C-100/80

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

in question and the particular which gives an indication of the scale circumstances of the case. Those of the infringement. On the other factors may, depending on the hand, it follows that it is important circumstances, include the volume not to confer on one or the other of and the value of the goods in respect those figures an importance dispro- of which the infringement was portionate to the other factors and, committed and the size and consequently, that the fixing of an economic power of the undertaking appropriate fine cannot be the result and, consequently, the influence of a simple calculation based on the which the undertaking was able to total turnover. That is particularly exert on the market. the case where the goods concerned account for only a small part of that It follows that, on the one hand, it is figure. permissible, for the purpose of fixing the fine, to have regard both to the total turnover of the undertaking, 17. If an undertaking has participated in which gives an indication, albeit two concerted practices which were approximate and imperfect, of the both designed to prevent parallel size of the undertaking and of its imports to a particular country of economic power, and to the pro- goods produced by the same firm, portion of that turnover accounted the Commission is entitled to treat for by the goods in respect of which the infringements as a single offence the infringement was committed, and therefore to impose a single fine.

In Joined Cases 100-103/80

100/80 M U S I Q U E DIFFUSION FRANÇAISE SA, Vélizy, represented by R. Collin, of the Paris Bar, and L. D e Giyse, Advocate with right of audience before the C o u r t of Cassation, Belgium, with an address for service in L u x e m b o u r g at the Chambers of E. Arendt, 34 R u e Philippe-II,

v

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, J. Temple Lang, and by M.-J. Jonczy and Götz zur Hausen, Members of its Legal Department, acting as Agents, with an address for service in Luxembourg at the office of its Legal Adviser, O. Montalto, Jean Monnet Building, Kirchberg,

defendant,

APPLICATION for a declaration that the Commission's Decision of 14 December 1979 relating to a proceeding under Article 85 of the EEC Treaty (IV.29.595 — Pioneer Hi-fi equipment), published in Official Journal L 60 of 5 March 1980 at p. 21, is void,

T H E COURT,

composed of: J. Mertens de Wilmars, President, P. Pescatore, A. O'Keeffe, U. Everling (Presidents of Chambers), G. Bosco, T. Koopmans, O. Due, K. Bahlmann and Y. Galmot, Judges,

I — The Pioneer group and its distribution system in the EEC 1835 II •—· The disputed decision 1836 III — Procedure 1837 IV — Conclusions of the parties 1837 V — Case 101/80, Melchers 1837 A — The individuals involved 1837 B •—• The facts not in dispute 1837 The negotiations between Mr Schreiber and Mr Full 1837 Mr Iffli's order 1838 The meeting in Antwerp 1839 Melchers' stocks 1839 Melchers' alleged refusal to deliver 1839 The meeting in Rommelshausen 1840 The abandonment of Mr Iffli's order 1841 Mr Full's offer to Mr Weber in 1977 1841 The undertaking EVB of Stuttgart 1841 C — The conclusions which the Commission draws from the facts 1841 D — The conclusions which Melchers draws from the facts 1842 E — Mr Schreiber's statements 1843 F — The essential differences between the two versions of the facts 1844 The negotiations between Mr Schreiber and Mr Full 1844 Mr Iffli's order 1846 Melchers' stocks 1846 Melchers' alleged refusal to deliver 1846 The meeting in Rommelshausen 1848 Mr Schreiber's alleged error regarding value-added tax 1849 The undertaking EVB of Stuttgart 1851 VI — Case 103/80, Pioneer GB 1851 A — The facts not in dispute 1851 B — The conclusions which the Commission draws from the facts 1853 C — T h e principal submissions relied on by Pioneer GB 1853 The market share of Pioneer products 1853 The effect of Mr Todd's letters to Comet and Audiotronic 1855 Concerted practice 1858

JUDGMENT OF 7. 6. 1983 — JOINED CASES 100-103/80

Decision

A — Submissions relating to the infringement of essential procedural requirements . . . 1880 a) The combination of the functions of prosecutor and judge 1880 b) The non-disclosure in the statement of objections of certain matters mentioned in the decision 1881 c) The non-disclosure of documents , 1884 d) The non-disclosure of the opinion of the Advisory Committee 1886

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

B — The assessment and classification of the facts on the basis of which the Commission found that there had been infringements of Article 85 (1) 1887 a) Melchers' alleged refusal to sell 1887 b) The effects of the letters sent by Mr Todd 1894 c) The duration of the concerted practices 1897 d) Pioneer's participation in the concerted practices 1897 e) The market shares held by the applicants and the effect on trade between Member States 1899 C — Submissions based on a failure to take into account circumstances precluding the imposition of fines 1901 a) Legitimate self-protection and necessity 1901 b) Article 85 (3) of the Treaty 1902 c) Conformity of Melchers' conduct with its contractual obligations notified to the Commission I9O3 d) The absence of instructions from the partners 1903 e) The Commission's joint responsibility in these cases 1904 D —Submissions relating to the size of the fines 1904 a) The general level of the fines 1904 b) The alleged absence of intention on the part of Pioneer 1907 c) The use of turnover as the basis for calculating the fines 1907 d) The duration of the concerted practices 1909 e) The imposition of a single fine for two concerted practices 1910 E — Conclusion 19ļļ The claim for a declaration of nullity 1911 The claim for a reduction of the fines 1911 C o s t s 1913

Federal Republic of Germany: Melchers had set up a network of over a BFR 200 699 871 thousand retailers and seven local rep- France: BFR 227 206 908 resentatives, who were given responsi- United Kingdom: BFR 305 964 158 bility for maintaining contacts with the retailers in a particular area and promoting sales of Pioneer products locally. II — T h e d i s p u t e d d e c i s i o n As from 1 January 1978 the distribution of Pioneer products was entrusted to Pioneer-Melchers GmbH, a new On 14 December 1979 the Commission company of which 40% of the auth- adopted the decision at issue in the orized capital was to be held by Pioneer present cases (Official Journal L 60, 5. 3. and 60% by Melchers. The latter 1980, p. 21), whereby it established that company still pursues commercial the concerted practice between MDF, activities in other fields. Pioneer and Melchers consisting in the prevention, from the latter part of 1975 until February 1976, of imports of Shriro had set up a network of over 260 Pioneer equipment from the Federal retailers. There were approximately 480 Republic of Germany into France, and sales outlets for Pioneer products in the the concerted practice between MDF, United Kingdom. Two retailers, Comet Pioneer and Pioneer GB consisting in the and Audiotronic, had between them prevention, from the latter part of 1975 approximately 160 sales outlets and until the latter part of 1977, of imports together achieved about 4 5 % of the sales from the United Kingdom into France, of Pioneer products supplied by Shriro. constituted infringements of Article 85 (1) of the EEC Treaty.

By order of 10 July 1981 the four cases were joined for the purposes of the 1. The individuals having the greatest procedure and judgment. involvement in the Melchers case arc as follows: Mr Iffli, proprietor of the 2. The Judge-Rapporteur and the undertaking of the same name in Metz, Advocate General held preparatory which sells hi-fi equipment and other meetings with the parties on 10 July and products at reduced prices, and general 3 December 1981. manager of the purchasing group Connexion, which purchases hi-fi On 18 September 1981 the Second equipment, inter alia, by means of Chamber of the Court heard witnesses in parallel imports; Mr Weber, former Case 101/80 (Melchers). manager of the undertaking Willi Jung of Saarbrücken, who, after the Following the preparatory meetings, the acquisition of Jung by the large German parties drew up lists of the relevant wholesaler, Gruoner of Rommelshausen, questions of fact and law. The parties became manager of Gruoner's branch in also negotiated with a view to reaching Saarbrücken; Mr Schmidt, proprietor agreement on certain questions of fact. of Gruoner; Mr Hauser, purchasing They reached agreement on certain manager of Gruoner; Mr Schreiber, a questions and clarified their views on buyer at Gruoner; Mr Mackenthun, others. head of the hi-fi department at Melchers; Mr von Bonin, sales manager of Melchers' hi-fi department; Mr Full, Melchers' local representative for the IV — Conclusions of the parties Karlsruhe area; and Mr Setton, Chairman of MDF, Pioneer's distributor in France. 1. The applicants claim that the decision should be declared void or, in the alter- native, that the fines should be reduced and that the Commission should be B — The facts not in dispute ordered to pay the costs. MDF also claims, in the further alternative, that it should be allowed to pay the reduced The negotiations between Mr Schreiber fine by instalments of an acceptable and Mr Full amount.

effected by Connexion from Belgium. Mr Iffli's order Shortly afterwards, Mr Iffli approached Mr Schreiber through Mr "Weber with a view to obtaining in the Federal Republic of Germany an alternative source for parallel imports for various products, 3. Following the first discussions with including those of Pioneer. For that Mr Full, Mr Schreiber made an offer to purpose, Mr Iffli went to Gruoner's Mr Iffli on 31 December 1975, in head office in Rommelshausen on 12 particular for Pioneer equipment, at December 1975 for discussions with Mr prices up to 30 % below those charged Hauser and Mr Schreiber. Mr Iffli was by MDF. On 12 and 14 January 1976 on accompanied by Mr Weber. Mr Hauser the basis of the prices quoted by Mr prepared a memorandum regarding that Schreiber, Mr Iffli sent Mr "Weber two meeting. Mr Schreiber in turn asked orders worth together about D M 1 Melchers, by telex message of 15 million, which were transmitted by telex December 1975 alluding only in general on the same dates by Mr Weber to terms to Gruoner's intention to expand Gruoner. On 19 January 1976, Mr its business in the hi-fi sector, to send Weber wrote to Mr Iffli informing him him a price list for Pioneer products. In that the delivery conditions for his order reply Melchers referred Mr Schreiber to of Pioneer equipment would be indicated Mr Full. by the "Hamburg" importer on 19 January 1976. Mr Schreiber forwarded Mr Iffli's orders to Melchers by telex on 20 January 1976, after reducing the value thereof. The reasons for which Mr Schreiber made that reduction are During the last two weeks of December disputed by the parties (see below, 1975, Mr Full visited Mr Schreiber. At paragraph 21). the meeting, Mr Full described the terms granted by Melchers for retail business and handed Mr Schreiber Melchers' current price list, that is to say price list On the same day Mr Weber informed No 8/75. Mr Full met Mr Schreiber a Mr Iffli by telephone that the major part second time in January 1976 and on that of his order for Pioneer equipment had occasion referred to the new terms already been sent to Rommelshausen and applied by Melchers as from February he sent him a letter listing those of the 1976 by virtue of price list N o 1/76. The articles ordered by Mr Iffli which he said latter list contained inter alia a discount Melchers had already dispatched to of 3 % for wholesalers. Gruoner, and also those which would be reserved for Mr Iffli at the importer's warehouse in Hamburg. The articles listed by Mr Weber as having already been dispatched to Rommelshausen or as Mr Schreiber kept notes regarding the having been reserved at Hamburg two meetings with Mr Full. The content correspond to those ordered by Mr of those notes was clarified by Mr Schreiber on 20 January 1976. Schreiber at the hearing of witnesses on 18 September 1981. The question whether Mr Full gave Mr Schreiber the impression that Melchers had accepted Mr Schreiber stated at the hearing of Gruoner as a customer is disputed by the witnesses of 18 September 1981 that parties (see below, paragraph 20). he had informed Mr Weber of the

Melchers' alleged refusal to deliver The meeting in Antwerp 6. On 23 January 1976 Mr Schreiber sent a telex message to Melchers, stating 4. Pioneer arranged a meeting at its as follows: "Please confirm our order offices in Antwerp on 19 and 20 January and give us the name of the carrier who 1976 in which, amongst others, its will deliver the goods here." Melchers general manager, Mr Ito, Mr Settori, Mr replied as follows: "We hereby confirm Mackenthun and representatives of the your orders. The carrier who will deliver Pioneer distributors in the United King- the goods is Gildemeister." The question dom, the Netherlands and Switzerland whether that reply constituted accept- took part. Before the Antwerp meeting ance of the order or a mere acknowl- Mr Setton had complained to Mr Ito on edgement of receipt is in dispute (see several occasions about parallel imports below, paragraph 23). of Pioneer equipment into France. Pioneer forwarded Mr Setton's com- plaints to Melchers. Mr Setton reiterated 7. On 28 January 1976 Mr Schreiber his complaints at the meeting in sent the following telex message to Mr Antwerp. Weber:

"Telephone conversation with Mr von On 19 January 1976 Mr Iffli made an Bonin, sales manager of Pioneer's agents import declaration to the French customs in Germany, amounts to the following: authorities for Pioneer equipment on the basis of pro forma invoices and on 21 Pioneer's European head office in and 22 January 1976 he obtained import Antwerp already knows that a licence licences. Pioneer was advised of this by has been issued to import Pioneer MDF and passed on the information to equipment. The German representative Melchers. was instructed not to supply Jung under

The question whether that conversation between Mr von Bonin and Mr Schreiber On 18 February 1976, Mr Schreiber sent actually took place is disputed by the Mr Weber the following telex message: parties (see below, paragraph 23). "The meeting with the management of Melchers in Bremen concerning the sale of Pioneer equipment has enabled the 8. Mr Iffli then complained to Mr following matters to be clarified: Weber and Mr Schreiber about Melchers' alleged refusal to deliver and threatened to take legal action against 1. Melchers made deliveries in 1975 to Gruoner. Mr Weber endorsed his undertakings which exported equip- complaints. In particular, he informed ment to Belgium and France. EVB of Mr Schmidt and Mr Hauser of Gruoner, Stuttgart made deliveries to France — by telex message of 6 February 1976, the orders were for a relatively small that he had in his possession evidence of amount; a fairly large retailer in the the fact that -Melchers had sold Pioneer Ruhr made deliveries in Belgium. equipment to a Brussels wholesaler, Some of the equipment came back equipment which had then been re- into the Federal Republic and exported to Mr Iffli, and that the under- Melchers even has to repurchase some taking EVB of Stuttgart had also of it so as to avoid considerable delivered Pioneer products supplied by problems. Melchers to an undertaking in Paris. On the telex message there are handwritten notes by Mr Schreiber which state, 2. Melchers firmly denies ever having regarding the delivery via Brussels: "did made any exports itself. Any such not itself deliver, is known at Bremen. activity is expressly ruled out by the But not via Germany, Melchers denies it agreements between Pioneer Head absolutely." As regards the delivery by Office in Antwerp and the national EVB, the notes state: "Right, it was in distributors. It is perfectly legitimate November 1975, enormous trouble so to direct goods traffic through careful now". Mr Schreiber explained his Antwerp, and Melchers would be notes at the hearing of witnesses on 18 endangering its position if it did not September 1981 (see below, last subpara- keep the distribution channels for graph of paragraph 20). Pioneer equipment under control in

The undertaking EVB of Stuttgart On 19 February 1976 Mr Schreiber wrote a memorandum regarding the 13. Pioneer products purchased from Rommelshausen meeting in which he stated inter alia: "Following talks with C. Melchers were exported to France in Melchers & Co. . . . any obstacles to November 1975 by the undertaking EVB cooperation between us have now been of Stuttgart in spite of the fact that the removed." The connection between the firm had confirmed in writing, at the telex message and the meeting and the request of Mr Full, that the goods in · meaning of the memorandum are question were not to be re-sold within disputed by the parties (see below, the common market. The reasons which paragraph 24). led Mr Full to require that confirmation are disputed by the parties (see below, paragraph 26). The abandonment of Mr Iffli's order C — The conclusions which the Commission draws from the facts 10. On 20 February 1976 Mr Schreiber sent a telex message to Mr Iff li informing him that the prices which had 14. If on 31 December 1975 Mr been quoted to him on 31 December Schreiber quoted Mr Iffli prices up to 1975 for Pioneer equipment and other 30% lower than MDF's prices, he did products were no longer valid "on so, according to the Commission, account of price developments". Thus because he obtained from his discussions Mr Iffli's order was definitively dropped with Mr Full at the end of December and he never received the equipment 1975 the impression that he would be ordered. The reason for the failure to able, as a wholesaler and by reason of

the volume of the orders, to obtain be described only as "initial contacts". supplies from Melchers on terms which The order of 20 January 1976 was would enable him to make such an offer. premature because the conditions It is said that before forwarding Mr concerning the future business relations Iffli's order to Melchers on 20 January between Gruoner and Melchers were 1976, Mr Schreiber reduced the order, not discussed until the meeting in believing that the nature and size of it Rommelshausen on 11 February 1976 would give Melchers the impression that and Gruoner did not accept those the equipment ordered was to be conditions until after that meeting. Since exported to France. At first, Melchers Melchers was accustomed, with one or reacted to that order in a perfectly two exceptions, to selling to retailers, not normal manner: it checked its stocks, wholesalers, some time was in fact requested and obtained credit insurance required in order to establish business and confirmed the order, indicating the relations with Gruoner. Melchers was forwarding agent. However, as a result therefore very surprised to receive an of the complaints made by Mr Setton, order from Gruoner on 20 January 1976 the discussions at the meeting in and a request for confirmation on 23 Antwerp and the instructions given by January 1976, that is to say at a time Pioneer, Melchers changed its attitude when none of the basic conditions and refused to supply the equipment referred to above had been determined. ordered by Gruoner. That refusal was The telex message following the request expressed in particular in the course of a for confirmation and the approach to telephone conversation which Mr Hermes Kreditversicherung were· routine Schreiber had with Mr von Bonin on or steps which did not show that the order about 27 January 1976; in fact, Mr von had been accepted. Moreover, a large Bonin said on that occasion that proportion of the goods ordered by Melchers refused to deliver because it Gruoner were not in stock. had not received the assurance that the equipment ordered would not be exported. At the meeting on 11 February 1976 in Rommelshausen Melchers' representatives repeated that they could not fulfil the order of 20 January 1976. 16. In its reply, Melchers relies on new matters of fact which are said to have emerged as a result of visits which it made to Gruoner between the date on which the defence was lodged and the date on which the reply was lodged. During those visits Melchers examined D — The conclusions which Melchers Gruoner's documents relating to the draws from the facts present case and put questions to Mr Schreiber.

which he had quoted to Mr Iffli on 31 Mr Iffli; he asked the importer for December 1975. Mr Schreiber calculated confirmation of the would-be order, those prices on the basis of Melcher's which, in the case of National normal price lists. He deducted the Panasonic, was merely a request for standard discount (for retailers benefiting reservation; he wrote to Mr Weber, who, from the highest discounts) and 11 % in in turn, informed Mr Iffli that the order respect of German value-added tax, could not be performed owing to the assuming incorrectly that the latter importer's refusal to deliver; on 20 deduction could be made because the February 1976 he withdrew the price goods were intended for export. The quotation which he had given to Mr Iffli Melchers price lists, from which he on 31 December 1975 on the ground of deducted the value-added tax, stated the price developments. net prices, excluding value-added tax. Melchers concludes that the reason why Mr Iffli's order was not performed is not that Melchers refused to deliver or that the prices quoted to Mr Iffli were no longer valid "on account of price E — Mr Schreiber's statements developments", but merely that Mr Schreiber had become aware of his mistake in the calculation of the value- added tax, a mistake which, if Mr Iffli's order were to be performed on the basis 18. Each of the parties seeks support of that quotation, would have compelled for its version of the facts from the Mr Schreiber to sell at prices lower than written statements made by Mr those at which he could buy, which Schreiber. The Commission relies on the would have entailed a loss for Gruoner statement which Mr Schreiber made at in excess of DM 80 000. Melchers the request of its inspectors on 18 May concludes that it is Gruoner alone, and 1977. Melchers relies on the statement more precisely Mr Schreiber, who is which Mr Schreiber made at its request responsible for the fact that Mr Iffli did on 5 September 1980. Mr Schreiber not receive the goods which he had made two further statements: on 15 ordered. February 1980 he stated that Mr von Bonin's refusal to deliver referred perhaps to the Jung undertaking of Mainz; on 12 September 1980 he stated that he might have known of the VAT error since January 1976. 17. In support of its argument, Melchers also points out that there is a parallelism between Mr Schreiber's transactions with Pioneer and his transactions with National Panasonic, another Japanese producer of hi-fi 19. In his statement of 18 May 1977 equipment. In both cases Mr Weber Mr Schreiber said that: (supposedly misled by Mr Schreiber) informed Mr Iffli that the goods ordered had been dispatched to Rommelshausen by the importer before the order had even been forwarded to the importer by He was acting on the basis of infor- Mr Schreiber. In both cases Mr mation supplied by Mr Full with regard Schreiber reduced the order placed by to the prices and availability of Pioneer

There was no longer any obstacle to business relations between Melchers The negotiations between Mr Schreiber and Gruoner after Mr Iffli's order had and Mr Full been discussed at the Rommelshausen meeting. 20. Melchers claims that Mr Full explained to Mr Schreiber that in general Melchers did not deal with wholesalers In his "Statement of 5 September 1980 Mr and further discussions would have to Schreiber said: take place with Melchers' head office before Gruoner was accepted as a customer. " 1 . The extremely low prices which we quoted to Iffli resulted from an idea which we had and which had not According to the Commission, Mr been settled with Melchers; Schreiber did not obtain that impression "We wrongly supposed that the from his discussions with Mr Full, refund of VAT would entail a because he sent an order to Melchers on reduction in prices and not that it 20 January 1976. would have a neutral effect on prices. . . At the hearing of witnesses on 18 September 1981, Mr Schreiber explained that Melchers had not drawn up conditions for wholesalers at the time of 4. When it became apparent to us that his first meeting with Mr Full. The two we could not keep our promise to wholesalers who were being supplied at supply Iffli, we were faced with the the time by Melchers, namely Brom- problem of finding a plausible expla- melhaupt and Weide, benefited from the

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

JUDGMENT OF 7. 6. 1983 — JOINED CASES 100-103/80

Mr Full stated at the hearing of witnesses levels were very low as a result oí that it was unlikely that he had given Christmas sales. The stock levels oí that information to Mr Schreiber. Pioneer in Antwerp were also very low; a large part of the stock had been sold in advance. , - ' Mr Iffli's order

According to the Commission, all the 21. According to the Commission, Mr products ordered by Gruoner could have Schreiber . reduced Mr Iffli's order been dispatched by 10 February 1976 at because he thought that the nature and the latest; besides, Melchers could have size of it would give Melchers the obtained supplies not only from Pioneer impression that the equipment ordered in Antwerp but also from Japan. was intended for export to France.

22. Melchers claims that, of the 41 models ordered by Gruoner on 20 January 1976, 13 were not in stock; for Mr Schreiber explained, at the hearing of others, the quantities in stock were less witnesses on 18 September 1981, that he than those ordered by Gruoner. Stock understood the telex message of 23

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

January 1976 as an acceptance of his meeting in fact took place solely through order since that telex message went so the intermediary of Mr Full. far as to refer to the carrier.

JUDGMENT OF 7. 6. 1983 — JOINED CASES 100-103/80

24. According to the Commission, Melchers claims that the Rommelshausen Melchers' representatives repeated on meeting was not organized for the that occasion that Melchers could not purpose of discussing Gruoner's order satisfy Gruoner's orders unless it was but solely in order to negotiate the basic certain that Gruoner would use those conditions of the business relationship

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

between Gruoner and Melchers, which 6 February 1976, following the telex confirms that Gruoner's order was message from Mr Weber to Messrs placed at a time when those conditions Schmidt and Hauser of Gruoner of the had not yet been established. same day (see above, paragraphs 8 and 20).

JUDGMENT OF 7. 6. 1983 — JOINED CASES 100-103/80

repayment of the VAT would entail a shown on Melcher's price list — which is price reduction and would not, for very improbable in view of the fact that example, have a neutral effect on prices." that list very clearly states at the bottom of page 2 that value-added tax is not included — he would first have deducted the 1 1 % for value-added tax and only then would he have brought the Melchers attempted to reconstruct the discounts and profit margin into his calculation made by Mr Schreiber. calculation.

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

price quoted to Iffli was DM 84.30). He sell equipment in the Community, in emphasized that he also made an error order to ensure that EVB respected the regarding value-added tax in the case of oral undertaking which it had given him the loudspeakers. to export the goods to Turkey. Mr Full took that initiative because the re-impor- tation into Germany of goods exported In reply to a question put by the Court, to other countries in the common market Mr Schreiber was unable to explain why had in the past caused considerable he deducted 'Vioo and not u / l u , having problems for Melchers. It was unlikely regard to the fact that the rate of value- that an exporter who had completed the added tax, namely 1 1 % , is to be formalities for importation into Turkey calculated on the price net of value- would have the goods brought back into added tax. the Community. Mr Full further stated that he had discussed the question of re- importations with Mr von Bonin. He did According to the explanations given by not recall having discussed that question Mr Schreiber on 18 September 1981, the with Mr Schreiber and thought that it reason why Gruoner did not deliver the was unlikely that he would have done so. goods ordered by Iffli was that because of the VAT error it was no longer able to deliver at the prices quoted to Iffli on 31 December 1975. VI — C a s e 1 0 3 / 8 0 , P i o n e e r GB

The undertaking EVB of Stuttgart A — The facts not in dispute

discontinue exporting Pioneer products. the ground cut from underneath my feet. Audiotronic and Comet were Shriro's To produce the proof that I had most important customers. In 1976, demanded, the French distributor had according to the decision (paragraphs 42 placed some small test orders with and 80), they accounted for 45 % of several of our larger dealers. Shriro's sales. Audiotronic was the owner in the United Kingdom of the Laskys chain of shops, well-known in the field of hi-fi. Between 1975 and 1977, Audio- tronic acquired a large holding of Allwave BV of Delft, which is a Netherlands chain of hi-fi shops, and I am well aware of the EEC rules also in Kings Music, which at that time regarding parallel exports but quite was MDF's principal customer in France. frankly at times I am more concerned Audiotronic has since withdrawn from with justice than the law itself. King Music and Laskys. Comet was the principal chain of discount stores and cut-price retail stores in the United Kingdom, selling mainly electrical audio equipment and electrical household appliances. Comet and Audiotronic The obvious solution to the question of exported hi-fi products to various exports to France would be for me to put customers outside the United Kingdom. up my prices and for the French They sold Pioneer equipment inter alia distributor to bring down his. Regretfully to Euro-Electro of Brussels, which re- the obvious is not always possible in sold those products to Connexion in different economic climates. France, that is to say the purchasing group of which Mr Iffli was the general manager (see above, paragraph V.A.I and B.2).

The Commission then instructed B — The conclusions which the Com- Mackintosh Consultants Company of mission draws from the facts London to draw up a report on the volume of the hi-fi market in the Member States in question. On the basis of that report and of the two applicant's 3. The Commission maintains that at turnover in Pioneer products, the the Antwerp meeting Mr Setton and Mr Commission estimated the French hi-fi Todd concluded a gentlemen's agree- market share in 1976 at 11.5% and the ment whereby Mr Todd was to take care British market share at 10.5%. For that to prevent his British customers from reason, the Commission adhered, in exporting Pioneer equipment. Mr Todd paragraph 25 of its decision, to the subsequently attempted to prevent his figures given in the statement of main customers from exporting. After objections. receiving the letters from Mr Todd, Comet and Audiotronic agreed to stop exporting Pioneer equipment altogether. Part of the abovementioned report was Cornet's exports then ceased and Audio- made available to the applicants on 6 tronic took over from Comet in March 1980, that is to say after the supplying Euro-Electro of Brussels, but adoption of the decision; the rest of the only until May 1976. If Audiotronic had report was made available to Pioneer GB been free to export, it could have and MDF on 26 and 27 January 1982 obtained much more business. Shriro respectively. They claim that because the took those measures in order to avoid report was disclosed to them at such a any difficulties with MDF and Pioneer. late stage their right to a proper hearing The market share of Pioneer products in was infringed. France and in the United Kingdom is sufficiently large for the conduct of the persons involved in the concerted practice to be able to affect trade 5. In their pleadings lodged at the between Member States appreciably. Court MDF and Pioneer GB criticized the Commission for:

and stereo car radios, whereas in expressed in terms of current selling paragraph 25 of the decision the figures prices, Pioneer GB increases them by from the report are compared with the 125 % and thus arrives at a turnover of total turnover figures of the applicants in UKL 4.13 million. Pioneer equipment, thus including not only all hi-fi products but also products not classifiable as such. As regards the size of the hi-fi market, Pioneer GB relies upon the 1978 Mackintosh Yearbook of European Pioneer GB considers that its share in the Electronics Data, according to which the United Kingdom hi-fi market was turnover in hi-fi equipment in the United 3.18 % in 1976. MDF considers that the Kingdom in 1976 was UKL 130 million. share of Pioneer products in the French The Mackintosh Yearbook is based on hi-fi market in 1976 was 3.38%, on the current selling prices. basis of the SIERE survey. According to the BREF survey, which relates to the French market in 1975, that share was That· figure, relates to hi-fi units and 4.33%. tape-recorders. It includes complete units, plus amplifiers sold separately, tuners, amplifiers and the related The report drawn up by Mackintosh furniture, but not car radios, batteries or Consultants Co., upon which the radios, radio-recorders, radio-receivers Commission relies, concerns the market or portable record-players. Pioneer GB for separate, items of hi-fi equipment, admits that the figure quoted' above namely loudspeakers, turntables, cassette includes some "mid-fi" products, but recorders, tuners and amplifiers, adds that the definition upon which it is expressed in terms of ex-factory prices. based is the definition used in the The report values that market in 1976 at published figures which is closest to that UKL 70 million in the United Kingdom put forward by Pioneer GB in 1976. and FF 670 million in France.

units (tuners, loudspeakers, turntables, The effect of Mr Todd's letters to cassette tape-recorders and reel-to-reel Comet and Audiotronic tape decks) and also stereo music centres, amplifiers and pre-amplifiers, and amplifier-tuners, provided that those units comply with DIN 45-500. MDF also relies on the BREF survey, which includes magnetic tapes, cassettes and music centres. 8. According to the Commission, Comet exported more than ever in 1976 and 1977: goods to the value of UKL 1 066 000 and UKL 785 000 respectively, according to Comet's annual reports. Those exports comprised almost exclus- Pioneer also considers that the ively hi-fi equipment. After January Commission over-estimated the market 1976, none of those exports related to shares of Pioneer products. In its Pioneer products. In this regard the opinion, the fine should therefore be Commission relies on the reports of its reduced. inspectors after their visits to Comet and Euro-Electro, when Mr Lightowler, sales manager of Comet, and Mr Bossaert, of Euro-Electro, stated that Comet ceased exporting following the letter from Mr Todd: "Effectively Pioneer export business stopped after the letter from Mr 6. MDF and Pioneer GB submit that, in Todd" (Report on the Comet visit, accordance with - the case-law of the paragraph 3 (iii); "Since . . . about the Court and the Commission's notices beginning of 1976 . . . [Mr Bossaert] concerning agreements of minor import- could not obtain supplies from Comet ance, their respective market shares are . . . " . One of the Commission's inspectors not sufficient for Article 85 (1) to be also examined all the invoices relating to applicable. Comet's exports from January 1976 until the date of his visit in April 1977 and he did not find any invoice relating to exports of Pioneer equipment. On 28 January 1982 the Commission sent to the Court copies of the invoices relating to Comet's sales in 1977 to its principal 7. The Commission concedes that it is client abroad, Diaphon of Hamburg. very difficult, if not impossible, to define Those invoices do not relate to Pioneer the hi-fi market but it stresses that the products. On the same date the turnovers of the undertakings exceed the Commission sent extracts from Comet's 50 million units of account mentioned export records for the period in question, in its notice of 19 December 1977 con- from which it appears, according to the cerning agreements of minor importance Commission, that Comet's purchasers (Official Journal C 313, 29. 12. 1977, were essentially or exclusively retailers of p. 3) and that in any event the market hi-fi equipment. The Commission share far exceeds the percentages held emphasizes that the export records make to be insignificant by the Court in its no distinction between Pioneer equip- judgment of 9 July 1969 in Case 5/69 ment and other equipment, nor between (Volk v Vervaecke [1969] ECR 295). hi-fi and other products.

10. According to the Commission, Audiotronic replaced Comet as regards supplies to Euro-Electro, as soon as Comet had discontinued exporting Pioneer GB considers that its right to a Pioneer equipment. Audiotronic received proper hearing has been infringed orders worth more than UKL 150 000 in because the Commission disclosed only a March 1976, but it actually executed wholly irrelevant part of Mr Mason's orders only to a value of UKL 59 000 statement before the adoption of the because Shriro had created difficulties. decision. In fact, by letter of 9 October (The Commission acknowledged at the 1978 the Commission disclosed para- preparatory meeting on 3 December graphs 1 and 2 of the statement and the that the figure of UKL 55 000 contained signature. The relevant paragraphs, in paragraph 50 of the decision should namely numbers 3, 4 and 5, were read UKL 59 000). After May 1976 disclosed to Pioneer GB by Comet on or Audiotronic no longer exported Pioneer about 21 November 1978 (the date of products, except to its associate Allwave the hearing at the Commission). The hi-fi in the Netherlands. In that respect Commission disclosed the full text only the Commission relies upon the oral in its letter to the Court of 6 April 1981. statements made to its inspectors by Mr

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

Keighley and Mr Smith of Audiotronic. tronic made to undertakings other than One of the Commission's inspectors also Allwave. checked Audiotronic's export invoices for the period in question.

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Pioneer GB argues finally that its right intended to prove that that agreement to a proper hearing was infringed in so was being infringed. Whatever the case ' far as the information to the effect that may be, to establish a concerted practice Audiotroņic received orders for UKL it suffices that the letters from Mr Todd 150 000 but only executed orders for were the result of his conversation with UKL 55 000 appears for the first time in Mr Setton. The letters themselves the decision. indicate that that was the case. Moreover, Pioneer GB does not deny that M r Todd and Mr Setton agreed on that occasion that Mr Todd would Concerted practice attempt to induce his British customers to cease exporting. Finally, Mr Todd stated at the hearing that he had given "considerable thought" to writing those 13. According to Pioneer GB, the letters. Besides, it is clear from the letters decision establishes neither the existence which Mr Todd sent to Comet and of an intention to act in a concerted Audiotronic that a concerted practice manner nor the existence of any already existed before the Antwerp practices whatsoever designed to give meeting. effect to such an intention.

A large number of questions were 15. According to Pioneer GB, the fact discussed at the Antwerp meeting. Mr that Mr Setton obtained evidence of Setton reiterated his complaints con­ parallel imports does not prove that an cerning parallel imports into France. Mr agreement already existed before the Todd advised him to reduce his prices Antwerp meeting. Moreover, the letters but there is nothing to suggest that there from Mr Todd show that the previous was any agreement between Pioneer, discussion concerned parallel imports but MDF and Pioneer GB on that occasion. not that a discussion took place with a view to imposing an export prohibition.

again to say that he had been able to prosecutor and judge and is therefore establish that the parallel imports came contrary to Article 6 (1) of the European from Germany. Mr Setton subsequently Convention on Human Rights. telephoned Pioneer several times on the same matter. The Commission refers to the judgment of 29 October 1980 in Joined Cases 209 2. At the beginning of December 1975 and 215 and 218/78 (Van Landewyck Comet and Audiotronic (see above, and Others v Commission [1980] ECR paragraph VLA.2), received from the 3125) in which the Court held that the Office pour le Développement de Commission is not a tribunal within the l'Acoustique Appliquée Sari, of Rungis, meaning of the abovemcntioned article. near Paris, a small order for Pioneer turntables. 9 5 % of the capital of that The non-disclosure of the opinion of the company is held by MDF and 5% by Mr Advisory Committee Setton. Mr Setton admitted that the orders were test purchases intended to prove the existence of parallel imports 5. MDF considers that the fact that it is and that he took that evidence to the not able to present observations on that Antwerp meeting. On that occasion Mr opinion constitutes an infringement of its Setton reiterated his complaints about right to a proper hearing. MDF stresses parallel imports to France. moreover that it had no such opportunity subsequent to the contested decision, even after it made an express request to B — The conclusions which the Com- the Commission. Pioneer (Europe) puts mission draws from these facts forward the same argument in order to demonstrate the unlawful and excessive nature of the fine. 3. According to the Commission, Mr Setton's complaints incited Pioneer and The Commission replies that in refusing Melchers to prevent parallel exports to disclose the aforesaid opinion it was from Germany to France. At the merely applying Article 10 (6) of Regu- Antwerp meeting Mr Setton made lation No 17, which provides that such representations to Mr Todd of such a an opinion "shall not be made public". nature that Mr Todd undertook to The purpose of that provision is to dissuade his two main customers in ensure the impartiality and independence Britain from exporting Pioneer products of the members of the committee. from the United Kingdom.

the alleged concerted practice in view of invoiced by the distributors rather than the insignificance of the transactions the prices applicable to sales in large involved. MDF bases that submission on quantities. After the protracted exchange its weak market position and on the fact of pleadings which followed the that parallel trade was of no interest in preparatory meeting of 3 December view of the development of prices in 1981, Pioneer admitted that it is very the countries concerned. In fact, the difficult to evaluate the prices applicable Commission made mistakes in calcu- to such sales on a comparable basis and lating the differences between MDF's that the trend remains the same in both prices, on the one hand, and those of cases. Shriro arid Melchers, on the other. In that regard, MDF states as follows: Table I annexed to the statement of objections shows a large increase in the prices charged by Melchers for Model Pioneer further points out that the tables SA 5300 between December 1975 and drawn up by the Commission do not January 1976, whereas Table 13 annexed show the price changes for 1977, to the Commission's defence shows a whereas both MDF and Shriro changed slight reduction in those prices in the their prices during that period. same period.

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

takes VAT into account since that is defence were not disclosed before the neutral at the stage of the transactions in adoption of the decision. Pioneer question and MDF gives no indication of (Europe) shares that view. the other charges which might affect the German price. The Commission states that in its defence it compared the prices quoted by Gruoner to Iffli with the net price charged by MDF for a quantity of 20 items; the question whether Shriro's The Commission relies upon the dicta of prices were realistic does not arise, in its the Court in the judgment of 13 opinion, since those prices were much February 1979 in Case 85/76 lower than those of MDF with the Hoffmann-La Roche v Commission consequence that Comet and Audio- [1979] ECR 461) and in the Van tronic could have made a substantial Landewyck judgment (cited in paragraph impact on the French market. 4).

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Article 85 (3) of the type that takes place two or three times a year but an ad hoc meeting of the type that is held whenever necessary. Mr 11. MDF claims that the substantive Setton reiterated his complaints at that conditions for an exemption under meeting and produced evidence of the Article 85 (3) were fulfilled and that existence of parallel imports (with consequently, upon notification, it could respect to these purchases, see the facts have obtained an exemption. It did not not in dispute in the MDF case, therefore commit a breach of one of the paragraph VILA, above). There is no principal objectives of the Treaty but written trace of that meeting in Pioneer's merely an infringement of a rule of form, records. Pioneer subsequently informed namely a failure to comply with the Melchers that Iffli had obtained French obligation to notify the agreement and import licences for Pioneer equipment obtain a formal exemption. That fact (see above, paragraph V.B 4). ought, at the very least, to result in a considerable reduction in the fine. 2. On 2_8 and 29 January 1976, Mr Todd wrote two similar letters to Audio- In reply the Commission states that tronic and Comet, his most important notification constitutes a condition sine customers, in which he asked them, after qua non for the applicability of the explaining that he had been summoned abovementioned provision. Moreover, to Antwerp to discuss the question of exemption would not have been possible parallel imports, to cease exporting even if the practice had been notified. Pioneer . products (regarding those letters, see the facts not in dispute in the Pioneer GB case, paragraph VLA, above).

practice between MDF, Pioneer GB and the effect that the meeting had been Melcliers. It bases its view on the organized in order to discuss music following facts in particular: Pioneer centres; transmitted to Melcliers Mr Setton's complaints and the information about the import licences obtained by Iffli; it organized the Antwerp meeting; the The reply given by Mr Setton, on the discussions on that occasion centred on same occasion, to the question whether the suppression of parallel imports and the meeting had been organized to took place with the cooperation of the discuss parallel imports: "That would chairman of the meeting, Mr Ito; that is show that they (Pioneer) gave me great the only meeting of which there exists no importance . . . if I had that sort of written mention in Pioneer's records; the power over Pioneer, I would not deny absence of any record is explained either it»; by an unfortunate omission or by a deliberate decision not to keep any written document relating to that meeting; Mr von Bonin told Mr Mr Ito's statement that the purpose of Schreiber that Melcliers had refused to the meeting was to consult Pioneer's sell in accordance with instructions from main representatives on the new range of Pioneer; the power which Pioneer has as products; a subsidiary of the producer to decide whether to continue the exclusive contracts of the distributors places a particular responsibility on it. Mr Todd's statement at the hearing: "In May 1977 I said that that was not the purpose of the meeting and I repeat it again today"; C — The principal submissions relied upon by Pioneer Mr Todd's written statement according to which he has never been subject to 5. Pioneer claims in particular that it pressure from Pioneer. did not participate in the alleged concerted practices. The fact that Mr Todd wrote to Audio- tronic and Comet stating that he had The Antwerp meeting been summoned to Antwerp to discuss parallel imports (see above, paragraph VI.A.2) was intended only to reinforce his request. 6. Pioneer does not agree that the object of the Antwerp meeting was to discuss parallel imports. In that respect it relies upon: If the Antwerp meeting had been convened in order to discuss parallel imports, the Italian distributor, who had also complained to Pioneer about such The statement which Mr Setton made imports, and the Belgian distributor during the hearing at the Commission to (Belgium was one of the main sources of

parallel imports into France) would have meeting. Since a written invitation had been invited, whilst the Swiss distributor, been sent to the people invited to parti­ who had no 'interest in parallel imports, cipate in the regular meeting and since it would not have been invited. was understood that an ad hoc meeting would be held at the same time and place, it was quite normal for the invitation to that meeting also to be sent in writing. Moreover, each distributor Pioneer and Pioneer GB also claim that had been given a task before that the statement of objections did not meeting, namely to monitor the activities indicate that the purpose of the Antwerp of Technics on its territory. meeting was to discuss parallel imports or that Pioneer was invited to explain why there was no written mention of the Antwerp meeting in its records. According to Pioneer and Pioneer GB, Pioneer concludes that the circumstances that procedural irregularity ought to lead surrounding the Antwerp meeting do not to the annulment of the decision. disclose any illegality. Indeed it cannot be maintained that the mere discussion of a problem is tantamount to an agreement that the problem shall be The absence of written records is resolved by recourse to illegal means. perfectly normal for ad hoc meetings of distributors, such as the one in question. For regular meetings, the participants receive a written invitation and a copy of the agenda; for ad hoc meetings they There exists no proof that at the time of normally receive no written invitation the Antwerp meeting Pioneer did more and no agenda. Moreover, Pioneer does than listen to Mr Setton's complaints and not keep minutes and does not retain advise him to reduce his prices. In fact, notes concerning what it said at a all the participants in that meeting deny meeting, whether it be regular or ad hoc. that concerted action was suggested by Pioneer, that Pioneer indicated its consent to such action, that it exerted pressure on distributors, or even that it requested their assistance for the purpose 7. The Commission states that one of of restraining parallel imports. its inspectors discovered in Pioneer's records invitations together with agendas for an ad hoc meeting concerning competition from Technics products. There is nothing to prove that Pioneer contributed to the conclusion of the gentlemen's agreement between Mr Todd and Mr Şetton (see above, Pioneer accounts for those documents by paragraph VI.8). the fact that, although it is not usual to send invitations or agendas for ad hoc meetings, that procedure may have been followed on certain occasions. As regards the meeting concerning Technics, it was Pioneer cannot agree with the convened on the occasion of a regular Commission's statement concerning its

8. According to the Commission, the purpose of the Antwerp meeting was to discuss parallel imports. In its decision the Commission confined itself to stating that "the main item that was actually In the present case, the concertation, discussed was the prevention of parallel which is the first essential ingredient of a imports". The Commission relies in concerted practice, was the contract particular on the fact that Mr Todd between the persons involved in the wrote to Comet and to Audiotronic Antwerp meeting, the purpose of which informing them that he had been invited was to influence the general behaviour of to the Antwerp meeting to discuss that the participants. Pioneer took an active question (see also paragraph VI.A.2, part in that meeting. The practical above). The Commission also observes, behaviour of the participants, which in this regard, that Pioneer's distributors constitutes the second prerequisite for a in the main countries from which parallel concerted practice, is clear from the imports were being made into France facts: the participants created conditions were present and that Mr Setton of competition which do not correspond produced evidence of the existence of to the normal market conditions. In parallel imports from the United support of its argument, the Commission Kingdom. Besides, Pioneer was not in a cites the judgments of the Court of 14 position to say what may have been the February 1972 in Case 48/69 (ICI v purpose of the meeting. The fact that the Commission [1972] ECR 618, paragraphs Italian distributor was not present does 64 to 57) and of 16 December 1975 in not prove that the purpose was Joined Cases 40 to 48, 50, 54 to 56, 111, otherwise; it merely shows that the 113 and 114/72 (Suiker Unic and Others concerted practice did not make it v Commission [1975] ECR 1663, possible to isolate the French market paragraphs 26, 173 and 174). totally. If the meeting had been convened to discuss new products all the distributors would have been present, a written record would have existed and Pioneer would have been able to tell the Court what products were involved. Melchers' alleged refusal to sell

10. The Commission observes that Gruoner did not refuse to sell. Consequently, it doubts that the object 9. In any case, Pioneer denies having of the telex message which Mr Schreiber participated in any concerted practice sent to Mr Weber on 28 January 1976 designed to prevent parallel imports into was to instruct Mr Weber to inform Iffli France from Germany. It denies having of Gruoner's refusal to sell. Besides, the instructed Melchers to refuse to deliver telex message contained no instruction to Gruoner. In its opinion, Mr to write to Mr Iffli in those terms. Schreiber's telex message to Mr Weber According to the Commission, Mr of 28 January 1976, according to which Schreiber was not obliged to confirm in Pioneer had given such instructions, his statement of 18 May 1977 what he must be regarded as the explanation for had said in his telex message of 28 Gruoner's refusal to sell which the chief January 1976; he did not need to invent buyer of Gruoner was instructing his an explanation for the Commission's employee Mr Weber to give to a inspectors because even if he had refused customer. Even if Mr Schreiber repeated to sell that would not have been contrary that explanation in the written statement to Community law per se; it is unlikely which he made to the Commission's that Mr Schreiber had reason to fear that inspectors of 18 May 1977, it should not Mr Iffli would take action against him in be regarded as correct because even in May 1977; Mr Iffli's threats were made 1977 Mr Schreiber had an obvious in a letter dated 30 January 1976 and interest in giving the explanation which therefore did not have any influence on he gave: he was thus making another the telex message which Mr Schreiber company responsible for the refusal to sent to Mr Weber on 28 January 1976 or deliver. Moreover, Mr Schreiber had . on the letter which Mr Weber sent to Mr stated on 5 September 1980 that that Iffli on 29 January 1976 (see above, explanation was intended to cover up his paragraph V.B.7). Finally, even if error of calculation by providing an Gruoner became Melchers' largest excuse for not executing Mr Iffli's order. customer after 11 February 1976 without Finally, Pioneer states that there is no having to give a written undertaking not evidence that Gruoner ever gave a to export, that is irrelevant since written assurance not to export, although Gruoner might have given an oral the decision (paragraph 63.1.3) states promise or Melchers might have decided that "the Commission believes that the that the changes in exchange rates made goods would not have been delivered by exports žo France unprofitable.

Among the most serious infringements of The duration of the alleged concerted Community law are export and import practice prohibitions, since they deprive consumers of all the advantages which should normally result from the abolition of tariff barriers and quantitative 12. Nor does Pioneer agree that it is restrictions on trade between Member apparent from the facts, as they emerged States; they impede the integration of the at the Commission hearing, that the economies of the Member States; they alleged concerted practice between leave distributors and retailers in a state Schreiber and MDF lasted for the period of subordination to producers. Heavier attributed to it in the decision. Pioneer's fines are particularly necessary when the arguments in that respect, which are also principal purpose of the infringement is, put forward to demonstrate that the fine as in the present case, to maintain higher is excessive, are summarized in para- prices for consumers. graph IX.9-10, below.

2. According to the applicants, neither the nature of the cases nor the products I X — T h e fines in question, nor even the circumstances surrounding the cases, can justify the Commission's change of policy. The reference to such a change shows that General observations the Commission did not base its action on the gravity and duration of the infringement. The criterion applied by the Commission tends to arbitrariness 1. The Commission states that it and is discriminatory. Moreover, the gradually formed the view that the time facts of the present cases occurred at the for making concessions on account of same time as the facts underlying other the relative novelty of Community law cases which the Commission had decided had come to an end as regards previously, imposing incomparably lower

3. The Commission states that all the fines which it imposed in the past amounted to approximately 2 % , or less, The Commission stresses that since there of the turnover in question. However, in are so many unquantifiable criteria to be the present cases it considered that it was taken into consideration, no math- appropriate to impose fines equivalent to ematical formula of general application is around 4 % of the turnover of MDF and possible. Different approaches may be Pioneer, 3 % of the turnover of Shriro used in different cases. Even when it is and 2.5% of the turnover of Melchers. possible to connect the size of the fine to The different percentages took sufficient a quantifiable criterion, such as turnover, account of the gravity and duration of the decision as to what must be the the infringements established, the size of relationship between the fine and the the undertakings and the aggravating criteria thus measured is a question of circumstances mentioned in the decision. appraisal rather than simple calculation.

MUSIQUE DIPFUSION FRANÇAISE v COMMISSION

The Commission considers that it is the whole of their turnover. Melchers appropriate to adopt an approach which considers that, as a result of the method takes into consideration the following used by the Commission, its fine is factors: the gravity and duration of the disproportionate in comparison with infringement; the size of the under- those of the other applicants. Melchers takings concerned, so that, other things therefore asks the Court, in any event, to being equal, the largest undertakings reduce its fine to a lower level than that suffer the heaviest fines; subjective of Shriro. factors, such as intention or negligence.

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on the undertaking Johnson & Johnson taken into account, since it is that based on the turnover in the product turnover which best reflects the size of concerned in the infringement (decision the undertaking at the time when the of 25 November 1980, Official Journal fine is to be imposed. 1980 L 377, p. 16).

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

The Commission states in reply that According to Pioneer, such a conceited MDF complained to Pioneer of the practice designed to prevent parallel existence of parallel imports into France imports continues only for as long as the at the end of 1975 and that Pioneer parties take measures to give effect to it. acknowledges that it sent the infor- mation on parallel imports to Melchers at that time. Pioneer and Melchers point out that the alleged concerted practice between MDF, Pioneer and Melchers was per- In addition, it is apparent from petrated on 27 January 1976 when Mr paragraphs 43 to 46 of the decision that von Bonin told Mr Schreiber that at the beginning of December 1975, Melchers would not deliver the goods; it Office pour le Développement de therefore lasted for a maximum of eight l'Acoustique Appliquée Sail, of Rungis, days. near Paris, 9 5 % of whose capital is held by MDF, carried out test purchases to prove the existence of parallel imports from the United Kingdom. That fact, which is not denied by Pioneer, shows In the event of the Court's accepting the that MDF and Pioneer had prior Commission's view summarized in knowledge of the existence of parallel paragraph 10, Pioneer states that even imports and that MDF had attempted to after MDF increased its prices in April prevent them. It also shows that in 1975 1976 the difference between MDF's there was already a concerted practice prices and those of Melchers was no intended to prevent such imports and more attractive than in January and, in that MDF knew that as soon as it had any case, was insufficient to make proof that the imports had taken place it parallel imports into France from would be able to use that proof to force Germany profitable (see also paragraphs Shriro to act. 12 to 14 below and paragrph VII. 7, above).

The applicants also allege that the Commission infringed Article 4 of Regu- The profit which Audiotronic and Comet lation No 99/63 of the Commission of achieved on sales in the United Kingdom 25 July 1963 on the hearings provided was higher than the profit which they for in Article 19 (1) and (2) of Regu- would have achieved by selling to a lation No 17 (Official Journal, English French parallel importer; Special Edition 1963-64, p. 47), inas- much as the duration of the infringe- ments indicated in the statement of objections was shorter than that on For almost all Pioneer models the prices which the decision is based. paid by consumers in the United Kingdom in May 1976 were higher than the list prices applied by MDF;

The effects of the alleged concerted practice In evaluating the differences in prices it must be borne in mind that the list prices 11. According to the applicants, the applied for retail sales in France included effects of the alleged concerted practice service and warranties, that MDF had were minimal. Consequently, the alleged advertising costs and that it was also infringement is less serious than the necessary to take into account transport Commission claims and the fine should costs and the profit of the Belgian re- be reduced. exporter.

the domestic market or on the export When Comet and Audiotronic ceased market assumes that dealers are not exporting that was not as a result of the allowed to buy unlimited quantities of letters from Mr Todd; Pioneer products. The Commission stresses that in the hi-fi industry exports are normally made in large quantities Nothing was done to put into effect the and for cash; further, such sales are letters from Mr Todd; normally made ex-warehouse so that the seller has no handling expenses and the transaction is almost cost-free to him. Iffli and the Connexion group had no The Commission concludes from this difficulty in obtaining all the Pioneer that if Comet and Audiotronic had been equipment they wanted from the Benelux allowed to develop a regular business in countries; thus they did not suffer any Pioneer products they could have run it damage as a result of the allégea on a continuing and profitable basis, in concerted practice; addition to their domestic sales.

In 1976 parallel trade between Germany The Commission considers that the and France ceased to be attractive. French consumers were entitled to choose to pay either a high price and thus benefit from service and warranties (c) Other arguments concerning the or a lower price and thus risk having to effects of the concerted practice pay a little more for any service and repairs which might be necessary later. 16. Pioneer stresses that the products in question are not products of the first The Commission also submits that necessity, that its market share was small transport costs are very low in relation to and that export prohibitions imposed on the value of hi-fi products and that the distributors do not impede competition profit margin of the parallel importer in between brands. question, Euro-Electro, was minimal.

The Commission did not even disclose those criteria in the decision. Thus the 22. Pioneer states that it could not have decision is insufficiently reasoned. been aware that its conduct — which consisted of the passing from one distributor to another òf information and complaints relating to parallel' imports 19. The Commission replies that it is and the organization of a meeting at normally impossible to indicate in the which those imports were discussed — statement of objections, even approxi- was illegal. The cases dealt with by the mately, the amount of the fine likely to Court and by the Commission relating to be imposed. The fixing of a fine involves export prohibition clauses imposed by consideration of too large a number of producers on their distributors do not in factors and these can be weighed up only fact define any conduct similar to that of after the undertaking has been heard. If Pioneer. Since the Commission left open Melchers' arguments were accepted it the question of intention, in paragraph would be necessary, according to the 90 of the decision, it may not rely upon Commission, to introduce an entirely it in the proceedings before the Court. new stage into the Commission's Likewise, the Commission may not procedure in every case in which a fine reproach Pioneer for such behaviour was contemplated. None of the cases in since in the statement of objections it which the Commission has issued a accused only Shriro of having acted second or supplementary statement of intentionally. objections concerned primarily the size of the fine. The Commission alleges that Pioneer organized, facilitated and helped to enforce an export prohibition and that it Intention must have known that what it was doing would restrict competition and be unlawful, whether or not there was a precedent in the decisions of the Court 20. Melchers submits that acts allegedly whereby that conduct was adjudged committed by employees, such as Mr illegal.

The Commission replies that there is absolutely no justification for MDF's The responsibility which the Commission claim that it is unable to pay the fine bears in the present case imposed on it and in any event it is inconceivable that the payment of such a fine could cause MDF to go out of 31. Melchers points out that the Com- business completely. mission authorized France to prohibit

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Decision

1 By applications registered at the C o u r t on 2 1 , 24 and 25 M a r c h 1980, the four undertakings M u s i q u e Diffusion Française SA, C. Melchers & C o . , Pioneer Electronic (Europe) N V and Pioneer H i g h Fidelity (GB) Limited b r o u g h t actions, p u r s u a n t to the second p a r a g r a p h of Article 173 of the E E C T r e a t y , for a declaration t h a t Commission Decision N o 8 0 / 2 5 6 of 14 D e c e m b e r 1979 relating to a proceeding u n d e r Article 85 of the E E C T r e a t y (rV/29.595 — Pioneer Hi-fi Equipment), published in Official J o u r n a l 1980 L 60, is void.

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4 The decision stated that the concerted practice between MDF, Pioneer and Melchers preventing imports from the Federal Republic of Germany consisted in a refusal on the part of Melchers to fulfil an order placed on 20 January 1976 by a German wholesaler, Otto Gruoner KG (hereinafter referred to as "Gruoner"), for Pioneer equipment having a value of approxi- mately D M 550 000, which was to be delivered by that wholesaler to a French purchasing group the general manager of which was B. Iffli of Metz. The concerted practice between MDF, Pioneer and Shriro preventing imports from the United Kingdom manifested itself, according to the decision, in particular in two letters of 28 and 29 January 1976 which the director of Shriro, Mr Todd, sent to the general manager of the Audiotronic

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Group (hereinafter referred to as "Audiotronic") and to the chairman of Comet Radiovision Services Limited (hereinafter referred to as "Comet"), those two undertakings being the main customers of Shriro, inviting them to cease exporting Pioneer products.

5 The submissions which the applicants put forward against the decision may in essence be grouped together as follows:

A — Infringement of essential procedural requirements, inasmuch as:

(a) The Commission combines the functions of judge and prosecutor;

(c) The duration of the alleged concerted practices;

(d) Pioneer's participation in those practices;

(e) The hi-fi market shares held by the applicants in France and the United Kingdom and therefore the effect of the concerted practices on trade between Member States.

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C — Failure to take into account circumstances precluding the imposition of fines:

(a) Legitimate self-protection and necessity, as regards MDF;

(b) Absence of intention on the part of Pioneer;

(c) Erroneous basis of calculation on the grounds that the fines are pro- portionate to the total turnover of the undertakings, that in the case of Melchers the fine exceeds 10 % of the relevant turnover and that, in the cases of MDF and Pioneer, the turnover used relates to a different financial year from that used in the case of the other applicants;

(d) Erroneous appraisal of the duration of the concerted practices;

(e) As regards MDF and Pioneer, breach of the alleged principle that a single fine cannot be imposed by combining several fines for separate infringements;

(f) Confiscatory nature of the fine imposed on Melchers and breach of the principle of proportionality inasmuch as the fine imposed on MDF exceeds the economic capacities of the undertaking.

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9 Thus Article 19 (1) of Regulation No 17 of the Council of 6 February 1962 (Official Journal, English Special Edition 1959-62 p. 87) requires the Commission, before taking a decision, to give the parties concerned the opportunity of being heard on the matters to which the Commission has taken objection and the Commission, in its Regulation No 99/63 of 25 July 1963 on the hearings provided for in Article 19 (1) and (2) of Council Regu- lation No 17 (Official Journal, English Special Edition 1963-64, p. 47), instituted a procedure of an adversary nature. Under that procedure the Commission must notify its objections to the undertakings concerned, which may then reply in writing within a stated period. Where appropriate, and particularly in cases where the Commission proposes to impose fines, the undertakings may be afforded an oral hearing. Under the terms of Article 4 of Regulation No 99/63 the Commission may, in its decisions, deal only with those objections raised against undertakings in respect of which they have been afforded the opportunity of making known their views.

io As the Court recalled in its judgment of 13 February 1979 in Case 85/76 (Hoffmann-La Roche v Commission [1979] ECR 461), the abovementioned

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provisions are an application of the fundamental principle of Community law which requires the right to a fair hearing to be observed in all proceedings, even those of an administrative nature, and lays down in particular that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged and on the documents used by the Commission to support its claim that there has been an infringement of the Treaty.

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Commission's statement of objections. The Commission must take into account the factors emerging from the administrative procedure in order either to abandon such objections as have been shown to be unfounded or to amend and supplement its arguments, both in fact and in law, in support of the objections which it maintains, provided however that it relies only on facts on which the parties concerned have had an opportunity to make known their views and provided that, in the course of the administrative procedure, it has made available to the undertakings concerned the infor- mation necessary for their defence.

is Since, in accordance with the last subparagraph of Article 15 (2) of Regu- lation N o 17, the duration of the infringement is one of the factors to be taken into consideration when fixing the fine, it is clear from those decisions of the Court that the Commission, particularly when it proposes to impose fines, must state, as an essential factor, the duration established by it on the basis of the information available to it at the time when it formulates the statement of objections. The Commission may extend the period thus stated if supplementary information obtained during the administrative procedure so justifies, provided that the undertakings have had an opportunity to make their views known in that respect.

i6 In the present cases it is not disputed that the Commission did not indicate to the applicants its intention to establish the existence of infringements of a longer duration than was mentioned in the statement of objections and that the undertakings had no opportunity of making known their views as regards periods which were not mentioned therein.

20 Finally, the applicants claim that the Commission infringed their right to a fair hearing by not stating, during the administrative procedure, if necessary in a supplementary statement of objections, the criteria on the basis of which it was proposing to calculate the fine, not to mention the amount or even the approximate size of it. That infringement is said to be all the more serious in the present case since the fines imposed were considerably higher than those imposed in the past and since they were calculated by applying a formula linked to the turnover of the undertakings in question. Moreover, Pioneer claims that it was not open to the Commission to impose on it a fine based on the assumption that the infringement was intentional when, in the statement of objections, it did not describe Pioneer's conduct in that way.

21 That part of the submission cannot be upheld either. In its statement of objections, the Commission expressly stated that it would consider whether it was appropriate to impose fines on the undertakings and it also indicated the main factual and legal criteria capable of attracting a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed "intentionally or negligently". In doing so the Commission fulfilled its obligations on this point inasmuch as it gave the undertakings the

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necessary details to enable them to defend themselves not merely against the finding of an infringement but also against the imposition of fines. To give indications as regards the level of the fines envisaged, before the under- takings have been invited to submit their observations on the allegations against them, would be to anticipate the Commission's decision and would thus be inappropriate.

26 Since the period to be taken into consideration in assessing the duration of the infringements must, as has been stated above, be confined to late January and early February 1976 and since the Commission's findings relating to the effects on Audiotronic's exports relate specifically to a later period, the Court's examination of this part of the submission may be restricted to Comet's situation.

27 As far as the latter u n d e r t a k i n g is concerned, the Commission relied essentially on a written statement by M r M a s o n , a director of C o m e t , and on the reports of its inspectors on visits to C o m e t and E u r o - E l e c t r o and on accounting documents relating to Comet.

28 Mr Mason's statement was communicated to the applicants by the Commission on 9 October 1978, but only in part. The Commission refused to divulge the pertinent points of the statement, invoking their confidential nature, which did not however prevent Mr Mason himself from sending to the applicants, at their request, a complete copy of the statement.

29 Although, as a result of their own diligence, the applicants thus gained knowledge of the whole of the statement made by Mr Mason just before the hearing, it is not disputed that they were not acquainted or were only partially acquainted with the other documents mentioned above before the Commission adopted its decision. Therefore they did not have the oppor- tunity, in due time, of making known their views on the contents and the scope of those documents or of obtaining and putting forward, where appro- priate, evidence to the contrary. It follows that the Commission was wrong to base its decision on the contents of those documents.

33 However, in paragraph (25) of its decision, the Commission adhered to the figures which it had given in the statement of objections. It did not therefore base its decision on the volume of those markets as estimated in the report. That report was requested solely in order to verify the Commission's initial estimates, on which the applicants had cast doubts during the administrative procedure. That part of the submission cannot therefore be accepted.

(d) The non-disclosure of the opinion of the Advisory Committee

34 MDF and Pioneer argue that Article 10 (6) of Regulation N o 17, which states that the opinion of the Advisory Committee shall not be made public, should be construed in such a way as to allow the opinion to be disclosed confidentially to "the undertakings directly concerned". It is argued that if such a construction is not accepted the aforesaid provision is invalid because it offends against the principle of the right to a fair hearing.

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35 Article 10 (6) of Regulation N o 17 cannot be construed in the way suggested by the applicants. It is clear from that article that the consultation of the Advisory Committee represents the final stage of the procedure before the adoption of the decision and the opinion is given on the basis of a draft of the decision. To give the undertakings the opportunity of making their views known on that opinion and, therefore, on the draft decision would amount to reopening the previous stage of the procedure, which would be contrary to the system intended by the regulation.

38 Following a discussion with Mr Iffli on 12 December 1975 at Gruoner's head office in Rommelshausen, the chief buyer for that company, Mr Schreiber, sent a telex message to Melchers, amongst others, on 15 December 1975 requesting it to send price lists. Melchers referred him to its local represen- tative, who visited Gruoner. On the basis of the information thus obtained, including the latest price list for 1975, Mr Schreiber, on 31 December 1975 sent an offer to Mr Iffli for equipment, including Pioneer equipment, at prices up to 30% below those quoted by MDF at that time.

39 On 12 and 14 January 1976, Mr Iffli placed two orders with Mr Weber for a. total value of approximately D M 1 000 000. Mr "Weber immediately forwarded those orders to Gruoner but it was not until 20 January 1976, that is to say the day on which Mr Weber assured Mr Iffli that part of the goods were already on their way to Rommelshausen, that Mr Schreiber ordered by telex from Melchers goods corresponding to the orders placed by Mr Iffli but having a value of only D M 550 000. According to Mr Schreiber's expla- nations he had in the meantime had fresh discussions with the local represen- tative of Melchers and had obtained a new price list applicable as from February 1976.

40 On 21 and 22 January 1976 Mr Iffli obtained the necessary import licences from the French authorities. On the same dates, Melchers, for its part, checked its stocks in relation to Gruoner's order and obtained an under- taking from an insurance company that it was prepared to cover Gruoner's order for D M 200 000. On 23 January 1976, in reply to a further telex message from Mr Schreiber, Melchers confirmed the order and gave the name of the carrier who was to deliver the goods. According to Melchers' explanations, that telex message was sent in error.

44 In a telex message dated 18 February 1976, Mr Schreiber, referring to "the meeting with the management of Melchers", gave Mr Weber information identical to that contained in his handwritten notes on the telex message of 6 February. The telex message of 18 February continues as follows:

" 3 . We are very interested in including Pioneer equipment in our sales programme. We cannot make deliveries in sufficient quantities unless Melchers has an assurance that we supply the equipment delivered to the German retail trade.

4. There can be no talk of commercial pressure and that factor cannot unfortunately be changed overnight. Ultimately, it is decisive for European sales to maintain the level of prices."

45 In a memorandum dated 19 February 1976 regarding the meeting in Rommelshausen on 11 February, Mr Schreiber stated, inter alia, that

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"Following talks with C. Melchers and Co. . . . any obstacles to cooperation between us have now been removed."

49 Again according to Melchers, the reason why the goods were not delivered after business relations between the two undertakings were finally established at the meeting in Rommelshausen on 11 February 1976 was that Gruoner had lost all interest in performing the contract entered into with Mr Iffli. Mr Schreiber had in fact discovered that he had made a mistake in calculating the prices which he had quoted to Mr Iffli on 31 December 1975. Apart from

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the various standard discounts mentioned by the local representative, he had deducted 1 1 % in respect of German value-added tax whereas the basic prices did not include value-added tax.

so In that regard, Melchers relies on a mathematical formula written by hand by Mr Schreiber on a price list for products other than Pioneer equipment which Melchers' lawyers found during a visit to Gruoner's premises and also on a written statement of 5 September 1980 in which Mr Schreiber admitted having invented the story of Melchers' refusal to sell so as to conceal the mistake which he had made in his calculations. That statement was confirmed in essence by Mr Schreiber at the hearing of witnesses before the Court.

si In view of the opposing arguments of the parties and the contradictory statements of Mr Schreiber, it must be seen whether the other evidence is capable of confirming one or other of those arguments.

52 As regards the Commission's argument, it should be borne in mind that the telex message sent by Mr Schreiber to Mr Weber on 28 January 1976 stated that "Pioneer's European head office in Antwerp already knows that a licence has been issued to import Pioneer equipment." In fact it is not disputed that MDF informed Pioneer of the licences issued to Mr If fli on 21 and 22 January 1976 and that Pioneer forwarded that information to Melchers. In those circumstances, the explanation given by Mr Schreiber in his statement of 5 September 1980 to the effect that it was Mr Iffli who informed him of the grant of the licences is unconvincing.

55 As regards the applicant's argument, the description of the discussions between Mr Schreiber and the local representative as merely being an initial contact does not accord with the notes taken by Mr Schreiber during those two discussions. Those handwritten notes, the contents of which were explained by Mr Schreiber before the Court, describe in detail the conditions of sale and delivery, including the various rebates and bonuses offered to retailers of different sizes and even to the single wholesaler previously supplied by Melchers. It is possible that Gruoner, as a large wholesaler, might have hoped to obtain more by prolonged negotiations but it is impossible to understand why Melchers was not prepared to supply the goods ordered on terms which according to it were the normal terms at that time. Save for the period of payment, it is moreover difficult to detect any difference between the terms stated in the handwritten notes regarding the last discussion with the local representative and those stated in the memorandum of 19 February 1976 regarding the meeting in Rommelshausen.

57 As far as the alleged error relating to value-added tax is concerned, it is true that, in respect of most of the models, the discounts indicated by a fixed percentage in Mr Schreiber's handwritten notes do not by themselves explain the low prices offered by Mr Schreiber to Mr Iffli on 31 December 1975, whereas an application of the formula indicated by Mclchers makes it possible, provided certain of those percentages are inserted, to arrive at the exact prices offered. As the Commission has emphasized, the price lists which formed the basis of Mr Schreiber's calculations clearly stated that the prices were quoted exclusive of value-added tax; the method indicated by the formula is not the one to be used to deduct value-added tax at the rate of 1 1 % and the alleged error was not in any event made in respect of the prices for loudspeakers. Moreover, when the witnesses were heard before the Court, Mr Schreiber was unable to explain how he could have made such an error and was unable to demonstrate his calculations in that respect. So, even if the precise level of most of the prices offered to Mr Iffli thus remains unexplained, the explanation proposed by Melchers cannot be accepted.

58 Finally, it is impossible to disregard the chronological sequence of events or the fact that they are c o n t e m p o r a n e o u s with those relating to parallel imports from the United K i n g d o m . G r u o n e r ' s order was in fact treated in a perfectly normal m a n n e r by Melchers until the time w h e n it may reasonably be supposed that Melchers received knowledge of the grant of the licences to Iffli. T h a t m o m e n t was in the w e e k following Melchers' participation in the meeting of 19 and 20 J a n u a r y 1976 at Pioneer's headquarters in Antwerp. At that meeting M D F complained of parallel imports into France and, following the meeting, Shriro's m a n a g i n g director requested his main customers, by letters of 28 and 29 J a n u a r y 1976, to cease exporting.

62 In that respect it should first be emphasized that it is not disputed that those letters followed increasingly insistent appeals from Mr Setton, the owner of MDF, who had even made some test purchases with Audiotronic and Comet, the results of which he produced at the Antwerp meeting on 19 and 20 January 1976. The letters contain unequivocal requests to cease exporting Pioneer equipment. They were sent to the two main customers, which together accounted for some 4 5 % of sales of Pioneer equipment supplied by Shriro. In those circumstances, the two letters constitute, by themselves, proof of a concerted practice between MDF and Shriro which had as its object the restriction of competition within the common market. Subject to

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the shares held by MDF and Shriro in die markets concerned, a question which is dealt with below in section (e), that practice was also capable of affecting trade between Member States. The submission put forward by the two applicants does not therefore relate to the existence of an infringement of Article 85 (1) of the Treaty but merely to the effect of that infringement and, consequently, to its gravity.

63 As regards Audiotronic, the Commission admits that the letter sent to that undertaking had no immediate effects. On the contrary, according to paragraph (50) of the contested decision, Audiotronic even replaced Comet in supplying Euro-Electro in Brussels as soon as Comet ceased exporting Pioneer equipment. According to the Commission, it was only as from March 1976 that the concerted practice had any effect as regards Audio- tronic. Since the submissions relating to procedural defects result in the period to be taken into consideration being restricted to late January and early February 1976, those statements are immaterial.

"On 30 January 1976 a letter was received by the company addressed to the Chairman from the Managing Director of Shriro (UK) Ltd. The company was anxious to preserve its good relations with Shriro and to be able to continue obtaining satisfactory supplies. A placatory letter was therefore sent to Shriro. Following this correspondence the matter has been discussed with Shriro, but nothing additional to what is set out in the letter of 30 January 1976 has been said. . . . Since January 1976 we have received various requests for Pioneer equipment from abroad, but because of the combined effects of credit limits on our customers and available margins, we have so far only been able to meet these requests to a very limited extent, though the company has now made it clear to Shriro (UK) Ltd it must be free to trade in accordance with EEC laws."

68 The applicants maintain that, although that statement in fact confirms that no large quantities of Pioneer equipment were exported after receipt of Mr Todd's letter, it indicates on the other hand that that was due not to the letter but to circumstances of a commercial nature.

69 In that regard it must however be remembered that at the period in question Comet, far from stating that it must be able to trade freely, stated in reply to Mr Todd's letter that it "will not deliberately export Pioneer products to trade customers outside the United Kingdom". It follows that the last sentence of Mr Mason's statement relates to a period which, in any event, is later than the period "late January/early February 1976".

73 Pioneer disputes that its conduct may be described in such a way. It maintains that it was in no position to have any control over the conduct of Shriro or Melchers. The purpose of the Antwerp meeting was not to discuss parallel imports. On that occasion, as on many others, Pioneer's represen- tatives merely listened to the complaints made by Mr Setton of MDF and advised him to lower his prices. The forwarding of information on parallel imports merely forms part of the normal exchange of information between supplier and distributor concerning the market situation.

74 In this regard, it should be remembered that the purpose of Pioneer, which is a wholly-owned subsidiary of the parent company in Japan, is to import

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Pioneer equipment into Europe and to organize sales of such equipment. T o that end, it attempts to find a distributor in each of the Member States in question, offers it an exclusive distributorship agreement, divides the products imported amongst the national distributors and seeks to coordinate their sales efforts, inter alia by holding regular meetings.

75 Even if those activities do not necessarily confer on Pioneer a decisive influence on the conduct of each of the distributors, that does not alter the fact that, on account of its central position, it was obliged to display particular vigilance in order to prevent concerted efforts of that kind from giving rise to practices contrary to the competition rules.

76 As far as Melchers' conduct is concerned, it is not disputed that Pioneer forwarded to that distributor not merely Mr Setton's complaints but also information concerning the import licences obtained by Mr Iffli from the French authorities. In those circumstances such a communication appears to have been an implied incitement to Melchers to try to discover the source of those imports and to put a stop to them.

so It must therefore be concluded that the Commission was justified in finding that Pioneer had participated in two concerted practices.

(e) The market shares held by the applicants and the effect on trade between Member States

si In paragraph (3) of its decision, the Commission estimates the total value of hi-fi products sold by Pioneer to its distributors in the three Member States concerned during the financial year 1975/76 at BFR 735 000 000. Further- more, it states in paragraph (25) that in 1976 M D F s turnover in Pioneer products was FF 77 000 000, Shriro's was UKL 7 300 000 and Melchers' was D M 19 000 000. On the basis of an estimate of the hi-fi markets in the three Member States it arrives at the conclusion that the share of the market held by Pioneer products in 1976 was at least 7 to 10% in France, 8 to 9% in the United Kingdom and approximately 2 % in the Federal Republic of Germany. It finds in paragraphs (75) and (82) that those market shares were sufficiently large for the behaviour of the undertakings to. be, in principle, capable of appreciably affecting trade between Member States.

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82 MDF and Pioneer GB dispute those calculations. On the one hand, the Commission included, in the turnover figures stated, products other than Pioneer hi-fi equipment; on the other hand, it defined the hi-fi market too narrowly. The two applicants consider that their market shares in 1976 were 3.38% in France and 3.18% in the United Kingdom. They maintain that such market shares are not sufficient for their conduct to be regarded as capable of affecting trade between Member States within the meaning of Article 85 (1) of the Treaty.

86 That is not the position of the applicants in the present case. The studies produced by MDF and Pioneer GB show that the market in hi-fi products in

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France and the United Kingdom is veiy large but that it is markedly divided between a very great number of brands, so that the percentages stated by the applicants exceed those of most of their competitors. If regard is had solely to imported brands, it even seems that the two applicants were amongst the largest suppliers of the two markets. In those circumstances, regard being had to their absolute turnover figures, it cannot be denied that conduct by those undertakings seeking to restrain parallel imports and therefore to partition national markets was capable of exercising an influence on the pattern of trade between Member States in a way capable of hindering the attainment of the objectives of a single market.

87 It must therefore be concluded that the Commission was justified in finding that the applicants' conduct was capable of appreciably affecting trade between Member States.

C •—• S u b m i s s i o n s b a s e d on a f a i l u r e to t a k e i n t o account c i r c u m s t a n c e s p r e c l u d i n g the i m p o s i t i o n of fines

(a) Legitimate self-protection and necessity

(b) Article 85 (3) of the Treaty

92 MDF claims that the substantive conditions for an exemption under Article 85 (3) were satisfied and that therefore it could have obtained an exemption by means of notification. The infringement therefore consisted not in a breach of one of the principal objects of the Treaty but merely in a breach of a procedural rule, namely the failure to satisfy · the > requirements of notification and obtaining a formal exemption.

95 In rejecting that submission it is sufficient to refer to the appraisal made by the Court, in part B (a) above/of Melchers' stock levels at the material time and of the absence of any attempt on its part to obtain the necessary goods.

(d) The absence of instructions from the partners

96 In Melchers' view, an undertaking may not be fined unless it is established that the infringement is attributable to the undertaking itself, that is to say, in the present case, to the general partners in Melchers. It is argued that the Commission has not shown that the partners intended to commit the alleged infringement or that they acted negligently.

97 It must be emphasized, in that respect, that Article 15 (1) and (2) of Regu- lation No 17 empowers the Commission to impose on undertakings or associations of undertakings fines where, intentionally or negligently, they have been guilty of infringements. For that provision to apply it is not necessary for there to have been action by, or even knowledge on the part of, the partners or principal managers of the undertaking concerned; action by a person who is authorized to act on behalf of the undertaking suffices.

98 The applicant has not shown that the managers of the hi-fi division of Melchers exceeded the powers which the partners conferred on them by employing them in those posts. As far as the local representative is concerned, the applicant even maintained that he always acted in his

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101 The applicants maintain that, in fixing the amounts of the fines, the Commission failed to observe the last subparagraph of Article 15 (2) of Regulation No 17, which provides that regard shall be had both to the gravity and to the duration of the infringement. According to the applicants, the Commission did not base itself on the gravity of their conduct nor on its duration. They say that it took advantage of these cases in order to introduce a new policy intended to increase the general level of fines for certain infringements of Community law although such a change in policy was justified neither by the nature of the infringements in question nor by the particular circumstances of the case. The imposition of such large fines in the present cases is solely due to the fact that the cases came before the Commission at a time when it was changing its policy, which is not only contrary to the provisions of the regulations but in fact leads to arbitrariness.

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102 Moreover, the method thus described is manifestly discriminatory. The facts of the present cases arose at the same time as those of other cases in which the Commission adopted a decision before the decision in the present case, imposing significantly lower fines.

103 The Commission admits that the present cases are the first in which it has imposed a level of fines considerably higher than in the past. Before the adoption of the contested decision it had not imposed fines exceeding 2 % of the total turnover of the undertaking, even for serious infringements. In these cases the fines range from 2 to 4 % of turnover.

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also encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles.

IOC It follows that, in assessing the gravity of an infringement for the purpose of fixing the amount of the fine, the Commission must take into consideration not only the particular circumstances of the case but also the context in which the infringement occurs and must ensure that its action has the necessary deterrent effect, especially as regards those types of infringement which are particularly harmful to the attainment of the objectives of the Community.

107 From that point of view, the Commission was right to classify as very serious infringements prohibitions on exports and imports seeking artificially to maintain price differences between the markets of the various Member States. Such prohibitions jeopardize the freedom of intra-Community trade, which is a fundamental principle of the Treaty, and they prevent the attainment of one of its objectives, namely the creation of a single market.

ios It was also open to the Commission to have regard to the fact that practices of this nature, although they were established as being unlawful at the outset of Community competition policy, are still relatively frequent on account of the profit that certain of the undertakings concerned are able to derive from them and, consequently, it was open to the Commission to consider that it was appropriate to raise the level of fines so as to reinforce their deterrent effect.

(c) The use of turnover as the basis for calculating the fines

113 Melchers claims that it is unlawful to fix the fines in proportion to the under- taking's turnover, as the Commission has done in the present cases. It argues that turnover in fact gives no indication of the profitability of the under- taking or of its ability to pay a fine.

IM In any event, Melchers, MDF and Pioneer claim that the fine cannot be calculated, as the Commission has done in the present case, on the basis of the total turnover of the undertaking, since the goods in respect of which the infringement was committed represent only a part of that turnover.

us Pioneer argues that the fine imposed on it must be reduced because the turnover on which the Commission based its calculations also related to sales of hi-fi equipment to countries not affected by the infringement.

116 According to Melchers, the Commission ought to have taken into consideration the fact that only about 10% of its turnover related to hi-fi products, whilst in the case of the other applicants those products accounted for the whole of their turnover. Melchers adds that, in fixing the ceiling for fines at 10% of the turnover, Article 15 (2) of Regulation No 17 refers to

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no In assessing the gravity of an infringement regard must be had to a large number of factors, the nature and importance of which vary according to the

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type of infringement in question and the particular circumstances of the case. Those factors may, depending on the circumstances, include the volume and value of the goods in respect of which the infringement was committed and the size and economic power of the undertaking and, consequently, the influence which the undertaking was able to exert on the market.

(d) The duration of the concerted practices

123 According to MDF and Pioneer, the concerted practices could only have commenced on 19 and 20 January 1976 at the time of the Antwerp meeting. Pioneer and Melchers observe that the concerted practice between MDF,

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Pioneer and Melchers was consummated on 27 January 1976 when the employees of Melchers told Mr Schreiber that the goods would not be delivered. Lastly, the applicants maintain that there is no evidence that the concerted practice between MDF, Pioneer and Shriro continued for two years. It is argued that, as the duration of the infringement is one of the factors to be taken into account in fixing a fine, it is appropriate to reduce the fines considerably on that ground.

124 As a result of the finding that the infringements committed were confined to the period "late January/early February" and in view of the findings relating to Melcher's refusal to sell, it is no longer necessary to deal with these submissions. The duration of the concerted practices established by the Court will enter into the general assessment to be made by it within the framework of its powers of unlimited jurisdiction.

(e) The imposition of a single fine for two concerted practices

1 2 8As stated above in part A (b), the finding relating to the duration of the infringements must be confined to the period "late January/early February 1976". The decision must therefore be declared void to the extent to which it finds that the concerted practices exceeded that period. For the rest, the claim for a declaration of nullity must be dismissed.

The claim for a reduction of the fines

129 In fixing the amount of the fines regard must be had to the duration of the infringements established and to all the factors capable of affecting the assessment of the gravity of the infringements, such as the conduct of each of the undertakings, the role played by each of them in the establishment of the concerted practices, the profit which they were able to derive from those practices, their size, the value of the goods concerned and the threat that infringements of that type pose to the objectives of the Community.

1 3 0 In relation to the criteria used by the Commission in fixing the fines, regard must be had in particular, in the case of all the undertakings, to the shorter duration of the infringements resulting from the partial nullity of the contested decision and to the considerations set out above in part D (c)

JUDGMENT OF 7. 6. 1983 — JOINED CASES 100-103/80

concerning the relationship between the total turnover of the undertakings and the other factors to be taken into account for the purpose of determining the gravity of the infringements.

135 In view of the reduction of the fines decided above and the fact that since the date of the contested decision the undertakings have had the use of the sums in question without having to arrange a guarantee or pay interest, the submissions put forward by MDF and Melchers regarding the difficulties

MUSIQUE DIFFUSION FRANÇAISE v COMMISSION

which payment of the fines would entail for them must be rejected. That applies equally to M D F s claim to be allowed to pay the fine in several instalments. It is for the Commission to decide, in an appropriate case and haying regard to the current financial situation of the undertakings, whether it is desirable to allow payment to be deferred or effected in instalments.

Costs

136 Under the terms of Article 69 (2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party's pleading. However, under paragraph (3) of that article the Court may order the parties to bear their own costs in whole or in part where each party succeeds on some and fails on other heads or where the circumstances are exceptional.

137 Since each party has failed on certain heads, each must bear its own costs.

In the case of Melchers (Case 101/80), 400 000 units of account, that is to say DM 992 184;

OPINION OF SIR GORDON SLYNN — JOINED CASES 100-103/80

In the case of Pioneer (Case 102/80), 2 000 000 units of account, that is to say BFR 80 679 000;

In the case of Pioneer G B (Case 103/80), 200 000 units of account, that is to say U K L 129 950;

3. Dismisses the applications for the rest;

4. Orders each party to bear its own costs.