C-37/79

In Case 37/79

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal de Commerce [Commercial Court], Paris, Third Chamber, for a preliminary ruling in the action pending before that court between

ANNE MARTY S.A., Paris,

and

ESTÉÉ LAUDER S.A., Paris

on the interpretation of Article 85 of the EEC Treaty and of certain measures implementing that provision,

Facts and Issues

I — Facts and procedure of which were set out in that writ, and to deliver that order, specifying that Anne Marty would pay the amount of that 1. Anne Marty S.A., the plaintiff in the order upon receipt of the invoice. main action, operates a retail outlet in Paris in which it sells perfumes. When Estéé Lauder refused to deliver, Estéé Lauder S.A., the defendant in the Anne Marty brought proceedings against main action, was formed on 30 May it on 5 May 1978 before the Tribunal de 1967 and is the French subsidiary of the Commerce, Paris, claiming that it be Canadian company Estéé Lauder ordered, in particular, to deliver the Cosmetics Limited. Its objects include, in goods requested and to pay Anne Marty particular, the distribution, sale, import a sum of FF 100 000 as compensation for and export of cosmetics, toiletries, the damage caused. sanitary products and perfumery. In its submissions of 4 October 1978 Estéé Lauder asked the Tribunal de 2. By writ of 20 April 1978, Anne Commerce, in particular, to dismiss Anne Marty formally requested Estéé Lauder Marty's claims and, in the alternative, to to open for it an account and a depot for "rule that since Community law is Estéé Lauder products and consequently applicable to the contractual relationship to enter up and fill its first order, details between Estéé Lauder S.A. and its

JUDGMENT OF 10. 7. 1980 — CASE 37/79

MARTY v LAUDER

another authorized distributor in the the conditions of sale applied by your common market within one year of their company in France may be considered, being launched without previously ascer- taking account of the economic context taining that they have already been put in which they operate, as not capable of on the market by Estéé Lauder in the being affected by the rules on country to which they are consigned; the competition contained in the EEC obligation on Estéé Lauder not to deliver Treaty. products of its brand to persons other than authorized distributors) and extending to the countries of the However, I should be grateful if you common market; as a result the Tribunal could inform me whether and in what de Commerce took the view that the way you have organized the sale of your contracts between Estéé Lauder and its products in the remaining eight countries French distributors are capable of of the EEC and send me, where appro- affecting trade between Member States. priate, the texts of the agreements which The court also relied upon the fact that establish your sales network in the said Estéé Lauder's products are not manu- countries, or a detailed description of factured in France, but in Belgium and their contents if they have not been put Great Britain, and that the products into writing. delivered by the company in France to its authorized distributors are thus imported from another country of the Community, which also affects trade between In anticipation of an early reply, I Member States. remain, etc."

A negative clearance constitutes a (2) If the answer is in the affirmative, Commission decision which the national does the letter of 23 July 1977 courts must comply with because of the constitute a Commission decision fact that Community law takes which may be invoked in relation to precedence over national legislation. third parties and is binding upon the courts of the Member States of the Community? However the words 'negative clearance' do not appear anywhere either in the title or in the actual body of the letter of (3) If the answer to the first or the 23 July 1977 from the Commission. second question is in the negative, has a procedure been initiated within the meaning of Article 9 (3) of Regu- It does not seem that such ä negative lation No 17 and which authorities document was in any case published as are at present competent to enforce required in the Official Journal of the Article 85 (1) of the Treaty? European Communities in accordance with Articles 19 (3) and 21 (1) of Regu- lation No 17. 8. The judgment making the reference was received at the Court Registry on Initiation of a procedure within the 2 March 1979. meaning of Article 9 (3) of Regulation No 17 and the course or termination thereof are not clearly apparent." In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Estéé Lauder S.A., the 7. Considering that the matters defendant in the main action, reproduced above raise serious problems represented by C. Lebel, Advocate at the in the field of Community law, the Court of Appeal, Paris, by the French Tribunal de Commerce, Paris, by a Republic, and by the Commission of the judgment of 28 February 1979, decided European Communities, represented by to stay proceedings and to submit to the its Legal Adviser, J. Temple Lang and by Court of Justice the following pre- J.-F. Verstrynge, a member of the Legal liminary questions: Department of the Commission, acting as Agents.

The quantitative selection is based on the — The option offered to each auth- need to maintain the profitability of sales orized distributor to obtain supplies outlets, which must be substantial in from any subsidiary abroad; order to maintain the prestige status demanded by customers, and to renew it — An undertaking to take care to in relation to changes in fashion. That maintain the freshness of products quantitative selection also enables the offered for sale." authorized distributors' profitability to be ensured through the restriction in the sales outlets for such products, which interest only one class of customer. A The terms of the agreement imposing wide distribution network would devalue obligations on the manufacturer require the products and would have reper- the latter: cussions internationally.

The undertakings entered into by the — "Not to deliver products of its brand authorized distributor under the to persons other than authorized standard agreement concluded by Estéé distributors; Lauder are as follows: — To assist authorized distributors by — "An undertaking to market the providing them with the necessary products only in a certain place and documentation and advertising ma- solely at the retail level; terial;

JUDGMENT OF 10. 7. 1980 — CASE 37/79

— Effectively to ensure the continuous companied by genuine sales assistance • training of the retailers' staff." granted by the manufacturer to the retailers; such assistance is costly and includes supplying the distributor with 2. The applicability of Article 85 (3) advertising panels, various materials and samples.

Consumers receive a fair share of the benefit accruing from that organization The richesse vive of an area is the for two groups of reasons: amount of money capable of being converted into purchases in an area, or, alternatively, the potential expenditure in — in the first place through having the the area. desired environment together with constantly improved, original pro- ducts and a guarantee that those products are absolutely fresh; That richesse vive is calculated on the basis of people's actual consumption of a certain number of goods. Beauty — but also by avoiding having to bear products, toiletry and perfumes the increased costs of distribution constitute a distinct category among which would be the inevitable result non-food products, and, as regards that of anarchic distribution. category, the richesse vive factor enables firms, as they develop, to open new sales outlets, taking account of the precise In fact the agreements between the potential of the market for the articles in manufacturer and retailers are ac- question (see in the annex an extract

MARTY v LAUDER

from "Proscop" on the calculation of 4. Letters sent to Estéé Lauder by the richesse vive). Commission

With reference to the information which 3. French rules on the refusal to sell you supplied to me in your letters of 6 April 1977 and 28 March of this year concerning the sale of your products in the EEC, I am pleased to inform you The existence of a criminal-law provision that this case has been filed and that no penalising the refusal to sell — such as further action is being taken. Article 37 of the French Decree of 30 June 1945 — in one of the countries of the Community creates a distortion in Yours etc." competition to the detriment of under- takings based in that country. Unlike other countries which have chosen a more flexible legal attitude, France is the 5. Scope and nature of the letters sent by only Member State of the Community to the Commission have adopted a general prohibition of the refusal to sell. The effect of such a difference in legal provisions is to distort Referring to the judgment of the Court the role of competition within the of 15 March 1967 in Cimenteries v common market: first, the cost of distri- Commission [1967] ECR 75, Estéé bution depends on the internal legislation Lauder submits that the aforesaid letters governing the refusal to sell; secondly, constitute acts of the Commission the development of a manufacturer's whereby the Community institution gave production could be seriously disturbed an unambiguous ruling on the conditions by requests to open accounts which for applying Estéé Lauder's selective would not lead to increased sales, thus distribution system in the common weakening its competitve position. market. According to Estéé Lauder,

Hence Estéé Lauder concludes that the reply to the questions submitted to the However, it is necessary to reflect upon Court should be as follows: the status of the "negative clearance" contained in the letter of 23 March 1977. In fact: "The Commission's letters dated 23 March 1977 and 8 June 1978, taken together, constitute an informal decision — It would be an irregular clearance, to grant exemption under Article 85 (3) the Commission not having followed of the EEC Treaty, applicable to all the the procedure laid down by Regu- agreements concerning the qualitative lation No 17 (consultation of the and quantitative aspects of the selective Advisory Committee on Restrictive distribution system of Estéé Lauder S.A." Practices and Monopolies, publi- cation of the application in order to obtain the observations of interested third parties); B — Observations of the French Republic

In the first place the French Republic — Such clearance could not be regarded observes that the case, should be seen in as final vis-à-vis third parties, since it

MARTY v LAUDER

Further, the Commission never put forward its letter as a negative clearance Although it is true that the courts must and did not subject it to any of the forms be regarded as "national authorities" of procedure laid down in Regulation within the meaning of Article 9 (3) of No 17. Even if one may not rely on the Regulation No 17 (see for example Case anomalies in the procedure followed by 43/69 Bilger v Jehk and /ehk [1970] 1 the Commission as against Estéé Lauder, ECR 127) it must be recognized that it is it is pointless to say that one is dealing more difficult to apply that description to with a negative clearance unless that the courts when the question is brought clearance vested definitive rights in the before them incidentally. claimant. As has been said above, that could not be the case, since, not having In view of that, and even though it is been published, the clearance in question clear that the provisions of Article 85 (1) could be challenged by third parties. are directly applicable in the Member States, the French Republic emphasizes that it is necessary to take account of The second question undertakings' need for legal certainty. This question has a purpose only in so far as the first question is answered in the affirmative. Although it proposes a The third question negative answer to the first question, the French Republic considers it useful to Article 9 of Regulation No 17 lays down submit certain arguments in case the rules allocating powers for . the Court should feel compelled to take a application of Articles 85 and 86, and, in different view. particular, Article 9 (3) provides that the authorities of the Member States shall The reply to the second question remain competent to apply Article 85 (1) requires a distinction to be drawn and Article 86 "as long as the between the general problem and the Commission has not initiated any case in point. procedure under Articles 2, 3 or 6".

In the present case, therefore, there is no • doubt that the Tribunal de Commerce is According to the Commission, there are competent to apply Article 85 (1) of the two aspects to the problem raised by the EEC Treaty to the dispute which has first preliminary question. The first been submitted to it. aspect concerns the question of the legal nature of the letter, in particular in the present case the question whether that If the Court considers: that a procedure letter is or is not a decision within the has been initiated within the meaning of meaning of the fourth paragraph of Article 9 (3), the resulting legal situation Article 189 of the EEC Treaty. The would be identical to that which is raised second aspect concerns the objective of by the second question and dealt with that letter, and in the present case the under the heading (b). question whether its objective was to issue a negative clearance within the meaning of Article 2 and the sixth recital C — Observations of the Commission of the preamble to Regulation No 17.

(a) Competence form allowing the nature thereof to be identified. Nowhere does the letter state that a "decision" is involved or indicate The letter in question was signed by an in any way that a ruling is being given. official of Directorate-General IV, acting Nor does it include the words "negative on behalf of the Director of Directorate clearance", as the Tribunal de IV/B. Such a person could not in any Commerce has pointed out. It does not circumstances be considered competent use any of the normal forms adopted in to take decisions under Article 2 of all the numerous decisions of the Regulation No 17. Nor does the letter Commission on negative clearance state that the official in question was (citations, grounds on which expressly engaging the liability of the Commission based, operative part, etc.). Moreover, as or that he had been delegated to do so, the Tribunal de Commerce pertinently or even that he was expressing the observed, it was written without any of opinion of the Commission. the publicity required by Regulation No 17. It was not published in the Official Journal as required by Article 21 (1) of that regulation and was not included The rules of procedure of the in the list of decisions which the Commission, Article 27 of which deals Commission publishes each year in an with the delegation of powers, were annex to the annual Report on published in the Official Journal L 199 Competition Policy. On the contrary, of 30 July 1975, p. 43. As Community one of those reports (Fifth Report (1975) law stands at present the power to take p. 51, No 59) states that the Com- decisions under Article 2 of Regulation mission's activity in that sector has not No 17 has not in any case been included any formal decisions, which delegated to officials, Directors or even suggests, moreover, that the Commission Directors-General. Moreover the fact did not intend to take a decision in that that Directors in DG IV are not sector. empowered to enter into commitments on behalf of the Commission was emphasized by the Court in paragraph 20 of its judgment in Case 71/74 Frubo v Commission [1975] 1 ECR 563. Such a combination of factors is sufficient, in the Commission's opinion, Thus the letter cannot in any way be to establish that the letter is not a regarded as an act issued by the competent decision by reason of the absence of a body. Moreover, this case differs from whole series of essential procedural the Cimenteries case, cited above, in that requirements. the letter was not preceded by any deliberation or act on the part of the Commissioners meeting as the Com- mission.

Consequently, as it merely declared that The text of the letter also points towards there was no infringement of the rules such a conclusion when it states that on competition, if the letter was to the agreements concerned "may be produce effects of an administrative, if considered, taking account of the not a legal, nature, those effects could economic context in which they operate, concern only the Commission which as not capable of being affected by the could no longer take action, in the rules on competition contained in the absence of new factors, with regard to EEC Treaty". Such wording can be those agreements, in particular by interpreted only as meaning that the imposing fines. agreements concerned do not constitute an infringement of Article 85 (1) and hence fall outside that provision's field of application. For all those reasons the Commission considers that the letter in question cannot be regarded as a decision within In the view of the Commission, the meaning of the fourth paragraph of therefore, it may properly be said that Article 189 of the EEC Treaty. the reasoning followed in the letter sent to Estéé Lauder is similar to the reasoning followed by the Commission (2) The objective of the letter when it takes a decision to grant negative clearance.

Referring to the written observations which it submitted in Joined Cases The second question 253/78 and 1 to 3/79, the Commission recalls that it decided not to take action in the perfumery sector on condition that Since it takes the view that the first all prohibitions, whether direct or question should not be answered in the indirect, on exports or imports, imposed affirmative, the Commission considers in particular on authorized distributors, that the second question is not relevant. were abolished, together with the The Commission observes, none the less, obligation imposed upon such distribu- that there are grounds for holding that tors to observe the prices fixed for re- the letter involved in this case may not importation or re-exportation. be relied upon as against third parties

The power of such a court to refer a The defendant in the main action, request for a preliminary ruling to the represented by C. Lebel, Advocate, and Court of Justice cannot be impaired by the Commission of the European Com- virtue of Article 9 of Regulation No 17. munities, represented by J.-F. Ver- None the less, if the Commission strynge, presented oral argument at the initiates a procedure under Article 3 of hearing on 16 October 1979. Regulation No 17 that court may, if it considers it necessary for reasons of legal certainty, stay proceedings in order to The Advocate General delivered his await the outcome of the Commission's opinion at the sitting on 22 November action. 1979.

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IV — Re-opening of the oral Lebel, by the British, Danish, French, procedure Belgian, German and Netherlands Governments and also by the Commission.2 By order of 16 January 1980 the Court decided to re-open the oral procedure in the present case as also in Joined Cases The defendant in the main action, 253/78 and 1 to 3/79 and Case 99/79 represented by Mr Lebel, Advocate, the and requested the parties to the main Government of the United Kingdom, actions, the Member States, the Council represented by Mr Scott, and the and the Commission to state their views Commission, represented by Mr Vers- on three questions. ' trynge, presented oral argument at the hearing on 28 April 1980.

In reply to the question written obser- The Advocate General delivered his sup- vations were lodged by the defendant in plementary opinion at the sitting on the main action, represented by Mr 24 June 1980.

3 In its defence Estéé Lauder argued that the agreements setting up its distri- bution system, which is based upon both quantitative and qualitative criteria of selection, have been acknowledged by the Commission of the European Communities to conform with Community competition rules and that that approval by the Commission prevented the application of the prohibitions provided for by national competition law. In that regard Estéé Lauder made reference to a letter of 23 March 1977 from the Commission's Directorate- General for Competition informing it that "the authorized distributorship agreement and the conditions of sale applied by your company in France may be considered, taking account of the economic context in which they operate, as not capable of being affected by the rules on competition contained in the EEC Treaty".

4 The Tribunal de Commerce, Paris, decided to stay the proceedings and submitted to the Court of Justice the following questions for a preliminary ruling:

"(1) Does the letter of 23 March 1977 of the Commission of the European Communities, which does not contain the words 'negative clearance' and seems to have been issued without being published as laid down in Regulation No 17, constitute a negative clearance?

(2) If the answer is in the affirmative, does the letter of 23 March 1977 constitute a Commission decision which may be invoked in relation to third parties and is binding upon the courts of the Member States of the Community?

(3) If the answer to the first or the second question is in the negative, has a procedure been initiated within the meaning of Article 9 (3) of Regu- lation No 17 and which authorities are at present competent to enforce Article 85 (1) of the Treaty?"

7 The instruments thus placed at the Commission's disposal for the accomplishment of its task include decisions granting negative clearance and decisions applying Article 85 (3). So far as decisions granting negative clearance are concerned, Article 2 of Regulation No 17 of the Council provides that, upon application by the undertakings concerned, the Commission may certify that, on the basis of the facts in its possession, there are no grounds under Article 85 (1) or Article 86 of the Treaty for action on its part in respect of an agreement, decision or practice. So far as decisions applying Article 85 (3) are concerned, Article 6 et seq. of Regulation No 17 provide that the Commission may adopt decisions declaring the provisions of Article 85 (1) to be inapplicable to a given agreement provided that the latter has been notified to it or notification has been dispensed with by virtue of Article 4 (2) of the regulation.

8 Regulation No 17 and the regulations issued in implementation thereof lay down the rules which must be followed by the Commission in adopting the aforementioned decisions. Where the Commission intends to give negative clearance pursuant to Article 2 or take a decision in application of Article 85 (3) of the Treaty, it is bound, in particular, by virtue of Article 19 (3) of Regulation No 17 to publish a summary of the relevant application or notification and invite all interested third parties to submit their observations within a time-limit which it shall fix. Decisions granting negative clearance

MARTY v LAUDER

and exemptions must be published, as provided for by Article 21 (1) of that regulation.

1 1 The first two questions put by the national court should therefore be answered in the manner indicated above.

The third question

12 The third question seeks to ascertain the powers of national courts to apply Article 85 (1), regard being had to the provisions of Article 9 (3) of Regu- lation No 17 which is worded as follows :

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"As long as the Commission has not initiated any procedure under Articles 2, 3 or 6, the authorities of the Member States shall remain competent to apply Article 85 (1) and Ariele 86 in accordance with Article 88 of the Treaty . . . "

1 3 As the Court held in its judgment of 30 January 1974 in Case 127/73, BRTv SABAM [1974] ECR 51, since the prohibitions contained in Articles 85 (1) and 86 tend by their very nature to produce direct effects in relations between individuals, those articles create direct rights in respect of the individuals concerned which the national courts must safeguard. To deny, by virtue of Article 9 of Regulation No 17, the national courts' jurisdiction to afford that safeguard would mean depriving the individuals of rights which they hold under the Treaty itself. It follows that the initiation by the Commission of a procedure under Articles 2, 3 or 6 of that regulation cannot exempt a national court before which the direct effect of Article 85 (1) is pleaded from giving judgment.

i7 The costs incurred by the Belgian Government, the Danish Government, the Netherlands Government, the French Government, the Government of the Federal Republic of Germany, the Government of the United Kingdom and the Commission of the European Communities, which have submitted obser- vations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

T H E COURT,

in answer to the questions submitted to it by the Tribunal de Commerce, Paris, by order of 28 February 1979, hereby rules:

1. An administrative letter informing the undertaking concerned of the Commission's opinion that there is no need for it to take any action in respect of certain agreements under the provisions of Article 85 (1) does not have the effect of preventing national courts, before which the agreements in question are alleged to be incompatible with Article 85, from reaching a different finding as regards the agreements in question on the basis of information available to them. Whilst it does not bind the national courts, the opinion transmitted in such letters nevertheless constitutes a factor which the national courts may take into account in examining whether the agreements or conduct in question are in accordance with the provisions of Article 85.

2. The jurisdiction of national courts before which the direct effect of Article 85 (1) is relied upon is not restricted by Article 9 (3) of Regu- lation No 17. In any case an administrative letter informing the

OPINION OF MR ADVOCATE GENERAL REISCHL DELIVERED O N 22 NOVEMBER 1979 x

j

Mr. President, distributes them through a network of Members of the Court, authorized dealers in the common market. For details, reference should be made to the order for reference from the Tribunal de Commerce, Paris in The case in which I now have to deliver particular to page 7 et seq. and 10 of the an opinion also concerns a selective English version of that judgment. distribution system in the perfume industry of the type which was involved in Joined Cases 253/78 and 1 to 3/79. The Commission learned of the distri- bution organization when Estéé Lauder That system is operated by the French notified it on 11 January 1977 of the company Estéé Lauder, which was standard-form contract and general founded in 1967 and is a subsidiary of conditions of sale applicable to dealers in the Canadian company Estéé Lauder France. A letter of 23 March 1977 signed Cosmetics Limited. The former obtains by a director in the Directorate-General beauty aids and perfumes manufactured for Competition stated that it might be in Belgium and in Great Britain and assumed that those texts might "be I — Translated from the German.