C-43/82

VERENIGING T E R BEVORDERING VAN H E T VLAAMSE BOEKWEZEN, VBVB (Association for t h e P r o m o t i o n of Flemish Books), having its place of business in A n t w e r p , represented b y Aimé de C a l u w é a n d J o h a n Billiet, of the Brussels Bar, with an address for service in L u x e m b o u r g at the C h a m b e r s of Ernest A r e n d t , 34 B R u e Philippe-Il, and V E R E E N I G I N G TER BEVORDERING VAN D E BELANGEN DES BOEKHANDELS, VÉBE (Association for t h e P r o m o t i o n of t h e Interests of t h e B o o k T r a d e ) , having its place of business in A m s t e r d a m , represented b y T h . R. Bremer, of t h e A m s t e r d a m Bar, with an address for service in L u x e m b o u r g at t h e C h a m b e r s of J e a n - C l a u d e W o l t e r , 2 R u e G o e t h e , applicants, supported b y G R O U P E M E N T DES ASSOCIATIONS DE LIBRAIRES DE LA C E E ( G A L C ) [ F e d e r a t i o n of Associations of Booksellers in t h e E E C , hereinafter referred t o as " t h e Booksellers' F e d e r a t i o n " ] a n d G R O U P E M E N T DES ÉDITEURS DE LIVRES D E LA C E E ( G E L C ) [Federation of Associations of Publishers of Books in t h e E E C , hereinafter referred t o as " t h e Publishers' F e d e r a t i o n " ] , b o t h having their place of business in Brussels, represented for t h e written p r o c e d u r e by J e r e m y Lever, Q C , of G r a y ' s I n n , a n d Robin Griffith, Solicitor, Brussels, a n d for t h e oral p r o c e d u r e b y O r m o - W i l l e m Brouwer, of t h e A m s t e r d a m Bar, with an address for service in L u x e m b o u r g at t h e Chambers of Jacques Loesch, 2 R u e G o e t h e , and BÖRSENVEREIN DES D E U T S C H E N BUCHHANDELS E.V., having its registered office at F r a n k f u r t - a m - M a i n , represented for t h e written p r o c e d u r e by F r a n z - Wilhelm Peter, Rechtsanwalt, Frankfurt, a n d for t h e oral p r o c e d u r e b y O r m o - W i l l e m Brouwer, with an address for service in L u x e m b o u r g at t h e C h a m b e r s of J e a n - C l a u d e W o l t e r , interveners,

interveners,

APPLICATION for a declaration that Commission Decision 82/123/EEC of 25 November 1981 relating to a proceeding under Article 85 of the EEC Treaty (IV/428-VBBB/VBVB) is void,

THE COURT

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

Advocate General: P. VerLoren van Themaat Registrar: J. A. Pompe, Deputy Registrar

gives the following

The essential feature of the national rules is a resale price maintenance system, I — S u m m a r y of t h e f a c t s collectively applied, which is binding on the members of the associations. The associations are empowered to conclude with national or foreign organizations The Vereeniging ter Bevordering van de binding agreements relating to the book Belangen des Boekhandels (hereinafter trade. referred to as "the Dutch Association") is an association of publishers, book wholesalers, booksellers, importers of books and book-club operators who are On 21 January 1949 the Dutch and established in the Netherlands. Its object Flemish Associations made an agreement is to protect the common interests of (amended on 2 June 1958) relating to booksellers and publishers and to trade in Dutch-language books between promote cooperation in the book trade Belgium and the Netherlands. in the widest sense, in particular by laying down and administering binding rules governing the book trade in the According to Article 1 thereof publishers Netherlands with the object of and booksellers who are members of the determining standards and practices for association in one country may on bookselling in the Netherlands- and · request . become members of· the encouraging their observance and ap- association of the other country with the plication. same rights and obligations as'publishers and booksellers who, in the other country, are members of that association. Membership is not open to persons who, The Vereniging ter Bevordering van het whilst being members of the association Vlaamse Boekwezen (hereinafter in one country, carry on business as referred to as "the Flemish Associ- publishers or booksellers or both in the ation"), an association having its place of other country without having been business in Antwerp, is a federation, recognized by the association of that possessing legal personality, of pub- country. lishers, booksellers, sole distributors of domestic and foreign publishing houses and members of allied trades and is established in the Dutch-speaking part of Under Article 2 of the agreement books - Belgium. Its object is to protect the to which the agreement relates may not interests of the book trade in the widest be sold or offered for sale in Belgium or

Books published in one country by pub- lishers not recognized in that country On 7 December 1977 the Commission may not be sold or stocked nor may decided to institute a proceeding. The their sale be promoted in any way in the Commission's statement of objections other country. was received by the Dutch Association on 12 January 1978 and by the Flemish Association on 19 December 1977. In pursuance of Article 19 (1) of Regulation No one may be appointed as sole No 17 and of the provisions of Regu- distributor or depositoiy in the other lation No 99/63 of the Commission of country who in that country holds 25 July 1963 on the hearings provided himself out to the public as a publisher, for in Article 19 (1) and (2) of Council bookseller or importer, either system- Regulation No 17 (Official Journal, atically or occasionally, even for a single English Special Edition 1963-1964, p. title, without being recognized as such 47) they were heard on 15 and 16 March by the association of that country. 1978 and 18 October 1979; on several occasions they submitted to the Commission written observations and documents. Articles 3 and 4 of the agreement specify the rules to be observed by publishers and booksellers recognized as such in one country when they cany on business After obtaining on 20 May 1981 the in the other. Thus to cany on business in opinion of the Advisory Committee on the Netherlands a publisher must fix a Restrictive Practices and Dominant single retail price for each format in Positions in pursuance of Article 10 of which each of his titles appears. Regulation No 17, the Commission on 25 November 1981 adopted Decision 82/123 relating to a proceeding under Article 5 lays down a system of penalties Article 85 of the EEC Treaty (IV/ for failure to apply the agreement. 428-VBBB/VBVB), notified on 11 and 14 December 1981 respectively and published in the Official Journal on 25 February 1982 (Official Journal, L 54, The agreement concluded between the p. 36). two associations was notified to the Commission, in pursuance of Article 5 of Regulation No 17 of the Council of 6 February 1962, the first regulation Article 1 of the decision states that the implementing Articles 85 and 86 of the agreement between the two associations, Treaty (Official Journal, English Special making provision for collective exclusive

II — W r i t t e n p r o c e d u r e On the same dates as those on which the main applications were lodged the applicants, in pursuance of Articles 185 and 186 of the EEC Treaty and of Applications were submitted to the Article 83 of the Rules of Procedure, Court, by the Flemish Association on each lodged an application for the 5 February 1982 and by the Dutch adoption of interim measures requesting Association on 15 February 1982, for a a suspension of the operation of the declaration that the Commission decision decision contested in the main actions. of 25 November 1981 was void. The The President of the Court by order of applications were registered under 17 February 1982 ordered the joinder of numbers 43/82 and 63/82 respectively. the two applications; by order of 10 March 1982 he allowed N V Club, NV GB-INNO-BM and NV Sodai to intervene in support of the Commission By order of 17 February 1982 the Court in the applications for the adoption of decided to join the two cases for the interim measures and after considering purposes of the procedure and the the written observations of the Com- judgment. mission and the interveners and after hearing them at a sitting on 25 March 1982 he made an order on 31 March By order of 10 March 1982 the Court 1982, the operative part of which is as decided to allow NV Club, NV GB- follows :

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" 1 . The operation of Articles 1, 2 and 3 Upon hearing the report of the Judge- of the Commission's decision of 25 Rapporteur and the views of the November 1981 relating to a Advocate General the Court decided to proceeding under Article 85 of the open the oral procedure without any EEC Treaty (IV/428-VBBB/VBVB) preparatory inquiry. However, it asked is suspended, in so far as those pro- the Commission and the applicants in the visions concern the system of main actions to reply in writing to collective resale price maintenance in certain questions and requests; the the trade in Dutch-language books parties complied within the period pre- resulting from the agreement be- scribed. tween the two associations con- cerned.

3. Neither the applicants nor the associations of which they are The applicant in Case 43/82 claims that composed shall apply the penalties the Court, after requiring the Com- or exclusions provided for by the mission, m pursuance of Article 186 of agreement, in particular in Article 5 the EEC Treaty, to produce the internal thereof, against those of their actual memoranda drawn up by it in the members or other parties recognized context of this case, should: or registered with them who do not voluntarily comply with the rules (a) declare the application admissible contained in that part of the and well founded and rule that the agreement which remains in force. contested decision must be declared void on the ground that the pro- 4. The costs are reserved." cedural conditions connected with the adoption of the decision and the By three orders of 14 July 1982 the preliminary inquiry have not been Court decided to allow the intervention observed; declare it void also on in support of the applicants in the account of breach of the rights of the main actions of the Groupement des defence, of the rules of procedure of Associations de Libraires de la CEE Community law and of the duty to (GALC), having its place of business in answer the submissions made; Brussels, the Groupement des Éditeurs de Livres de la CEE (GELC), having its (b) alternatively: declare that the place of business in Brussels, and the Commission is also bound to observe Börsenverein des Deutschen Buchhandels Article 10 of the Convention for the eV, having its registered office in Protection of Human Rights and Frankfurt-am-Main. Article 10 bis of the Paris Con- vention for the Protection of By order of 22 September 1982 the Industrial Property, which arc Court dismissed the application by the incompatible with the prohibition of three above-mentioned interveners to be resale price maintenance for books; allowed to submit their pleadings and to also declare that Article 85 (1) is not present oral argument in English. applicable to this matter as this case is not concerned with a decision by The written procedure followed the an association of undertakings normal course. having the effect of distorting

The applicant in Case 63/82 contends that the Court should: IV — S u b m i s s i o n s a n d a r g u m e n t s (a) declare the Commission decision of of t h e p a r t i e s in t h e w r i t t e n 25 November 1981 void for in- procedure fringement of essential procedural requirements, infringement of the The applicants and the parties intervening Treaty or of rules of law relating to in their support put forward against the its application; contested decision a series of'complaints, (b) order the Commission to pay the some based on procedure and others on costs. substance, by which they claim it is vitiated and which ought to lead to a The Booksellers' Federation and the Pub- declaration that it is void. lishers' Federation, interveners: The Commission and the parties in- (a) declare that they support the tervening in its support consider all the conclusions of the applicants in the above-mentioned submissions to be main action in so far as they claim a unfounded. declaration that the Commission decision of 25 November 1981 is void; A. The complaints of a procedural nature (b) ask that the Commission be ordered to pay their costs. The taking into account of the system of collective exclusive dealing The Börsenverein des Deutschen Buch- handels, intervener, declares that it adopts The applicants complain that the in their entirety the arguments and Commission based its decision on the conclusions of the Booksellers' Fed- alleged existence in the disputed eration and the Publishers' Federation, agreement of a system of collective interveners. exclusive dealing although it knew beyond doubt that that system was at The Commission contends that the Court least no longer actually applied. should: According to the Flemish Association the (a) dismiss the applications made by the Commission was officially informed of Dutch Association and the Flemish that fact in 1,979 and 1981 at the time of Association; the notification of the abolition of the

The Commission claims that its decision had to relate to the agreement as it was In spite of the assertion that the subject- notified to it. No official amendment to matter of the decision is not the legality the agreement was ever made. In order of a system of resale price maintenance that its decision may be properly based as such, the Commission has omitted to all that is necessaiy is for the Com- prove the special nature of the trans- mission to establish that the purpose of national agreement or of the national the contested agreement is to restrict rules of the Flemish and Dutch competition. Moreover the notification Associations. In actual fact it took as its of a fresh version of the Belgian national point of departure the idea that a general system combined with the implemen- system of resale price maintenance for tation of a different policy by the two books could not be permitted in view of associations concerned might involve the the Community competition rules. The effective reapplication of the rules of arguments put forward in the contested exclusive dealing at transnational level. decision on the advantages of the disputed system at the publishing and distribution level are based on a more general consideration of a system of The taking into account of the national resale price maintenance. Similarly, in its systems defence the Commission in refusing the application for exemption takes as its basis certain general aspects of collective price maintenance. The applicants put forward a double complaint against the Commission: on the one hand its decision bears the stamp The Commission denies that it made a of an internal contradiction inasmuch as general appreciation of the practice of a it considers the national systems whilst system of resale price maintenance. It refusing to include them in the pro- simply dealt with certain general aspects ceeding; on the other, it has undertaken of the situation with regard to collective an incomplete and erroneous appreci- prices since an appreciation of the ation of the national systems and of their agreement could not be undertaken in connection with the disputed agreement. complete isolation from such aspects.

Observance of the applicants' rights regard shall be had to the fundamental rights common to the Member States and, in a judgment of 18 May 1982 The applicants complain that from several (Case 155/79 AM & S [1982] ECR points of view the Commission disre- 1575), to the principles and concepts garded their rights both in drawing up common to the Member States. the contested decision and in its content. Moreover, by prohibiting the resale price maintenance system, the Commission has called in question the constitutional (a) In dealing with the national systems principle of freedom of expression. in the context of an appreciation of the disputed agreement the Commission prejudged its decision on those systems The Commission states that none of without having initiated an official those criticisms is relevant. proceeding. Such conduct jeopardizes the rights of the national associations. (a) It in no way arrived at any (b) In adopting its decision the judgment with regard to the national Commission disregarded its promises, systems and the question of their made at the hearings and before the compatibility with Community rules on European Parliament, to hold an inquiry competition remains an open one. into the book trade first. Moreover it refused to participate in any meaningful way in a search for solutions or to take (b) It did not give the promises alleged into account the Parliament's dec- by the applicants but insisted before the larations of intent. European Parliament on its re- sponsibilities in the sphere of compe- tition. At the hearings its representative (c) The systems laid down in the clearly formulated its objections to the disputed agreement correspond to the agreement. system in force in the other Community countries. In arriving at a decision on the Belgo-Netherlands agreement alone and (c) The contested agreement has in refusing negative clearance by reason specific characteristics, which are par- of the resale price maintenance system at ticularly restrictive, and which stem from transnational level the Commission is its transnational and collective character. discriminating between persons and organizations in the various Member States, to the prejudice of the integration of the small Dutch-language cultural and (d) The national rules with regard to linguistic community. prices for books belong to a special field of law regulating economic and social policy and have nothing to do with general rules of law or, a fortiori, with (d) On the basis of its statement that all fundamental rights. the Member States have a resale price maintenance system in books, the Flemish Association complains that the Commission has disregarded the The Booksellers' and Publishers' Fed- case-law of the Court which, in a erations, interveners, put forward criti- judgment of 14 May 1974 (Case 4/73 cisms which link up on several points Nold [1974] ECR 491), requires that with those of the applicants.

Moreover the Director-General cannot show any delegation of powers to make In this case the absence of the author in such a statement of objections; in any question was due to his inability to event such a delegation would have been attend; moreover the category of authors illegal and according to the case-law of was represented at the hearings by the Court cannot be presumed. another author.

JUDGMENT OF 17. 1. 1984 — JOINED CASES 43 AND 63/82

(c) The official who attended the submissions must be deemed to be hearing on 18 October 1979 had a accepted. special authorization from the Com- missioner responsible for competition. (d) The Flemish Association was never allowed, in spite of a request put forward in a memorandum of 1 October 1979, to The formal legality of the decision have cognizance of the administrative file or of the Commission's documents, or even a summary of the contents of the The Flemish Association, one of the file. applicants, supported on certain points by the Dutch Association, calls in question from various points of view the formal The Commission refutes the criticisms of legality of the contested decision. the legality of its decision.

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JUDGMENT OF 17. 1. 1984 — JOINED CASES 43 AND 63/82

the Court in its judgment of 15 May the Flemish and Dutch linguistic and 1975 (Case 71/74 Frubo [1975] ECR cultural communities — an object which 563) make it possible to assess the scope is in conformity with both the principles of a decision taken by an association of of the Member States concerned and the undertakings. principle of integration in Community law and which is embodied in the treaty on the linguistic union between Belgium and the Netherlands. B. The restriction on competition

VBVB AND VBBB v COMMISSION

(b) The appreciation of the various The Commission, for its part, thinks that aspects of competition the category of borrowers constitutes an important potential source of buyers. Liberalization of competition on the — Price competition book market might increase the pro- portion of his income which the The applicants stress the fundamental consumer devotes to the purchase of difference between the market for books books as compared with that devoted to and that for any other product. Amongst products of the leisure market in general. consumers of books there must be As regads price elasticity it must be numbered the important category of stated that the book market is charac- borrowers, who are not greatly inclined terized by relative elasticity. The figures to buy books, even at reduced prices. It put forward by the applicants are matters cannot be conceded that consumers of mere allegation. Furthermore it is not reserve a given part of their income for difficult to find on the market under- the purchase of books, that a price takings which are prepared to grant reduction makes it possible to increase discounts of the order of magnitude in sales or that price is the decisive factor in question. The importance to be at- consumer choice. Such an argument tributed to price competition between would be refuted in addition by the very products of the same brand may be seen slight elasticity of demand in relation to from the declarations of the applicants price, as experience shows. Research themselves, which show that little weight shows that a reduction of less than 20% must be attached to competition between of the price leads to hardly any increase different titles, even of analogous in sales; the same research leads to the content. It is clear that price competition conclusion that an abandonment of the at the retail level has been almost system of fixed prices would be more eliminated. The features of price likely to lead to a tendency for prices to competition on which the applicants rely rise. have only an entirely secondary im- portance.

large groups of consumers do not make The resale price maintenance system is use of the type of bookshop described. the only means of resisting effectively the What is particularly important is that the practice of loss-leading; such a system is exclusion of price competition prevents applied in all the Member States of the the consumer from determining freely Community. beyond the frontiers the relationship between the level of prices and the services offered. There is a contradiction in forbidding to undertakings under Article 85(1) what is permitted for Member States under Articles 30 to 36 of the Treaty. NV Club, NV GB-INNO-BM and NV Sodai, interveners, support the Com- mission's argument to the effect that the The Commission emphasizes that the cultural nature of books cannot justify disputed agreement still provides, apart their being exempted from the provisions from the system of collective resale price of the Treaty on competition. Price maintenance, for a system of collective competition is by no means incompatible exclusive dealing. The contested decision with the existence of other aspects of moreover provides a specific statement of competition relied on by the applicants. the reasons on which it is based as regards each of the two systems.

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competition, that is to say of the amount effect a partitioning of the Flemish and of competition necessary for fulfilment Dutch markets. The Commission would of the fundamental requirements and be committing the error of conferring on attainment of the aims of the Treaty and, the Belgo-Netherlands frontier a role in particular, the creation of a single detrimental to the achievement of a market with conditions analogous to single market between the Member those of a domestic market. States.

JUDGMENT OF 17. 1. 1984 — JOINED CASES 43 AND 63/82

possibility that the agreement may affect English, French and German language trade between Member States. The markets, which, moreover, are governed applicants have failed to show that the by an inter-State system of resale price application of the transnational system of maintenance. collective resale price maintenance is necessary for the achievement of the cultural and linguistic integration of the The Commission stresses that the Netherlands and Flanders. exclusive dealing system continues to form part of the agreement and that it has never been notified of any The parties intervening in support of the amendment. As to the factual data which Commission claim that it cannot be are disputed, it should be noted that in denied that from the economic point of any event the figures, which could only view the Belgian and Netherlands with great difficulty be proved accurate, markets in books remain distinct, if only are not an essential foundation for the by reason of the different national •disputed decision, which is based on the currencies, not to speak of any finding, which has not been challenged differences relating to taxation and to by the applicant, that the Dutch- the customs and tastes of consumers. If speaking part of Belgium is primarily an the purpose of the Treaty is to effect a importing country. single market it cannot to that extent permit the practice of resale price main- tenance operating beyond the frontiers. The applicability of Article 85 (3)

D. The perceptible effect of restrictions A. The application under Article 186 of on competition the EEC Treaty

83 (3) of the Rules of Procedure, it are no grounds for attributing to the ought to have been made by a separate cultural factor any absolute priority over document. the rules of competition. Morevoer the applicants cannot validly maintain that the decision jeopardizes freedom of expression. The Commission's ap- B. The Commission's role in the preciation of the conditions for the application of Article 85 (3) application of Article 85 (3) is in conformity with the criteria set out by the Court in the Grundig judgment. The applicants and the Booksellers' and Publishers' Federations, interveners, are critical of the way in which the Commission has considered the possi- C. Contribution to improving produc- bilities of exemption under Article 85 (3). tion or distribution They claim that it took the decision in question before coming to a decision on the general problem of fixed prices for books and before holding the promised (a) Improving production inquiry on the book market. By its decision it prejudged the appreciation of the national systems, to be made later. The applicants emphasize the high quantitative and qualitative standard of Dutch-language publishing in the In that connection the applicants repeat Netherlands and Flanders — geogra- the criticisms relating to the taking into phically a very restricted m a dee t — account of the exclusive dealing system, which is to be ascribed to the collective actually abolished, and of the analysis of resale price maintenance system — the the national systems, which are not the only system capable of permitting pub- subject-matter of the proceeding. lishers to arrange to the necessary extent to cross-subsidize best-sellers and less profitable books. Experience in France and Sweden after the abandonment of The Commission has failed to say the system of resale price maintenance anything about any merits of an proves the existence of a causal link individual transnational system of resale between this very extensive supply and price maintenance. In its analysis it has the disputed price system, which benefits disregarded cultural factors and the need all consumers. to protect freedom of expression.

consumer is not indispensable to the The Commission disputes the existence of application of cross-subsidization at the the causal link which the Dutch publisher's level. There is nothing to Association wishes to establish between prevent a publisher who wishes to apply computerization and a fixed retail price. a certain amount af cross-subsidization Wholesalers could cover the expenses from fixing an appropriate price at the occasioned by computerization by means outset. The Swedish and French of their trading margin ·— irrespective of examples are irrelevant. "What is relevant the existence of a fixed price. here is the abandonment of the disputed transnational system, not the radical suppression of a national system. Distribution is not effected entirely by wholesalers or the Centraal Boekhuis. Moreover it is difficult to see why the NV Club, NV GB-INNO-BM and NV setting up of the latter body should only Sodai, interveners, explain that at the have been possible as a result of the level of the publisher the abolition of setting up of a collective system of resale resale price maintenance is not capable price maintenance between Belgium and of affecting the supply of books in any the Netherlands. way at all. The publisher is free to continue to apply a set-off of trading margins between the various types of Once again the Commission stresses that books. the transnational system is at issue, not the national systems. (b) Improving distribution

— Wholesale level — Retail level

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Regard being had to the widespread from the sale of best-sellers. Moreover it dissemination and sale of books it is disputes the argument that the profits difficult to envisage that a reduction in from the sale of successful books price might attract new consumers. contribute to the maintenance of stocks.

The solution of specialization, advanced As to the alleged prejudicial effects by the Commission, is valid only for a which the abolition of the resale price restricted number of booksellers in the maintenance scheme would involve for large towns. retailers, it must be noted that discounts are applied only selectively and hardly The increase in stock held in bookshops affect booksellers established in country is the result of a large number of factors districts. and cannot simply be explained by the increase in the total number of books .on offer and the efficiency of wholesalers. It would be possible to reach fresh cat- egories of purchasers by liberalizing price competition. The idea of granting bookshops bigger trade margins at the expense of pub- As the holding of stock is the essential lishers would only displace the problem characteristic of a bookshop it would be to that level: in any event only large- illogical to consider reducing it; book- scale publishers are in a position to shops might usefully improve their ef- undertake that type of assistance. ficiency by specializing.

There is only a single market in Dutch- language books and the transnational The range of books at present held by agreement is the keystone of the two bookshops is merely the reflection of the national systems. number of titles on the market and the efficiency of the distribution system.

NV Club, NV GB-INNO-BM and NV D. The fair share for consumers Sodai, interveners, state that they have chosen to follow a policy of reduced prices and to work for the benefit of all The applicants take the view that those consumers; the applicants are defending who benefit from the contested rules, as special and restricted trade interests only. consumers within the meaning of Article The public interest requires preference to 85 (3), are the readers, whether as pur- be given to the Commission's argument. chasers or borrowers, the libraries, the market in second-hand books and old editions, authors and trade associations. E. The indispensable nature of the restriction of competition Purchasers, in particular, benefit from a wide range of high quality offered by bookshops, the supply of services as The applicants submit that the trans- regards information and facilities for national system of resale price main- placing orders at retail level and tenance constitutes the keystone of the relatively low average prices. Readers national systems which, in the long term, who use libraries benefit fully from a cannot outlive the abolition of the wide spread of works. For authors and agreement at issue; but these national trade associations the advantage lies in a systems are not in question in these guarantee of opportunities for publishing cases. and distribution and consequently of the maintenance of their income and employment. The Commission has rejected various proposals made by the applicants, in The Commission wishes to limit the particular the idea of an individual concept of consumer, as regards the system of resale price maintenance, bookshops concerned, to purchasers of whilst refusing to suggest any alter- books only. The question arises whether natives. a large supply constitutes a fair share for consumers; in any event the applicants have not succeeded in proving the Experience shows that the system of existence of a causal link between the resale price maintenance is the only system of resale price maintenance and means of guaranteeing optimal pro- high production. duction and distribution in the book

The Commission takes the view that the The Commission is disregarding the fact applicants have not succeeded in show- that the abolition of the resale price ing why the transnational restriction is maintenance system would lead to a indispensable to the maintenance of the reduction in the spread of foreign- national systems. Practice shows that language books held by bookshops. those systems are perfectly viable without the application of supranational re- strictions. As regards the statement of the reasons on which the decision is based the Furthermore the content of the idea of Commission is open to the criticism that optimal production or distribution must it has not indicated clearly whether the give rise to speculation in the absence of agreement is condemned because it is any effective competition. based on the collective nature of the system or because of opposition in principle to all resale price maintenance As to the cultural factor, the Commission practices, even on the basis of an would be ready to take it into individual decision. consideration, but it is unacceptable for organizations representing commercial interests to make a show of cultural Moreover the Commission has not arguments so as to infringe the Com- specified the less restrictive means said to munity competition rules. be available to the parties to guarantee an appropriate level of publishing and The Booksellers' and Publishers' Fed- distribution. erations, interveners, in support of the applicants' arguments, make a detailed analysis of the function of the trans- Nor is it clear from the decision whether national agreement in maintaining the the cultural advantages of an agreement national systems. Under this head they constitute a relevant factor in the ap- distinguish three different situations: preciation made on the basis of Article the importation and re-importation of 85 (3). Dutch-language books, and the impor- tation of foreign-language books. In any event the Commission cannot As regards the importation of Dutch- justify its refusal to grant an exemption language books the economic con- by the notion that the competent public siderations underlying the application of authorities would not hesitate to adopt, a system of resale price maintenance are if necessary, the measures required for identical for a region whose linguistic the protection of the cultural interests and political frontiers coincide and for a endangered by the abolition of the linguistic region bestriding a frontier. system of resale price maintenance. The examples of France, Germany and the As to the exportation of Dutch-language United Kingdom moreover demonstrate books note must be taken of the risk of that the States recognize that the

It is not required to indicate in its de- cision any possibly less restrictive means The Commission repeats that in its view which might be applied. retail price competition between the same books is essential for the consumer, since competition between interchange- able publications has only a restricted role to play. The applicants' arguments As regards the declarations made before with regard to the local nature of price the European Parliament by its rep- competition are irrelevant. The agree- resentative, it should be noted that he ment results in the consumer's being emphasized the diversity of fixed-price deprived of all incentive to turn to systems existing at State level — a fact another local market over the frontier; which in itself makes it possible to doubt similarly the retailer has no incentive to whether the most restrictive system is obtain supplies from the other State. indispensable. The doubts expressed as to the indispensable nature of that type of system by no means imply any duty on the Commission's part to cause an in- depth study of the book market to be undertaken. It is essentially for the public authorities to arrange for the protection V — R e p l i e s to t h e C o u r t ' s q u e s - of cultural interests. As regards Article tions and requests 85, its preference would be for effective competition accompanied by certian steps on the part of the authorities rather than a system of distorted competition without the invervention of the auth- In reply to the questions and requests put orities. It is indisputable that certain by the Court at the end of the written Member States attach greater importance procedure to the Commission and the to the cultural factor than to con- applicants in the main actions answers siderations of competition; however, that were given or action was taken as cannot be the Commission's standpoint. follows :

An individual system of resale price maintenance implies an agreement between producer and reseller on the "2. It appears from the file that the price to the consumer. A collective applicants, when notifying the system may exhibit two forms: the first Commission of the agreement which consists in a collective obligation of all is the subject of the contested producers in a given sector to impose a decision, also notified the agree- price to their resellers; the second ments existing within each of them, extends the system of imposed prices drawing attention to the close links from the producers to the resellers. The between the transnational agreement agreement at issue is a combination of and the two national agreements. In the two forms. fact, the Commission's decision contains numerous references to the national agreements although they The individual system is a disadvantage are not the subject of the decision, as to efficient distributors because it is stated in paragraph 1 of the prevents them from converting savings preamble to the desision. Can the in costs into a reduction in the selling Commission state its intentions with price to the public. Prices are fixed regard to the files concerning the permanently at a high level to take national agreements? Why did its account of the margin of profit necessary decision relate exclusively to the for a reseller on the border-line. transnational agreement in view of the links between that agreement and the national agreements?"

The disadvantageous features of the collective system are even more marked: resellers in a given sector are deprived of The object and effect of the agreement any choice between goods subject to a at issue was incontestably to affect trade resale price maintenance system and between Member States; it is therefore those which are not; producers can no without any doubt a matter with which longer adapt their policy to the the Commission has authority to deal.

The Netherlands agreement affects trade between Member States only to a slight extent; moreover it is established that it does not hinder parallel imports. There is no question of any development in the Commission's policy as regards resale price maintenance systems: the Commission has always opposed a The Belgian agreement is capable of system of fixed prices applied to the final affecting inter-State trade to a greater consumer. Resale price maintenance is extent; but it is characterized by a more essentially a competition problem at flexible application and the Flemish national level; the Commission seeks to collective system of resale price mainten- ensure however that intermediate sellers ance has been abolished by a decision of and consumers retain the opportunity to the national courts. buy on the most favourable conditions within the common market. Where such a system restricts competition and affects trade between Member States the The Commission's "wait and see" atti- Commission has the right to intervene. tude in respect of the national collective The fact that a resale price maintenance resale price maintenance agreements is system is authorized at national level justified by its willingness to await the does not prohibit the Commission from effects of the abolition of measures intervening with regard to measures designed to protect the national systems. intended to ensure its enforceability at The contested decision has, it is true, supranational level, since the public inter- certain effects on the national systems; est in free movement of goods must take however, its scope must not be over- precedence over the advantages which estimated. In rejecting the transnational certain sectors may enjoy as a result of agreement only, the Commission has not the application of such a scheme. The exceeded its powers of appraisal or acted numerous cases cited by the Commission ultra vires. It is entitled to reserve its illustrate the principles of that policy. power of appraisal with regard to the national systems.

which differ from the agreements or intermediate purchasers to require the rules first mentioned." observance of, the imposed price, even in the event of re-importation. (a) The British Netbook Agreement consists in an individual system of main- The Sammelrevers may be assimilated to tained prices which has certain collective the Netbook Agreement; however, it lias characteristics. more perceptible supranational reper- cussions inasmuch as it contains a provision capable of hindering parallel The decision to apply a maintained price imports. depends on each individual purchaser, who also decides on the measures to be taken to deal with individual (c) France has a system under public infringements. law ("Loi Lang"), involving a duty to impose a retail selling price even in the event of re-importation, a restriction on The system of conditions of sale linked to the system of maintained prices and the grant of discounts and rules on prices the collection of information on the for sales by book clubs. application of the system are of a collective nature. The Commission is at present studying this system with a view to possible A court decision has provided for an proceedings under Article 169 of the exemption from the legal prohibition of EEC Treaty. maintained prices in favour of the Netbook Agreement. The French system cannot be compared to the agreement at issue: it does not The British system has repercussions exclude all competition between book- outside the United Kingdom, particularly sellers as regards price. in Ireland. In contrast to the agreement at issue, however, it does not aim at ensuring complete supranational enforce- "5. The Commission is requested to ability. provide:

The Commission submits a copy of the of improving production or distribution. explanatory memorandum requested, Article 85(3) does not permit the with a list of studies already undertaken Commission to conduct a cultural policy. and refers to the Twelfth Report on Competition Policy as regards the results Of course the Commission must ensure of the most recent studies. that it does not negate cultural values by refusing a possible exemption, but only "6. The Commission is requested to to the extent to which restrictions on submit a memorandum containing : competition are indispensable. The Com- mission cannot, because of adventitious cultural considerations, relinquish its (a) a more precise explanation of its power to take action against agreements views of the scope of its powers which affect trade between Member to take account of the specific States. cultural nature of the product and of the market in question, regard being had to Article 85 As regards the questions of "cross-sub- (3); sidization" and any alternative solutions, it must be acknowledged that it is in (b) a more detailed statement of rea- principle for the Commission to obtain sons than that presented in the and appraise the evidence with regard to decision (paragraph (51)) and in a possible exemption under Article 85 its pleadings as regards the (3) ; but it is in any case entitled to refuse applicant's line of argument exemption when the evidence produced regarding 'cross-subsidization' in is not convincing. It has no duty to respect of bookshops; expound the "positive" effects of its de- cision or to suggest alternative solutions. (c) information as to the extent to which it takes the view that there Moreover the abolition of supranational is a possibility of finding an protection does not imply the aban- alternative to cross-subsidization donment of all cross-subsidization. It is as regards not only publishers established that the national systems can but also booksellers or, if appro- operate without the protection of the priate, why it feels that such transnational agreement. There is no alternatives are ineffective or direct and essential link between cross- undesirable as far as bookshops subsidization and the supranational are concerned." collective resale price maintenance system. As far as the specific cultural nature of the product is concerned the Com- The applicants themselves acknowledge mission feels, as far as concerns the that cross-subsidization is possible with- choice of the objectives which may play out any transnational collective resale a part in connection with the application price maintenance scheme, although to of Article 85 (3), that it cannot depart an inadequate degreee, but they do not from the criteria which it lays down; at provide any explanations as to the degree the most it might have regard to they have in mind. purposes closely bound up with the criteria set out in that article. The system at issue is excessively The specific cultural nature of the restrictive, as is particularly noticeable at product cannot be related to the concept the levels of publication and sale, and it

is not offset by its advantages in the field partments of newsagents and the of distribution. specialist shops with a limited but specialized range on the one hand; and self-service stores, department stores, Although the Commission has in prin- supermarkets and book clubs on the ciple no part to play as regards alter- other. The first group applies the resale native solutions, it has nevertheless price maintenance system and the distri- refered to the possibilities of specializ- butors of the second group select their ation, of purchasing groups, of differen- own prices. tiation of margins, of financial assistance and of selective distribution. The increase in the market share of distributors of the second group should not be exaggerated: the genuine book- B. Questions addressed to the applicants sellers' share of the market has in practice been preserved, although there is at present a tendency to decline owing to " 1 . The applicants are requested to the competitition of the supermarkets, explain in greater detail how they which apply a policy of discounts for can relate the considerable increase certain types of book for a limited in the market share of book clubs, period, combined with a limited range, self-service shops and other sales which brings about an enormous cultural channels offering a limited range impoverishment. and often at lower prices (mentioned inter alia in paragraphs 12, 16 and 51 of the preamble to the decision The application of lower prices by book and on page 43 of the rejoinder clubs does not result, in view of their and apparently admitted by the rules, which impose reasonable re- applicants) to the protection, quirements on the consumer, in brought about by the introduction of eliminating the competition of bookshops a collective system of resale price properly so called. maintenance, of cross-subsidization at the level of specialist bookshops offering a large range (whose share Cross-subsidization arrangements as far of the market, according to the Com- as publishers and retailers are concerned mission, has considerably diminished are not affected by book clubs; on the as a result of the development of other hand they simply do not exist as other channels of sale)." regards shops which practise loss-lead- ing.

lishers and bookshops and involves an Book clubs sell from a limited stock to interaction between them • both. Fur- members only; sales are made by a thermore a distinction must be drawn special system on the basis of a between the general bookshop, typified catalogue; the limited stock consists of by a very wide range of stock, and the older books entered in the catalogue specialist bookshop offering a very wide long after their appearance; the clubs selection in a restricted field. The quality provide a guarantee of ability to buy up and size of such ranges distinguish that and market that type of book. type of distribution from that engaged in by book clubs, self-service shops and other sales channels with a limited range. That special structure, combined with a rapid turnover of stock, enables book clubs to charge prices below those in The transnational agreement and the bookshops. national agreements which form its foun- dation aim at creating optimal conditions for as wide a dissemination as possible of a large range of books in conditions which are economically justifiable. There The book clubs' relative market share can be no objection to the development has considerably increased of recent of other sales channels provided that years whilst that of bookshops holding their use does not affect the operation of stock has declined, though not to the the bookshops' distribution network. same extent. The book clubs' market share has increased independently; however, their expansion is no longer continuing and their relative market The agreements in question do not share has at least stabilized. involve excessive restrictions of compe- tition; their purpose is to allow booksellers holding a considerable stock to enjoy a reasonable existence economically, to integrate books into the In absolute terms the position of book- socio-economic context by taking into shops holding stock has not been ad- account the difference between active versely affected; the development of purchasers, who look for a considerable book clubs has hardly been unfavourable spread, and non-active purchasers, to to them and is not contrary to the maintain the net quantities of books held collective resale price maintenance in stock and to develop other methods of system or to the continuance of cross- distribution.. to reach non-active pur- subsidization for traditional bookshops, chasers. which is bound up with them.

The Flemish Association refutes the At the publisher's level the acceptance of Commission's statement that cross- works by new authors or the publication subsidization can exist only at of books which do not sell readily is poss- production level and is not necessary at ible only as a result of the continued sale distribution level. The cross-subsidization of older titles and to the ability of machinery also operates, and must bookshops to stock new editions or continue to operate, at the level of the books which do not find a ready sale. specialist bookshop; in the absence of That interaction between publication and maintained prices such shops would have distribution is possible only as a result of no defence against the unremitting cut- a system of resale price maintenance. throat competition of the supermarkets and would be forced to go out of business — which would mean the disappearance of sales of cultural books. By reason of their special features books scarcely lend themselves in the restricted Dutch-speaking area to publicity In that respect the activities of book campaigns. The absence of a network of clubs present no problem. bookshops holding stocks means a re- duction in the publication of new titles.

The number of specialist bookshops in the Dutch-speaking part of Belgium has The distinction made by the Commission not diminished; however, no further between publishers of general-interest expansion is now taking place and the books and others docs not correspond to stocks held by existing bookshops are reality: there are no publishers of gen- not being extended. eral-interest books who include in their stock-in-trade only works which sell well. The Dutch Association takes the view that the solution proposed by the Com- mission, namely the application of cross- subsidization between less commercial The existence of an appropriate network titles and popular publications would be of booksellers holding stock is a necess- impracticable. ary condition for the publication of a wide spread of titles.

was poorly adapted to the reality and particular the scope of the exclusive trend of the market. The Flemish dealing has been considerably restricted. Association based its policy on the idea that the encouragement of reading and dissemination of books should be as wide VI — Oral procedure as possible; a satisfactory degree of expansion took place particularly with newsagents selling books incidentally. At the sitting on 13 July 1983 oral expla- Some self-service shops joined the nations and answers to questions put by association and observed the resale price the Court were given by A. de Caluwé maintenance system. However, certain and J. J. Billiet for the Flemish Associ- types of supermarket, which regarded ation, by Th. R. Bremer of the Dutch books as loss-leading articles and applied Association, by B. Van der Esch and P. J. discounts, did not join the association. Kuyper for the Commission, by O.-W. Brouwer for the Booksellers' Federation, The Dutch Association remarks that the Publishers' Federation and the paragraphs 39 and 40 of the disputed de- Börsenverein des deutschen Buchhandels, cision deal with the transnational system interveners, and by I. de Greef for Club, of exclusive dealing. GB-INNO-BM and Sodai, interveners. In trade in books between the For the most part they put forward their Netherlands and Belgium recognition of lines of argument as to the points in- the trader is irrelevant. The parties did cluded by the Court in its written not formally cancel the provisions in questions and requests and as to the question as the agreement was due to be significant aspects of the question of the reviewed in the context of the application to the agreement of Article negotiations with the Commission. 85 (3) of the EEC Treaty. The collective exclusive dealing system The Advocate General delivered his applied in the Netherlands has been to a opinion at the sitting on 18 October great extent formally revoked and in 1983.

3 The proceeding was initiated by the Commission on 7 December 1977. The statement of objections was contained in two identical letters sent to the applicants on 19 December 1977 and 12 January 1978.

4 The first heraring of the parties took place on 15 and 16 March 1978, the second on 18 October 1979 and a supplementary meeting with the parties on 19 March 1981. Between those dates the applicants submitted to the Commission a number of alternative suggestions, none of which the Commission was however able to accept. The Commission confirmed its attitude by letter of 27 March 1981 and on 25 November 1981 it adopted the decision which is the subject of the proceedings. In that decision the Commission stated that the agreement constituted an infringement of Article 85 (1) and refused to grant an exemption under Article 85 (3).

s The applications were lodged on 5 and 15 February 1982. On the same dates the applicants lodged applications for the adoption of interim measures with a view to a suspension of the operation of the decision in question whilst the proceedings in the main actions were pending. By order of 31 March 1982 the President of the Court granted such a suspension within certain limits and subject to certain conditions.

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6 The agreement, which is described in greater detail in paragraph 9 of the decision at issue, is characterized by three closely linked groups of provisions :

(a) The publisher must fix for each of his publications a retail selling price and has a corresponding duty as against all the other members of the two national associations to ensure that that price is observed up to the stage of retail sale, the only exceptions being those exhaustively prescribed by the national agreements. Those arrangements are hereinafter described as "the resale price maintenance system".

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was to appraise the agreement in accordance with the terms notified to it in 1962. The Court also must therefore consider the agreement in the form in which it was notified in 1962, including the exclusive dealing system.

T h e a p p l i c a t i o n of A r t i c l e 85 (1)

9 In Article 1 of its decision the Commission states that the agreement is incompatible with Article 85 (1). The objections to the agreement, mentioned in paragraphs 34 to 46 of the decision, may be summarized as follows:

The agreement in dispute must be classified as an "agreement between as- sociations of undertakings" within the meaning of Article 85 inasmuch as its effect is to bring together the members and affiliates of both associations including publishers, book clubs, importers, exclusive representatives, wholesalers and booksellers. It involved a restriction on competition within the common market by reason of both the collective exclusive dealing system and the collective resale price maintenance system for which it makes pro- vision.

The exclusive dealing system involves a prohibition of purchasing, stocking or encouraging the sale of books published in the other State by a publisher who is not recognized. Those provisions have the effect of restricting the greater part of trade in books between Belgium and the Netherlands to recognized undertakings and therefore prevent recognized publishers and traders from dealing with non-recognized publishers and traders from the other State.

Formal and procedural objections

n The Flemish Association in particular has raised numerous objections as to form and procedure; two of its objections have been taken up and further developed by the Dutch Association, as will appear below.

1 2 First the Flemish Association complains that the official who signed the statement of objections was not empowered to do so by an authorization duly granted by the Commission.

1 3 In reply to that complaint, which does not appear in greater detail in the ap- plication, the Commission has given circumstantial information from which it appears that the signatory of the document containing the statement of objections had been duly provided with instructions and duly authorized by the Commission in accordance with a practice expressly approved by the Court.

u In raising this objection the applicant is failing to have regard to the fact that delegation of power to sign, as the Court has recognized in its judgments of

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their behalf persons representing all aspects of the book trade. The applicant has not adduced any evidence to show that in the circumstances the • Commission, in not hearing Mr van Vlierden, unduly restricted the inquiry into the matter and thus limited the applicants' opportunity to provide expla- nations of the various aspects of the problems raised by the Commission's objections. This submission also must therefore be dismissed.

i9 Fourthly the applicant complains that the statement of objections was incomplete and that certain of the objections raised were inadequately or inaccurately explained. It takes the view that in those circumstances the Commission has infringed Article 4 of Regulation N o 99/63 under which the Commission may in its decisions deal only with those objections raised against the parties concerned in respect of which they have been afforded the opportunity of making known their views. The applicant does not give any more detailed indications as to the parts of the decision to which this criticism relates.

20 It may be seen from a comparison of the statement of objections and the contested decision that in the statement of objections the Commission expressly referred to the three matters finally established in making its dec- laration that the agreement was incompatible with Article 85 (1) and in its refusal to grant an exemption under Article 85 (3), namely: the system of resale price maintenance, the exclusive dealing system and the penalty system. The parties were therefore fully informed of the scope of the inquiry initiated against them and were in a position to defend themselves. This submission also must therefore be dismissed.

adoption of a decision, together with the legal considerations which have led to its adopting it, the article does not require the Commission to discuss all the matters of fact and of law which may have been dealt with during the administrative proceedings (see, most recently on that subject, the judgment of 9 November 1983, Case 322/81 Michelin [1983] ECR 3461. The state- ment of the reasons on which a decision adversely affecting a person is based must allow the Court to exercise its power of review as to the legality of the decision and must provide the person concerned with the information necessary to enable him to decide whether or not the decision is well founded. From that point of view it must be conceded that the Commission, in its statement of reasons, has sufficiently set out all the considerations of law and of fact on which it has relied in arriving at the operative part of its decision. This submission also must therefore be dismissed.

23 Sixthly the Flemish Association claims that the Commission did not give it access to the administrative file and that it was therefore unable to take cognizance of certain documents or studies used by the Commission for the purposes of its decision.

24 It may be noted that the Flemish Association was not in a position to identify any document which might have been used by the Commission as a basis for its decision but which is not accessible to the applicant. Its complaint there- fore seems rather to relate to the fact that it has not had the opportunity to inspect the Commission's file with a view to determining whether it might possibly contain documents in which it might be interested.

26 The seventh complaint is advanced by both the Flemish and the Dutch As­ sociations. Both applicants complain that the Commission has declared on several occasions its intention to hold an inquiry into the book trade in the Community as a whole before adopting any decision with regard thereto. They point on the one hand to a declaration made at the conclusion of the hearing on 15 and 16 March 1978 by the Commission's representative, Mr Ferry, and on the other hand to declarations made by Commissioner O'Kennedy at the sitting of the European Parliament on 13 February 1981 on the occasion of the discussion of the Beumer report on fixed prices for books (European Parliament Debates, Official Journal 1981, Annex, No 1-266, p. 335, and Doc. 1-544/80 of 10 November 1980), and the Commission's answers to two Parliamentary Questions, the first on 10 August 1981 to Written Question N o 514/81 by Mr Beyer de Ryke (Official Journal, C 240, p. 20), and the second to Question N o 28 by Mr Van Miert (Official Journal 1981, Annex, N o 1-273, p. 185).

27 A study of the declaration in question shows that the Commission did not at any time give an undertaking of the kind which the applicants attribute to it. It did no more that state that it was carrying out investigations into the various markets in books within the Community and that it hoped to resolve the probierń? arising with regard to competition as a whole. Those declar­ ations could not have the effect of preventing it from pursuing as a matter of priority any particular agreement as soon as it had completed its inquiries thereon. This submission also must therefore be dismissed.

30 Although the relationship between the transnational agreement on the one hand and the national agreements on the other is indisputable, the Commission cannot be criticized for concentrating its attention on the agreement between the two associations. Although the provisions of the transnational agreement refer to the national agreements in respect of each of the three essential features referred to above, the position nevertheless remains that that agreement may be made the subject of an appraisal in terms of its own objectives and it is not necessary at the same time to effect an appreciation of the national agreements.

3i Moreover, in paragraph 1 of the recitals in the preamble to its decision the Commission has expressly excluded the national agreements from its ambit It to lows from the procedure selected by the Commission that the judgment which the Court is called upon to make cannot be interpreted as prejudging matters which have not been the subject of the proceedings. In the absence of any injury in this respect it is therefore impossible to take the view that the procedure adopted by the Commission has adversely affected the rights of the defence. This submission also must therefore be dismissed.

T h e a p p l i c a t i o n of A r t i c l e 85 (1)

Complaints of a substantive nature

32 From the substantive point of view the applicants advance five different submissions regarding interference with freedom of expression as guaranteed in particular by Article 10 of the European Convention for the Protection of

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2. Submission as to infringement of Article 10 bis of the Paris Convention

35 T h e applicants claim that the system of resale price maintenance constitutes a guarantee against the so-called practice of "loss-leading", that is to say against the sale at abnormally low prices of certain books with the sole object of attracting customers. T h e i r view is that such practices are contrary to Article 10 bis of the Paris Convention as amended by the Lisbon Act, 31 O c t o b e r 1958, (Convention M a n u a l published by the United International Bureaux for the Protection of Intellectual Property, Geneva). T h e effect of the Convention, it is alleged, is to bind the C o m m u n i t y also and conse- quently to take precedence over the rules on competition.

36 It would appear that in alluding to Article 10 bis of the Paris Convention the applicants are referring to paragraph 1 which states: "The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective protection against unfair competition." They take the view that the so-called practice of "loss-leading" constitutes an act of unfair competition within the meaning of the provision cited. Since, according to them, the system of resale price maintenance constitutes a defence against such prac- tices, the Commission is not entitled to require its abolition by the application of the competition rules of the Treaty.

37 The fact that a system of resale price maintenance may have the incidental effect of preventing unfair competition of the kind described by the applicants is not, however, a sufficient reason for failing to apply Article 85 (1) to a whole sector of the market such as the book trade. It is open to undertakings which may have suffered injury as a result of unfair competition to have recourse to legislation on trade practices such as exists in one form or another in all the Member States, which provides remedies against abuses such as those mentioned by the applicants. On the other hand, the fact that such abuses exist cannot in any circumstances justify an infringement of the Community rules on competition. This submission must therefore be dismissed.

4i T h e applicants, supported especially on this point by t h e Booksellers' a n d Publishers' Federations, interveners, claim that t h e competition o n which t h e T r e a t y insists must be u n d e r s t o o d as "effective c o m p e t i t i o n " , adapted t o t h e special conditions of the m a r k e t in question. T h e Commission's error is n o t to have taken a c c o u n t of t h e specific nature of the b o o k as a p r o d u c t or of the special n a t u r e o r structure of the b o o k market, having taken t h e view that price competition was the essential element in competition. H o w e v e r , each b o o k constitutes a m a r k e t in itself a n d price elasticity of b o o k s , as g o o d s , is minimal, so that other facets of competition have a p r e d o m i n a n t interest in comparison with price. In this connection the applicants m e n t i o n :

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the variety of supply, the diversity of stock held by bookshops, the speed with which orders are executed, and the services offered to consumers by way or information and advice.

42 The applicants also claim that the practice of resale price maintenance leaves freedom of competition unimpaired both at the level of publishers — who are free to determine the selection of titles which they publish and to determine prices with due regard to the state of the market — and in relationships between the various stages of the distribution network — wholesalers and retailers. The consumer derives only advantages from this system as he may buy the same book in all places at the same price and in return enjoys a wide spread of titles available and the best possible service.

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of that agreement on trade between the markets in Dutch-language books in the Netherlands and Belgium.

45 Its view is however that the special features of that market do not permit the two associations to set up, in their mutual relations, a restrictive system whose effect is to deprive distributors of all freedom of action as regards the fixing of the selling price up to the level of the final price to the consumer. Such an arrangement would indeed infringe Article 85 (1) (a), which ex- pressly prohibits all agreements which "directly or indirectly fix purchase or selling prices". Furthermore the system of resale price maintenance laid down in the agreement allows each of the two associations to control outlets as far as the last stage in the other Member State from the point of view of price-fixing and thus to make impossible the introduction of sales methods capable of allowing consumers to be supplied in economically more favourable conditions, which brings the applicant associations also into conflict with the contents of Article 85 (1) (b).

46 'Thus, even on the supposition that the specific nature of books as an object of trade may justify certain special conditions in the matter of distribution and price, the conclusion must be drawn that in any case the very fact that the two large national associations of publishers and booksellers have ex- tended to intra-Community trade the closely supervised rules which are in force within them constitutes a sufficiently marked restriction of competition to justify the appreciation effected by the Commission under Article 85 (1). The submission put forward by the applicants must therefore be dismissed.

T h e a p p l i c a b i l i t y of A r t i c l e 85 (3)

so At the time of notifying the agreement the applicants, in case it was con- sidered incompatible with Article 85 (1), requested the Commission to make use of the power reserved to it by Article 85 (3) in order to declare the prohibition contained in paragraph 1 inapplicable to their agreement. By Article 2 of its decision the Commission dismissed that application for exemption. In paragraphs 47 to 63 of the preamble it set out its reasons for stating, in the light of the criteria laid down in Article 85 (3), that in its view the agreement did not constitute a contribution to improving the production or distribution of goods and did not allow consumers a fair share of the resulting benefit, that the restrictions imposed by the agreement did not appear to be indispensable and finally that the agreement eliminated competition in respect of a substantial part of the products in question.

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1. The Commission's refusal to follow up the applicants' alternative proposals

si As indicated above, the applicants submitted to the Commission certain alternative proposals set out in paragraphs 24 to 31 of the preamble to the decision. They complain that those proposals, which might have mitigated the effect of the resale price maintenance system, were not accepted by the Commission which, for its part, did not put forward any specific proposals which might have made an exemption possible.

VBVB AND VBBB v COMMISSION

55 On the other hand, they allege, the abolition of resale price maintenance would have the effect of concentrating trade on works which sell readily with the result that more difficult titles will be abandoned. Although it is true that successful books would sell more readily, there would be multiple negative consequences: publishers would no longer be able to assume the risk of publishing less promising works and the existence of small-scale specialist publishers would be threatened as a result. The variety of titles published would be reduced in consequence, the number of bookshops holding an extensive stock of books and offering service to customers would diminish to the advantage of distributors interested solely in works with a rapid turnover which would make it possible for them to reduce their profit margin. As a consequence of that transformation of distribution structure it would be necessary to expect, as the counterpart of the reduction in price of the easy titles, a corresponding increase in the price of all other works.

JUDGMENT OF 17. 1. 1984 — JOINED CASES 43 AND 63/82

58 In dealing with these arguments it should be recalled once again that the Court's decision can relate only to the transnational agreement. It does not appear that the Commission has exceeded the limits of its discretion in refusing, in view of the characteristics of the agreement, to recognize that it is such as to improve production and distribution of books as far as concerns trade between the markets in Dutch-language books in the Netherlands and Belgium.

59 The applicants, for their part, have not succeeded in showing that the continued existence of the transnational agreement is a condition for improving the production and distribution of books by the extension to trade between the two markets concerned of the effects of the "cross-subsi- dization" system, whatever view may be taken in the last resort of the intrinsic merits of the system — which can be conclusively appraised only in terms of the national agreements.

60 In the present of the proceedings the submission put forward by the applicants against the Commission's refusal to recognize that the agreement at issue is such as to contribute to improving the production or distribution of the goods in question must be dismissed.

6! As the conditions necessary for the grant of exemption under Articles 85 (3) are cumulative, it is unnecessary to consider the submissions relating to the other conditions for exemption.

62 It follows from all the foregoing that the applications must be dismissed.

hereby:

1. Dismisses the applications;

2. Orders the applicants and the parties who have intervened in their support to pay the costs of the main action and orders the applicants to pay in addition the costs of the application for the adoption of interim measures.

Mertens de Wilmars Koopmans Bahlmann

Galmot Pescatore Mackenzie Stuart O'Keeffe

Bosco Due Everling Kakouris