere."

Theal' label has been affixed, at the

The interveners' reply: time of manufacture in the United Kingdom, to articles manufactured by 'Tepea is a trading undertaking whose Watts intended for Theal. The label and operations do not cover the manu­ the 'een Theal- consisted of wording facture of products under its own trade­ ('a it Theal-produkt') produkt'

and was marks. The answer to this question is affixed to the plastic case of the article

therefore in the negative. Nevertheless (cf. telex message of 6 March 1978 Tepea is in a position to repair products from Baker & McKenzie, London; which it has bought from third parties Nicholas Conolly)."

Watt's application for confirmation gives 1957 undermentioned exception. Only distributor on the French the as the year of first use but wrongly market, HIFA at Montrouge mentions Tepea's registration as prior undertaking itself registration of this trade-mark in the (Paris) manufactures some of the

parts of the products in question. In a Netherlands. The exclusive agency letter 24 1975 latter agreement of 8 September 1956 makes of July the under­

no reference whatever to trade-marks. taking explained to the Com is on:

In this connexion reference is made 'Contrary to what you write none of first paragraph of page 2 of again to the these products is manufactured for us the agreement of 8 September 1956 (see by a Swiss undertaking. All the products Annex). are sold as they are except the dustbug. We import the brush and the felt- In the case of the trade-marks Disc covered roller of this article, the rest Preener and Parastat there had not yet France.'

being made by us in been any use thereof, because the goods

to which these trade-marks relate did This undertaking sells its products in not exist when the said agreement was France only. The HIFA undertaking is concluded. not the proprietor in France of the Watts is Dustbug trade-mark like the other trade- marks referred to. the The proprietor in France of the trade-marks trade-marks was not registered until Parastatik." Dust Bug, Parastat and much later because in the Netherlands

Common Market at that time and in the renewal of a registration confirmatory United Kingdom on the one hand by 29 effected earlier, namely on July Watts and on the other by Tepea, 1971. before the date of the agreement? Finally I should like to draw attention The applicant's reply: to the letters from Theal to Watts dated 'agreement'

"Assuming that the word 10 and 19 October 1973 which are on

refers to the exclusive agency agreement the file relating to the procedure Commission." for the benefit of Watts in the initiated by the

JUDGMENT OF 20. 6. 1978 — CASE 28/77

The defendant's reply: conclusion of the agreement of 8 September 1956. "As Theal's notification (Annex 2, p. 4 to the rejoinder) indicates, the oral Commission's footnote: agreement between Watts and Theal 1 —

Having regard to the date of pub­

p. 85 of Mrs Watts's book (Annex III) This question affords the interveners the and from the declaration made by Mrs opportunity to correct one point in their Watts on 11 July 1975, set out on p. 4 statement of 10 November 1977. Watts of the rejoinder (last sentence of the did not register the four trade-marks in quotation) that Mr Watts invented the the Netherlands before the entry into name Dust Bug and used it in the force of the Benelux Law of 1971 on United Kingdom before Theal did so in trade-marks. Watts did however apply the Netherlands. for the registration of these trade-marks

It is furthermore clear from Annex I to after 1971 and by doing so referred to

the rejoinder that Watts itself used the prior registrations in the Netherlands Bug' name in the Netherlands at a time when and, as far as the trade-mark 'Dust Theal apparently was not using it. This is concerned, the first use in its own

annex mentions deliveries from Watts to right (in right of Watts) in 1955, that is Netherlands firms which took place on to say before the agreement entered

16 April and 3 September 1955. Theal into with Tepea (cf. the evidence of the

does not appear on the list of those registration of the four trade-marks in deliveries. the name of Watts in the Benelux trade-marks)."

administrative procedure (with special rights to reduce "intra-brand reference to the letters mentioned in the competition, that is to competition say written procedure). "within has trade-mark"

the and

The Commission answered this question endeavoured to show that moves in this

by producing a series of documents direction might be caught by Article 85. (inter alia the minutes of the interview It has also described the difficulties on 23 March 1976). facing parallel importers, upon whom,

according to the applicant, lies the

burden of proof of the authenticity of V The oral procedure imported The is —

fact Watts the pointers given previously by the by the that raised no case-law of the Court must guide the objection on receipt of the copy of national courts before whom such the notification sent by Theal. disputes are brought. — Theal has never sued vendors of

Watts products who could prove the The Advocate General delivered his origin of the said products. opinion at the hearing on 10 May 1978.

Decision

1 The Commission on 21 December 1976 took a decision, which was published in Official Journal L 39 of 10 February 1977, p. 19, concerning the undertakings Theal NV and Cecil E. Watts, now known as Tepea BV "Theal" and Cecil E. Watts Ltd. (referred to hereafter in this judgment as

and "Watts"), Article 1 whereof recorded that:

(1) An oral exclusive distribution agreement between Theal and Watts

declaration under Article 85 (3) that Article 85 (1) is inapplicable is refused in respect of the agreement referred to in Article 1 hereof and the two undertakings were ordered to bring the infringement of Article 85 (1) of the Treaty to an end without delay and to refrain from all further action of any kind calculated to prevent the importation into or resale in the Netherlands of any Watts products.

2 Finally a fine of 10 000 u.a. was imposed on each of the undertakings, that is Hfl 36 200 on Theal and £ 4 166 on Watts, for infringement of Article 85 (1).

3 In addition a fine of 5 000 u.a., that is Hfl 18 100, was imposed on Theal for supplying incorrect misleading information in and a notification made

under Article 5 of Regulation No 17.

4 According to the information supplied by the Commission at the hearing Watts has complied with the Commission's decision.

5 In its application which reached the Registry on 24 February 1977 Theal has claimed that the Court should:

Watts entered into oral agreements with a single distributor in each of the

Netherlands, Belgium, Denmark, France, Ireland and Italy to the effect that the person concerned would act as exclusive distributor within the national

territory allotted to him.

TEPEA v COMMISSION

8 Watts was the sole supplier of about 20 wholesalers in the United Kingdom whom he had forbidden — at least since May 1972 — to export his products, the packaging of which was marked "Not for export".

9 In 1972, export prices which had been the same as or similar to prices on

relating to deliveries within a single Member State which had not been put

in writing — entered into with Watts on 8 September 1956 — of indefinite duration, under the terms of which "the factory undertakes to supply only Theal NV in Netherlands territory and to pass on all orders originating in that territory to NV".

12 The notification expressly stated that the agreement did not exclude free competition within the Member State concerned since the agreement applied only to one trade-mark.

13 According to Theal there was a large number of competing trade-marks, the consumer's freedom to purchase remained unfettered and the sole purpose

of the agreement was to make available to the said consumer a specialist

organization in order to provide him with the best possible service and

agreement notified showed that it did not provide for any absolute

territorial protection, it could therefore benefit from the exemption provided

for in Regulation No 67/67; nevertheless, if in faa the agreement did not

comply with the conditions for exemption laid down in the regulation, it should be amended accordingly, in which event the agreement would be exempted only from the date of such amendment.

16 Theal did not reply and accordingly the Commission had no reason to

doubt that the agreement complied with the provisions of Article 1 (1) of

19 It asserts that it is the applicant which established the trade-marks Dust Bug, Disc Preener and Parastat after the conclusion of the exclusive agency agreement for cleaning appliances for gramophone records manufactured by Watts in the United Kingdom.

20 It states further that Theal's trade-marks in the Netherlands and those of

Watts in England are completely independent of each other and were

established separately, the English trade-marks having originated without

Theal's knowledge.

21 Theal claims to have had an exclusive and independent right, vested in no

26 It points out in support of this argument that it was Watts who first used the "Parastat" words "Dust Bug", and "Disc Preener", and moreover had the

first two registered as trade-marks in the United Kingdom on 11 February 1958 and the third a little later.

27 The defendant states that Watts consented, at the request of Theal, with the like" Bug" words "Do as you to the use by Theal of the designation "Dust in its own name in the Netherlands.

28 The specific consent in respect of Dust Bug was also granted in respect of the trade-marks Disc Preener and Parastat.

29 In a letter of 10 October 1973 signed by the applicant's two directors, the applicant wrote to Watts and said "We acknowledge that your company is the proprietor of the trade-marks Dust Bug, Disc Preener, Parastat and

Watts. If you agree to withdraw the registration of these trade-marks in your name on the Benelux register or your application for registration, as

31 Moreover, the Commission contends, this situation found specific

expression when Watts, after having its trade-marks registered in the

Benelux register on 23 December 1971, had them struck out on 23 October 1973 at the request of Theal in order to facilitate the progress of the

proceedings instituted by the latter against parallel importers.

32 The Commission finds that the applicant's statements to the effect that a

further letter of 18 October 1973 superseded that of 10 October 1973 are

35 As far as concerns the grant of the exclusive right to use the trade-marks in the Netherlands it may be added that the distinctiveness of the words "Dust Bug" "Dust" which originated in the bringing together of the words and "Bug" is indisputably to be ascribed to the inventor of the cleaning appliance for gramophone records.

TEPEA v COMMISSION

36 It is clear from an article which appeared in an English periodical that this

wording has been used by Watts since 1955.

37 Itwas therefore possible for the registration of this specifically English designation as a trade-mark in the Netherlands to be effected by Theal only with the consent of its inventor, just as Watts consented to the registration

of this trade-mark subsequently in Belgium, Luxembourg, France, Italy and Germany.

Theal as the sole distributor of Watts's products in the Netherlands whereby Watts undertook to supply Theal exclusively in the Netherlands and to pass on to it all orders received by Warts for the Netherlands, the other consisting of the grant of the exclusive right to use in the Netherlands the

trade-marks affixed to these products.

41 These oral agreements mutually binding two undertakings were agreement within the meaning of Article 85 (1) the consequence of which was to give Theal absolute territorial protection in the Netherlands.

42 Furthermore this protection was ensured in 1956 by the applicable national law and strengthened later by the prohibition on exports imposed by Watts

on wholesalers in the United Kingdom and by the affixing of a label "een Theal-produkt"

to products supplied by Watts to Theal which enabled the

45 The original agreement cannot therefore be examined without taking into account the concerted practice which ensured its efficacy.

46 For an agreement to be incompatible with the Common Market and

prohibited under Article 85 it must in the first place be one "which may affect trade between Member States".

47 Although the case-law of the Court lays down (judgment of 25 November 1971 in 22/71, Béguelin Import Co. and Others v SA.G.L. Import Case Export and Others [1971] ECR at p. 959) that the faa that one of the under­

takings which are parties to the agreement is situate in a non-member

country does not prevent the application of Article 85 since the agreement is operative on the territory of the Common Market, the fact must also be

49 Theal continued to operate these agreements to its advantage after that date since it obtained judgments on 16 January and 5 June 1973 and 30 May

TEPEA v COMMISSION

1975 against three undertakings which were forbidden to import Watts products directly into the Netherlands and it continued to write to retailers

in the Netherlands who had bought Watts products directly or indirectly from wholesalers in United Kingdom, pointing the out that these dealings infringed its trade-mark rights in the Netherlands.

50 Consideration of the specific effects of these agreements shows that they restricted intra-Community trade appreciably since the sale of appliances of the Watts brand in the Netherlands accounted for 15 % of the market for appliances for cleaning gramophone records.

51 In view of these findings it is established that since 1 January 1973 the

whichthey exposed themselves by engaging in them that there was a specific demand for Watts's products in the Netherlands.

55 Theal's conduct shows that the latter feared the competition of traders who

obtained their supplies elsewhere since Watts's products accounted for more than 25 % of its turnover.

56 It follows from all these findings that, since the agreements in question have as from 1 January 1973 affected trade between Member States in cleaning appliances for gramophone records and their effect has been to deprive consumers of the benefits flowing from effective competition between products of the same brand which might spring from a large number of

outlets and sources supply of and from lower prices, they are incompatible with the Common Market and fall within the prohibition in Article 85 (1).

JUDGMENT OF 20. 6. 1978 — CASE 28/77

60 In fixing the amount of the fine to be imposed upon it regard must be had to the duration and gravity of the infringement.

61 As far the duration is concerned the Commission stated in the grounds of

the decision that it did not "propose to take account of infringements

subsisting before May 1972, the date on which the export prohibition was clearly in force and having effect." With reference more particularly to Theal the Commission took as the relevant date September 1972, which was the date onwhich the applicant first exercised its trade-mark rights to prevent parallel imports.

62 Although it is true that the facts date from 24 January 1963 the

infringement only materialized as from 1 January 1973, the date of the

65 Furthermore Theal's actions have led to clear restrictions of competition

which contravene one of the fundamental objectives of the Treaty, namely to establish a single market in the Community.

66 However, account must be taken of the fact that the products in question, item consumers'

owing to their nature, represent only a small of

expenditure.

67 Although Theal's conduct has contributed to eliminating competition

The infraction committed by Theal in supplying incorrect and misleading information was, if not intentional at least negligent, since the notification

form clearly drew its attention to the duty to inform the Commission of the provisions of the agreement and to state whether it involved a sharing of the markets or a restriction of freedom to purchase from or sell to third parties

or might in any other way have as its object or effect the restriction or

distortion of competition and since the applicant in its notification to the

JUDGMENT OF 20. 6. 1978 — CASE 28 /77

Commission did not disclose the agreement granting the exclusive right to

5 000 u. a. imposed on Tepea appears to be completely justified.

Costs

73 Under the terms of 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.

74 The applicant has failed on all the heads of its application.

2. Orders the applicant to bear the whole of the costs including those of the intervention.

Kutscher Sørensen Bosco Donner Mertens de Wilmars

Pescatore Mackenzie Stuart O'Keeffe Touffait

Delivered in open court in Luxembourg on 20 June 1978.

A. Van Houtte H. Kutscher

Registrar President

I consider it essential first of all to of sale of his products in the

summarize the facts which form the Netherlands. At that time Watts manu­

basis of the dispute. factured only the device known as the

"Dust Bug". In 1954 Mr Cecil E. Watts began manu­

facturing and marketing in the United On 24 January 1963 Theal notified the

Kingdom a product which he had exclusive dealing agreement to the