C-140/82

ν

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Advisers, H. Matthies and R. Wägenbaur, assisted by Professor E. Grabitz of the Free University of Berlin, with an address for service in Luxembourg at the office of Oreste Montako, a member of its Legal Department, Jean Monnet Building, Kirchberg, defendant,

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

APPLICATIONS for declarations that Commission Decisions No 533/82/ ECSC of 3 March 1982 (Official Journal 1982, L 65, p. 6) and No 1698/82/ ECSC of 30 June 1982 (Official Journal 1982, L 191, p. 43) are void and that the Commission's communications informing Thyssen Aktiengesellschaft of its reference production and production quotas for the second and third quarters of 1982 are void in so far as they concern the abatement rates for concrete reinforcing bars,

T H E COURT,

composed of: J. Mertens de Wilma«, 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,

2. Decision No 1831/81/ECSC 955

3. Decision No 533/82/ECSC 956

4. Decision No 1696/82/ECSC 957

5. Decision No 1698/82/ECSC 958

6. Decision No 2751/82/ECSC 959

7. The abatement rates 959

976 VI — Oral procedure

Decision 976 Decision 982 Admissibility 984 Substance Costs

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

Facts and Issues

The facts of the case, the course of the they had adopted measures conforming procedure and the conclusions, sub­ with the Community's steel policy, such missions and arguments of the parties as complying with the delivery may be summarized as follows: programmes established by the Com­ mission and modernizing plant or re­ structuring by means of investment on I — Legislation applicable which the Commission had not given an unfavourable opinion. 1. Faced with a manifest crisis on the Furthermore, under Article 14 of the steel market within the meaning of decision the Commission could adapt its Article 58 of the ECSC Treaty, the provisions to the specific situation where Commission, by Decision N o 2794/80/ the production or delivery restrictions ECSC of 31 October 1980 (Official imposed by the decision or by measures Journal 1980, L 291, p. 1), established for its implementation entailed "ex­ for the first time a system of production ceptional difficulties" for an undertaking. quotas for the Community's steel under­ takings. The decision entered into force on 31 October 1980 and remained in 2. At the end of the period of force until 30 June 1981. application of that system the Com­ mission replaced it by Decision No Articles 2 to 4 of that decision provided 1831/81 /ECSC of 14 June 1981 that the Commission was to fix in respect (Official Journal 1981, L 180, p. 1), of each undertaking concerned quarterly which, with certain changes, continued production quotas for crude steel and for the quota system from 1 July 1981 to each of the four groups into which rolled 30 June 1982. products were divided. The quotas were to be calculated on the basis of each In that decision light sections were undertaking's reference production fig­ divided into three groups: ures. All light sections (coiled wire rod, concrete reinforcing bars and other Category IV: wire rod merchant bars) fell within Group IV and were subject to the quota system. Category V: concrete reinforcing bars

was mitigated in Decision No 1831/81 3. By Decision No 533/82/ECSC of 3 by various exceptions. March 1982, amending for the third time Decision No 1831/81/ECSC, estab- lishing for undertakings in the iron and steel industry a monitoring system and a For example, Article 13 of Decision No new system of production quotas in 1831/81, as amended by Decision No respect of certain products (Official 1832/81, provides for a notional increase Journal 1982, L 65, p. 6), the Com- in the reference production of certain mission created an additional exception undertakings which have brought into to the uniform abatement rates fixed operation new plant in connection with for the second quarter of 1982 in restructuring measures financed by Commission Decision No 532/82/ECSC particular investments. of 3 March 1982 (Official Journal 1982, L 65, p. 5). That exception is worded as follows : Under Article 14 of Decision No 1831/81, as amended by Decision No 1832/81, appropriate adjustments may be made to the reference production of "For producers whose total production undertakings which so request if, because of the products [subject to the pro- of the scale of the abatement rates duction quotas] did not exceed 700 000 imposed, the quota system creates tonnes in 1981 and whose production of exceptional difficulties for them, Categories IV, V and VI accounts for at provided that: least 9 0 % of their total production, the abatement rates in respect of Category V for the purpose of establishing production quotas and the proportion of "The total reference production for the production quotas that may be Categories la to Id [certain types of hot- delivered to the common market laid rolled wide and narrow strip] comes to down in Article 1 of Decision No less than 1 000 000 tonnes a year and at 532/82/ECSC for the second quarter of least 7 5 % of the figures are based on 1982 shall be reduced by five percentage products having an abatement rate of points if production of Category V more than 20%, or represents at least 30% of production of Categories IV, V and VI in 1981."

during the last two quarters as a result reinforcing bars for the second of the worsening of the slump in the quarter of 1982, the system of quotas construction sector, together with the will clearly create exceptional high level of stocks, has required veiy difficulties for the undertakings high abatement rates to be granted. referred to in point 3 above. Less This reduction in demand has been stringent quotas should therefore now reflected during the last few weeks by be established for these undertakings. a slump in market prices, which in certain regions of the Community have fallen well below the level 5. Since point 3 above concerns a large corresponding to the Commission's number of undertakings, it should be guidance prices; this reduction in stipulated that for these producers a demand is also affecting, although less reduction in the abatement rates for severely, products in Categories IV the establishment of quotas will be (wire rod) and VI (merchant bars), made by general decision. which are marketed in the same sectors and often produced by the 6. The worsening of the slump in the same undertakings. construction sector and the increased downturn in demand and prices for 3. There are in the Community a sub­ concrete reinforcing bars constitute a stantial number of small and medium- radical change in the iron and steel sized undertakings whose production market within the meaning of Article depends almost exclusively on 16 (1) of Decision No 1831/81/ products in Categories IV, V and VI EEC." and to a considerable extent on the production of concrete reinforcing bars; such undertakings are clearly 4. At the end of the period of different both from undertakings that application of the quota system also produce several other categories introduced by Decision No 1831/81 the of products and can consequently Commission adopted Decision No 1696/ benefit from the more favourable 82/ECSC of 30 June 1982 (Official market conditions for their other Journal 1982, L 191, p. 1) which products and from undertakings that continued that system with a number of produce other categories of products adjustments and additions for a third only. period, running from 1 July 1982 to 30 June 1983.

"The total reference, production for Categories la to Id amounts, to less than 1 000 000 tonnes a year and at least 7 5 % 2. The depressed state of the market relates to products where the abatement continues, and the increased rates for one or more of these categories downturn in demand has been exceeds 20%, or reflected in a further reduction in prices and the holding of a high level of stocks by steel stockholders and The total reference production for Cate- consumers. gories IV, V and VI amounts to less than This situation has necessitated the 100 000 tonnes and the abatement rates setting of abatement rates for the for one or more of these categories third quarter of 1982 which are even exceeds 20%." higher than those for the second quarter. Finally, Article 18 (1) contains a provision worded in the same way as 3. In respect of the second quarter of Article 16 (1) of Decision No 1831/81. 1982, the Commission had already had to conclude that the application of high abatement rates would create 5. By Decision No 1698/82/ECSC of exceptional difficulties for certain 30 June 1982, adjusting the abatement small and medium-sized under- rates for Category V products for the takings whose production depends third quarter of 1982 in respect of almost exclusively on products in certain undertakings (Official Journal Categories IV, V and VI and 1982, L 191, p. 43), the Commission to a considerable extent on the created an additional exception to the production of reinforcing bars. uniform abatement rates fixed for that Consequently, in Decision No quarter by Decision No 1697/82 of 30 533/82/ECSC of 3 March 1982, the June 1982 (Official Journal 1982, L 191, Commission decided to reduce the p. 42). The exception provided for by abatement rates for such under- Decision No 1698/82 is worded in the takings by five percentage points, as same way as in Decision N o 533/82. the undertakings in question did not However, it is further provided that no meet all the criteria set out in Article undertaking in respect of which an 14 of Decision No 1831/81/ECSC, adjustment pursuant to Article 14 of as amended by Decision N o 1832/ Decision No 1696/82 is made for that 81/ECSC. quarter is to be entitled to the reduction in the abatement rates provided for in the first sentence of Article 1 of Decision 4. The present situation as described No 1698/82. above calls for a further adjustment

Group III/81 IV/81 I/82 II/8 2 III/82 IV/82 P I P I P I P I 1' I I' I

Ia 27 31 18 20 26 20 22 U 37 33 37 33

Ib 28 36 30 25 34 23 27 14 38 33 38 33

Ic 17 23 10 17 3 5 + 9 + 13 13 15 13 15

Id 0 0 +22+18 +23+26 +40+45 +31 +35 +31 +35

IV — — — — — — — — 40 40 30 30

II — F a c t s a n d w r i t t e n p r o c e d u r e second paragraph of Article 33 of the ECSC Treaty for declarations that Commission Decisions No 533 and No The beneficiaries of Decisions No 533 1698/82 are void. They were registered and No 1698/82 are, in the present at the Court on 30 April and 23 August cases, undertakings which produce 1982. almost exclusively concrete reinforcing bars, wire rod and other merchant bars. Thyssen AG made two applications to They make them from scrap which they the Court, again under the second convert directly into molten steel in paragraph of Article 33 of the ECSC electric furnaces.This involves modern Treaty, for declarations that the and relatively simple technology but it communications of 30 March and 20 does not enable other steel products to July 1982 by which the Commission be manufactured. Such undertakings are fixed its reference production and hereinafter referred to as single-product production quotas for the second and undertakings. third quarters of 1982 are void in so far as they concern the abatement rates for The decisions at issue do not apply concrete reinforcing bars. Its applications to "integrated" undertakings such as were registered at the Court on 11 May members of the Walzstahl-Vereingiung and 31 August 1982. [Association of Producers of Rolled Steel], the applicant in Cases 140 and By order of 23 March 1983 the Court 221/82. joined the four cases for the purposes of the oral procedure and judgment. Those undertakings differ from the single-product undertakings in so far as they manufacture a wide range Upon hearing the report of the Judge- of products. In general, concrete Rapporteur and the views of the reinforcing bars represent no more than Advocate General, the Court requested 5 % of their production. They normally the Commission to provide certain infor- obtain the crude steel needed to manu- mation. That information was given to facture reinforcing bars from iron ore the Court in a letter from the which they melt down in blast furnaces. Commission dated 26 April 1982 and is That process involves highly developed set out below. technology which, owing to the quality of the raw material used, also makes it possible to manufacture products of high quality. I I I — C o n c l u s i o n s of t h e p a r t i e s

The applicant in cases 146 and 226/82, high market risk in exchange for a Thyssen AG, claims that the Court smaller investment risk. should: Concrete reinforcing bars are also manu­ factured in other Member States — and (a) declare void the Commission's not only in small and medium-sized communications, addressed to it on undertakings — in such mini-steelworks 30 March and 20 July 1982 and with a production capacity of up to received by it on 5 April and 26 July 50 000 tonnes a month. Although many 1982, informing it of its reference of those steelworks, including the production and production quotas applicants, have an industrial structure for the second and third quarters of similar to that of the steelworks of 1982, in so far as they concern the Northern Italy, they differ from them in abatement rates for Category V; and so far as, at the cost of high investment, they have made the necessary technical alterations to existing plant to produce (b) order the defendant to pay the costs. other rolled steel products besides concrete reinforcing bars. In carrying out such modernization and re-structuring The Commission contends that the those undertakings deliberately assumed Court should: a higher investment risk in order to reduce the market risks.

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/82

industry. As that trend continued, a rates for flat products were reduced, at further large increase in the abatement least until the second quarter of 1982. rates for the third quarter was unavoid- able. The losses incurred by the integrated undertakings on concrete reinforcing That market trend produced a severe bars were therefore accompanied by an slump in prices for concrete reinforcing increase in earnings from other products bars. Between the beginning and end of which they made in much greater the first quarter of 1982 prices fell by quantities. Those integrated undertakings D M 80 to D M 100 per tonne. possessing modern plant even managed

their costs. The slump in prices which concrete reinforcing mesh, had also has occured thereafter by D M 80 to D M fallen appreciably. 100 per tonne, and the accompanying increase in the abatement rates, which This trend threatened to upset the led to a reduction in the rate of process of the adaptation of supply to utilization of capacity, not only the decline in demand by causing sudden eliminated the cost advantage of the structural changes with all the harmful single-product undertakings but caused social consequences which these would them to operate at a loss. The manufac- entail.

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/82

Thyssen AG challenges the communi­ 1.1. It makes no difference whether the cations informing it of its reference defendant actually intended to distort production for the second and third competition. quarter of 1982 on the ground that they are unlawful: the application of the abatement rates fixed by the Commission Moroever, the interference with the is contrary to the prohibition of discrimi­ integrated undertakings' position on the

WALZSTAHL-VEREINIGUNG AND THYSSEN v COMMISSION

2. The Commission challenges the applicants' argument that a quota system 2.2. The Commission concludes that based upon 'Article 58 of the ECSC the arguments advanced by the Treaty must be neutral as regards the applicants do not prove that the adoption effect on competition. That argument is of Decisions No 533/82 and No based on a misinterpretation of Article 1698/82 constituted a misuse of power. 58 and of certain passages in the Court's judgments cited in support of their interpretation of that article. By defi- nition a production quota system is not (b) The basis of authority neutral, for it removes an element of undertakings' business freedom which is vitally important for competition 1. The applicants maintain that the between them, namely their freedom to contested decisions have no basis cither determine the quantities they produce. in Article 58 of the ECSC Treaty or in Article 58 therefore authorizes the Articles 14 and 16 of Decision No Commission to intervene in competition 1831/81 (or in Articles 14 and 18 of between undertakings and requires only Decision No 1696/82).

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/82

In the second quarter of 1982, when the "general" abatement rate was 3 8 % , the uniform abatement rate for all producers of concrete reinforcing bars was 3 5 % . 1.3. It is obvious that Article 14 of Arguing that the burden of a 3 5 % Decision No 1831/81 and Article 14 of abatement rate constituted a threat to the Decision No 1696/82 can provide no very existence of all the single-product basis for the contested decision. To undertakings, the Commission fixed a judge from its structure, that provision special abatement rate of 3 3 % for them. is a hardship clause which, provided In its view, that was sufficient to avert specific conditions are fulfilled, enables the threat of ruin facing all the single- individual undertakings to obtain an product undertakings.

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

However, at most only a few of the single-product undertakings accorded the special There thus arises, so far as· "the threat treatment meet the conditions for the to existence" or "exceptional economic application of Article 14. In fact the difficulties" are concerned, the situation, defendant invoked Articles 16 and 18 as which the defendant is hardly able to the authority for its action in order to explain, that, whereas in the second save investigating whether the conditions quarter of 1982 an abatement rate of for the application of Article 14 were 3 5 % was then a threat to the very fulfilled. In so far as the defendant refers existence of the single-product under in this regard to "administrative takings, the much higher abatement rate simplification", it is sufficient to point of 4 2 % was sufficient to avert that threat out that, although the need for such in the third quarter, despite a deterio simplification may provide justification ration in the general situation on the for waiving certain formalities where market in concrete reinforcing bars. established and investigated facts are concerned, it cannot justify a decision not to investigate whether intervention by a Community authority is legitimate under Community law. The defendant's argument is even more paradoxical when one also considers the fourth quarter of 1982, for, although the abatement rates remained unchanged in that quarter, the general, indiscriminate 1.6. However, the circumstances in increase in the quotas accorded to which Article 16 (1) of Decision N o the single-product undertakings was re 1831/81 and Article 18 (1) of Decision moved because the assumed difference in No 1696/82 allow the general quotas to the additional burdens borne by the be adjusted did not exist.

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/82

of the crisis and long before production 2. The Commission points out that quotas were fixed. Nor was there a Decisions No 533/82 and No 1698/82 question of "unforeseen difficulties" pursue no aim connected with regional caused by the application of Decisions or structural policy. Although they apply No 1831/81 and No 1696/82 if, owing mainly to Italian undertakings, they also to their structure and the normal affect three French, two German and operation of the market, the single- one British undertaking. In any case, the product undertakings had to pay a extent to which the contested decisions certain price. affect individual Member States is irrelevant as far as their legality is concerned because the criterion for their application is not whether an under- taking belongs to a Member State or a 1.7. The applicants hold the view that, specific region. since Articles 16 and 18 are exceptional provisions, they do not give the Commission any authority to make fundamental changes to the entire system set up by Decisions No 1831/81 and No 2.1. The situation threatening the 1696/82 and in that way jeopardize the single-product undertakings due to the main aims of the general decisions. developments on the market in concrete reinforcing bars and the further sharp increases in the abatement rates for the second and third quarters of 1982 was an If, contrary to the applicant's view, exceptional difficulty, within the Articles 16 and 18 could be construed as meaning of Article 14 of Decisions No authorizing the Commission to make 1831/81 and No 1696/82, for under- substantial changes to the quota system, takings affected by Decisions No 533/82 such authority would be void under and No 1698/72. The Commission Article 58 of the ECSC Treaty for lack maintains that it examined all the of assent of the Council. relevant factors suggesting the existence of such exceptional difficulties. Those factors included the development of the market in concrete reinforcing bars and The Walzstahl Vereinigung makes the in flat products, and prices and the additional point that, irrespective of the structure of undertakings. other factors, those circumstances constitute a misuse of power.

time of the fourth quarter, the financial Categories IV and VI), concrete re situation had improved somewhat owing inforcing bars are a homogeneous to a slight increase in prices for concrete product. But the principle of equal reinforcing bars and to a slight fall in treatment requires that all undertakings prices for scrap. in that category should be given the relief envisaged, in which case a procedure making relief dependent on the submission of a request is un 2.3. However, in order to meet the necessary. imminent danger the Commission could not use Article 14 of Decision No 1831/81 or Article 14 of Decision No 1696/82 because those provisions could Furthermore, the enactment of legis be invoked only by the small single- lation in Article 1 of Decisions No 533 product undertakings. The medium-sized and No 1698/82 to deal with hardship single-product undertakings were, how cases helps to simplify administration.

It therefore adopted Decisions N o 533/82 and N o 1698/82 on the basis of those articles, as is clear from the preambles to 2.6. In the Commission's view, the those decisions. conditions for the application of Article 16 of Decision No 1831/81 and Article 18 of Decision No 1696/82 were fulfilled. The developments on the 2.5. In the Commission's view, Article market in concrete reinforcing bars 16 of Decision No 1831/81 and Article described above constituted a radical 18 of Decision No 1696/82 grant it wide change in the iron and steel market and, discretion when devising the measures as a result, unforeseen difficulties were needed to overcome exceptional encountered in the application of those difficulties. For example, it may make two decisions. The applicant's interpre relief dependent on the submission of a tation to the effect that there was no request by the undertakings concerned "radical change in the iron and steel or adopt a rule which eliminates the market" but only a gradual deterio difficulties without any requirement of a ration, rather than the substantial deteri special request. In the present case it was oration required by Articles 16 and 18, is necessary to adopt the latter course not supported by the terms used in those because the exceptional difficulties faced two provisions. Moreover, the dramatic by the single-product undertakings slump in the price of concrete affected the group as a whole. The reinforcing bars in the first quarter of reason why any undertaking experienced 1982 and the threat which it posed to the exceptional difficulties if concrete very existence of the single-product reinforcing bars accounted for more than undertakings undoubtedly constituted a 30% of its production is that, unlike substantial deterioration in comparison other steel products (including those in with the previous situation. Furthermore,

that development was not foreseeable. In 1698/82 exclusively to undertakings this regard, the Commission points out whose production is centred on concrete that, for the purpose of interpreting reinforcing bars, the Commission disre- Article 16 of Decision No 1831/81, it garded the fundamental aims of the does not matter whether or not a ECSC Treaty enunciated in the second particular situation was foreseeable at the paragraph of Article 2 and in Article 3 end of 1981. Article 16 merely empowers (d) and (g), from which may be, inferred and requires the Commission to make the principle that any action taken by an the necessary adjustments to Decision undertaking which enables it to cope No 1831/81 if its application encounters with the changing market situation and difficulties not foreseeable at the time adapt its production to demand on the of its adoption. Decision No 1698/82, market in concrete reinforcing bars is however, was not adopted on the ground desirable and positive. Decisions No of unforeseeable difficulties. Its preamble 533/82 and No 1698/82 are contrary to merely stressed that a radical change had that principle because they benefit those occurred on the market in concrete undertakings which, despite the general reinforcing bars and, according to Article structural crisis which has affected the 18 of Decision No 1696/82, that is all market in concrete reinforcing bars for that is required. many years, have concentrated on producing as much as they can of a single product, for which demand on the market is by far the weakest. 2.7. Finally, the Commission points out that Article 58 of the ECSC Treaty required it to adopt the necessary measures, that is to say Decisions No Therein lies a manifest breach of the 533/82 and N o 1698/82, which did not ECSC Treaty and a misuse of power. substantially modify the quota system any further but, as their strictly exceptional character indicates, were intended to enable exceptional dif- 2. In reply the Commission maintains ficulties to be overcome. that it is not possible to pursue all the aims of the Treaty simultaneously, parti- cularly in times of crisis. 2.8. The Commission concludes that Decisions No 533/82 and N o 1698/82 were adopted on the basis of Article 16 It therefore considers the applicants' of Decision No 1831/81 and Article 18 submission unfounded since the of Decision No 1696/82 and that the contested decisions have no structural conditions for the application of those aims. articles were fulfilled; so they neither lacked a basis of authority nor constituted a misuse of power. The quota system unquestionably contributes to the attainment of the aims of the Treaty by enabling production to (c) The alleged failure to take account be adapted to demand and making it of the fundamental aims of the easier for undertakings to carry out the ECSC Treaty necessary restructuring. Decisions No 533/82 and No 1698/82 are an integral part of the quota system. They prevent 1. The applicants take the view that, in the system from having disproportionate addressing Decisions No 533/82 and No consequences for certain undertakings

defined on the basis of objective criteria. 1.3. Amongst the undertakings ac­ If the Commission had failed to act, it corded the special treatment there are would have laid itself open to the charge undoubtedly many whose economic of infringing undertakings' basic rights. situation is better, or at any rate no worse, than that of the undertakings which were excluded from the relief (d) The alleged breach of the pro­ provided by the provisions in question. hibition of discrimination In any case, it is inconceivable that every small and medium-sized single-product 1. The applicants accuse the defendant undertaking producing concrete re­ of a misuse of power in favouring the inforcing bars was, without exception small and the medium-sized steel under­ and to the same degree, so affected by takings and putting the integrated under­ the quotas fixed for that product that an takings at a disadvantage by applying adjustment is "necessary". distinguishing criteria which did not justify unequal treatment. 2. Thyssen AG makes the additional point that in view of its production of 1.1. The Commission summarily con­ concrete reinforcing bars it must also be cluded that all the undertakings denied considered a single-product undertaking the favourable treatment had the benefit in the same way as the undertakings of a better situation on the market in accorded special treatment by the their other products and were therefore defendant. It points out that at high in a better economic and financial investment cost it has erected an electric position. That assumption is wrong. It is steelworks at Oberhausen designed wrong first of all because it is unfair to exclusively for the production of compel undertakings to subsidize heavy concrete reinforcing bars, merchant bars losses in a certain sector which is no and wire-rod. The defendant's as­ longer viable with profits from other sumption that integrated undertakings sectors of activity. If that were the case, offset losses in one sector with profits a highly diversified undertaking would from another does not therefore apply to also have to draw upon profits from Thyssen AG because it is not technically sectors unconnected with steel pro­ possible to manufacture other products, duction in order to subsidize the pro­ particularly flat products with plant duction of concrete reinforcing bars, designed for the production of a single which would be contrary to commercial product. So if the Commission interfered logic. Secondly, the argument that one with competition because the single- sector of an undertaking's activities product undertakings were at a disad­ should subsidize another is clearly inap­ vantage, undertakings like Thyssen AG plicable when an undertaking is still must in any case also be accorded the making losses on steel products in other same preferential treatment. categories, despite increased turnover.

individual steel producer can be taken burdens of the high abatement rates into account when the abatement rates for concrete reinforcing bars. are fixed. Departures from the principle of the uniform reduction of production are therefore admissible only in truly 3.1. It is that last factor, the possibility exceptional cases in order to avoid unfair of offsetting losses, which matters. That hardship. ability has saved the integrated under- takings from ruin, whereas the single- product undertakings have no such opportunity. Those two quite different 3. The Commission maintains that it situations also have quite different exercised its discretion in a non-discrimi- consequences as regards the security of natory manner. Although Decisions No employment in the steel industry. 533/82 and No 1698/82 treat single- Whereas integrated undertakings may be product undertakings differently from forced to lay off workers temporarily, integrated undertakings, the unequal the danger with single-product under- treatment is not discriminatory for the takings is that jobs might be lost forever. simple reason that their situations are not comparable. There are in fact considerable differences between single- 3.2. In answer to the applicants' product undertakings and integrated argument that not all of the undertakings steel undertakings and these may be benefiting from Decisions No 533 and summarized as follows: No 1698/82 were faced with the same financial difficulties, the Commission states that, after carefully comparing (1) The single-product undertakings are prices and costs and analyses of the small and medium-sized under- situation on the market in concrete takings, whereas the integrated steel reinforcing bars, it reached the manufacturers are large under- conclusion that all the undertakings takings; fulfilling the conditions set out in Article 1 of Decision No 533/82 and Article 1 of No 1698/82 were in the same economic situation. (2) Normally products in Categories IV, V and VI account for over 90% of the total production of the single- product undertakings; the same 3.3. As regards Thyssen AG, the products normally account for only Commission maintains that it was right about 20% of the integrated to treat it as an integrated undertaking. steelworks ; Although it possesses production plant in which it also manufactures concrete reinforcing bars in electric furnaces, that circumstance does not determine its (3) The fixing, at a time of crisis, of structure in the same way as happens in particularly high abatement rates for the case of the single-product under- concrete reinforcing bars in the takings, for Thyssen AG produces second and third quarters of 1982 mainly flat products. The decisive factor threatened to ruin the single-product is not the structure of a production plant undertakings; integrated steel under- but the structure of the whole under- takings, on the other hand, were taking and concrete reinforcing bars able, by virtue of the increase in represent only about 1% of Thyssen's prices for flat products, to offset the total production.

(e) The submission that the Commission 2.1 As regards the applicant's argu­ used unlawful means to achieve its ments that Decisions No 533/82 and No aim 1698/82 contravene the principle of proportionality, the Commission points 1. The applicants contend that another out that that argument is based on the aspect of the Commission's misuse of assumption that the decisions have power is that the means it used to caused a 5 % shift in market shares. That achieve its aims of improving the assumption is incorrect economic situation of the single-product undertakings were improper inasmuch as they were arbitrary, unjustified, dispro­ First, because the abatement rate of the portionate and inappropriate. single-product undertakings is lower by 5 % only when compared with the higher 1.1. For instance, there is no real justi­ abatement rates of the other under­ fication for the selection of the specific takings; and criteria for defining the group of under­ takings entitled to the special treatment. Nor were reasons given for that choice. Secondly, because, in their calculation of the extent to which market shares have been altered, the applicants wrongly 1.2. Moreover, the increase in the included undertakings which admittedly quotas allocated to the single-product fulfilled the conditions of Article 1 of undertakings is disproportionate because, Decisions No 533/82 and No 1698/82 compared with a uniform reduction of but which benefited under Article 14 of quotas for all producers of concrete Decision N o 1831/81 or Article 14 of reinforcing bars, it allows the single- Decision No 1696/82. If the appropriate product undertakings to increase pro­ corrections are made, the shift in market duction by at most only two percentage shares turns out to be only 1.5% so that points whereas there is a loss of 5 % in it cannot be said that an unduly large the integrated undertakings' share of the burden was imposed on the integrated market in concrete reinforcing bars. undertakings.

V — Question put to the Com- also by dealers, who sell approximately mission 80% of all concrete reinforcing bars produced. By increasing their stocks in times of rising demand and reducing The Court requested the Commission to them when demand falls, dealers provide it with the comparisons of the accentuate the fluctuations in prices for costs and prices of the various groups of concrete reinforcing bars. producers of concrete reinforcing bars and the results of its investigations into In the third quarter of 1982 the fall in the state of the m.arket in concrete prices for concrete reinforcing bars was reinforcing bars and the financial checked and they began to increase situation of those groups of producers slightly. This trend continued in the from which the Commission reached the fourth quarter of 1982 and has slowly conclusion that all the undertakings strengthened since then. The Com- meeting the criteria laid down in mission contributed to this development Decisions No 533/82 and N o 1698/82 by reducing quotas and thereby were, as regards the factors crucial to the establishing a better market equilibrium. introduction of the reduced abatement rates, in the same exceptional and difficult economic situation. B. Comparison of costs and prices of the various groups of producers of concrete The Commission replied as follows : reinforcing bars in the second and third quarters of 1982 "A. The situation on the market in con- crete reinforcing bars The following manufacturing processes are distinguished in the costs analysis: In the second quarter of 1982 there was (a) re-rolling of rails a marked decline in demand for concrete reinforcing bars in comparison with the (b) rolling of bought billets two previous quarters. The abatement rates (24% in the fourth quarter of 1981, (c) electric steel production by the 26% in the first quarter of 1982, 38% in continuous casting method the second quarter of 1982 and 47% in the third quarter of 1982) clearly illus- (d) electric steel production in semi- trated the decline in quantitative terms. finished product mills The reason for the sudden slump in demand for concrete reinforcing bars (e) production from pig-iron (in inte- was the recession in the building industry grated undertakings) at that time and the running down of surplus stocks by dealers and consumers. There was also a marked decline in In the second and third quarters the exports. costs of undertakings which re-roll rails were lower than those of the other After a brief rise at the end of 1981 and groups of undertakings. In the second the beginning of 1982 prices for concrete quarter of 1982 they were approximately reinforcing bars fell sharply: at the D M 560. beginning of the second quarter of 1982 they fell from slightly more than D M The costs of undertakings which roll 600 to approximately D M 550. Prices billets were approximately D M 615. for concrete reinforcing bars are not These undertakings buy billets for determined by the producers alone but rolling, either in the Community or in

The financial situation of the single- As regards the electrical steelworks with product undertaking, that is to say continuous casting plant, costs were undertakings using processes (a) to (d), calculated for modern, relatively large is characterized by the fact that they undertakings. They were approximately have no significant reserves. Any profits D M 600. The costs of less modern they make are used for plant moderni­ and smaller undertakings were slightly zation, which is also in progress in the higher. reinforcing bars sector. The losses sustained in the second and third quarters of 1982 therefore represented a serious threat. Since the costs/price ratio A few electrical steelworks have mills for for the other products manufactured by semi-finished products. However, as far these undertakings (Categories IV and as we know, they were not used in the VI) was also unsatisfactory, the losses on second and third quarters of 1982. If concrete reinforcing bars could not be they had been used to make semi­ made good. finished products, the costs for concrete reinforcing bars would have been approximately D M 670. In the first half of 1982 the integrated undertakings benefited from a sharp rise in prices and a slight increase in The costs of integrated undertakings quantities for nearly all flat products. which manufacture concrete reinforcing The price increase was more than D M bars from pig-iron exceeded D M 700. 100. The production of concrete reinforcing bars has only a marginal effect on the financial situation of the The average price of concrete re­ integrated undertakings because that inforcing bars during the period product accounts for only about 5 % of considered was about D M 550 ex works. their total production. Prices of bars produced by undertakings which roll rails were about D M 500. Those undertakings give no guarantee as During the third quarter the price of to the quality of their bars and can concrete reinforcing bars began to therefore charge lower prices than the increase slightly, whilst the price of other undertakings. scrap, which largely determines the costs of the single-product undertakings, fell slightly. The difference between prices Only single-product undertakings which and costs, which had been approximately mainly use processes (b) and (c) qualified D M 50 or more, therefore diminished. for the 5 % reduction in the abatement This slightly improved the financial rate. Single-product undertakings which situation of the single-product under­ roll rails were accorded adjustments takings. The Commission acted accord­ under Article 14. This last group of ingly and from the fourth quarter it undertakings falls in the category of adopted the practice of only reducing undertakings whose reference production abatement rates by 5% after examining is less than 100 000 tonnes. the individual cases."

3 By order of 23 March 1983 the Court decided, in view of the related nature of the four cases, to join them for the purposes of the oral procedure and judgment.

4 Before the applications are examined the general decisions at issue should be put into their context.

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

5 By Decision N o 2794/80/ECSC of 31 October 1980 (Official Journal 1980, L 291, p. 1) the Commission, faced with a manifest crisis on the steel market, introduced a system of quarterly production quotas for steel undertakings in the Community, pursuant to Article 58 of the ECSC Treaty. Under that system an abatement rate, which is the same for all undertakings, is applied to each undertaking's actual production during a reference period in respect of each product category covered by the system. Abatement rates are also applied to the proportion of production which may be delivered within the Common Market. However, the decision made provision for certain exceptions to the system of uniform abatement rates. Thus, reference production was increased for undertakings which, owing in particular to measures which they had adopted in conformity with the Community's steel policy found themselves in particular situations. Furthermore, Article 14 of the decision empowered the Commission to adapt the provisions at the request of an undertaking for which the production or delivery restrictions imposed by the decision or by measures implementing it entailed exceptional difficulties.

8 On the other hand, Article 16 (1) of Decision N o 1831/81 conferred a new power on the Commission by providing that:

"If radical changes occur in the iron and steel market or if the application of this decision encounters any unforeseen difficulties, the Commission shall carry out the necessary adjustments by general decision."

9 In the first of the contested general decisions, Decision N o 533/82 of 3 March 1982, the Commission, acting pursuant to Article 16 (1) of Decision N o 1831/81, made provision for an exception to the uniform abatement rates for the second quarter of 1982, as fixed by Decision No 532/82 of the same date (Official Journal 1982, L 65, p. 5). This exceptional provision is worded as follows:

"For producers whose total production of the products [subject to the quotas] did not exceed 700 000 tonnes in 1981 and whose production of Categories IV, V and VI accounts for at least 90% of their total production, the abatement rates in respect of Category V for the purpose of establishing production quotas and the proportion of the production quotas that may be delivered to the common market laid down in Decision N o 532/82/ECSC for the second quarter of 1982 shall be reduced by five percentage points if production of Category V represents at least 30% of production of Cate- gories IV, V and VI in 1981."

10 In the preamble to Decision N o 533/82 the reasons for that provision are stated as follows :

2. In the case of concrete reinforcing bars, which belong to Category V of the new system of quotas, the downturn in demand, which has continued and become more marked during the last two quarters as a result of the worsening of the slump in the construction sector, together with the high level of stocks, has required very high abatement rates to be granted. This

5. Since point 3 above concerns a large number of undertakings, it should be stipulated that for these producers a reduction in the abatement rates for the establishment of quotas will be made by general decision.

6. The worsening of the slump in the construction sector and the increased downturn in demand and prices for concrete reinforcing bars constitute a radical change in the iron and steel market within the meaning of Article 16 (1) of Decision N o 1831/81/ECSC."

11 "When the period of application of the quota system provided for in Decision No 1831/81 expired, the Commission adopted Decision N o 1696/82 of 30 June 1982 on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry (Official

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/82

Journal 1982, L 191, p. 1). That decision, which made the three categories of light sections (wire rod, concrete reinforcing bars and merchant bars) subject to the quota system, maintained the exceptions to the system of uniform abatement rates and the conditions governing the Commission's exercise of its power to make adjustments under Article 14; however, the level of production above which special relief may not be granted was raised from 60 000 to 100 000 tonnes. Finally, Article 18 (1) of Decision N o 1696/82 contains an enabling provision worded in the same way as Article 16 (1) of Decision N o 1831/81.

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

5. The worsening of the situation on the market for reinforcing bars and the resulting need to set exceptionally high rates for this product constitutes a radical change on this market and has created difficulties in the application of the quota system which are only partially provided for in Article 14 of Decision N o 1696/82/ECSC. Pursuant to Article 18 (1) of that decision, the decision should therefore be adjusted in respect of the third quarter of 1982."

1 3 For the fourth quarter of 1982, in which the abatement rate for concrete reinforcing bars remained the same as in the third quarter, the Commission ceased to provide for a general exception for the undertakings affected by the two decisions at issue. However, it altered the limits laid down in Article 14 of Decision N o 1696/82 so that it could make adjustments for those undertakings, upon request and after consideration of each individual case.

Admissibility

16 The Commission has expressed doubts about the admissibility of the actions, which are all based on the second paragraph of Article 33 of the EEC Treaty. That provision states that undertakings or the associations referred to in Article 48 may institute proceedings against decisions concerning them which are individual in character or against general decisions which they consider to involve a misuse of powers affecting them.

17 As regards the actions brought by the Walzstahl-Vereinigung, which are directed against Decisions N o 533/82 and N o 1698/82, the Commission calls in question that association's interest in bringing proceedings. It points out that only six of the thirteen member undertakings subject to the quota system manufacture concrete reinforcing bars, which account for no more than 3 % of the total production of all 13 members. Furthermore, 40% of all concrete reinforcing bars produced in the Federal Republic of Germany are made by undertakings which are not affiliated to the applicant association. From those facts the Commission concludes that the effects of the contested general decisions on the Walzstahl-Vereinigung are extremely slight.

18 In this regard it should be recalled that the Court, has consistently held that in order to establish an applicant's interest in bringing proceedings it need only be shown that it is an association of undertakings meeting the conditions laid down by the second paragraph of Article 33 and Article 48 of the ECSC Treaty and that it alleges a misuse of powers affecting one or more of its members and adduces relevant arguments to substantiate the

20 The Court held in its judgment of 28 October 1981 in Joined Cases 275/80 and 24/81 (Krupp Stahl AG ν Commission [1981] ECR 2489) that, although in an action for a declaration that an individual decision is void the applicant undertaking may allege that certain provisions of the general decisions which the contested decision implements are illegal, it may do so only if the individual decision is based on the rules alleged to be illegal. In this case it cannot be disputed that there is a close relationship between the decisions fixing the abatement rates for concrete reinforcing bars inter alia and the decisions reducing those rates for certain producers of concrete reinforcing bars. The latter decisions expressly refer to the former decisions and were adopted on the same dates. Moreover, since the purpose of the abatement, rates is to establish a balance between production and expected demand, it seems that the general abatement rate for the products concerned would have been lower if there had been no reduction in the abatement rate for producers holding 7 0 % of the relevant market. The individual decisions which the applicant seeks to have declared void are therefore partly based on the general decisions at issue.

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/32

21 Consequently, the four actions are admissible.

Substance

22 As explained in paragraph 15, the applicants charge the Commission with having committed a misuse of powers as against them by giving all single- product undertakings a competitive advantage on the market in concrete reinforcing bars without examining the individual situation of each of those undertakings, as required by Article 14 of the basic decisions then in force, and without amending those decisions in accordance with the procedure laid down in Article 58 of the ECSC Traty.

24 According to the Commission, this development affected manufacturers of concrete reinforcing bars in different ways. As far as the single-product undertakings were concerned, the fall in prices not only eroded their cost advantage but also led them to operate at a loss. The integrated under- takings' losses on reinforcing bars were even greater than those of the single- product undertakings; however, the benefit which the integrated under- takings derived, during the same period, from the rise in prices for flat products after the introduction of the quota system was maintained. Moreover, the abatement rates for flat products were reduced, at any rate until the second quarter of 1982. Therefore, contrary to what had happened in the case of the single-product undertakings, the losses incurred by the integrated undertakings on concrete reinforcing bars were accompanied by an increase in earnings from other, even more important sectors.

25 In the Commission's view, the developments described above threatened the very existence of the single-product undertakings, which were in exceptional difficulties within the meaning of Article 14 of Decisions No 1831/81 and No 1696/82. However, in order to meet that imminent danger the Commission could not apply those provisions because they could be invoked

WALZSTAHL-VEREINIGUNG AND THYSSEN ν COMMISSION

only by small single-product undertakings, whereas medium-sized single- product undertakings were in the same critical situation. Furthermore, the examination of individual cases required by those provisions was unnecessary since all the single-product undertakings faced the same market situation. However, the Commission claims that in Article 16 of Decision N o 1831/81 and Article 18 of Decision N o 1696/82 it had the legal means to carry out the necessary adjustments by general decisions. In its submission, the conditions for the application of those articles were fulfilled since the developments on the market in concrete reinforcing bars constituted a radical change in the steel market within the meaning of those articles.

985 .

JUDGMENT OF 21. 2. 1984 — JOINED CASES 140, 146, 221 AND 226/82

individual situation of the undertaking in question justified an exception, the Commission could decide upon a general increase of the quotas for a whole group of undertakings characterized by their structure only after following the procedure laid down in Article 58 of the Treaty, that is to say after consulting the Consultative Committee and obtaining the assent of the Council. Consequently, in acting pursuant to Articles 16 and 18 of the basic decisions, the Commission also evaded the procedure specifically laid down by the Treaty for that purpose.

30 In those circumstances the applicants' submission that Decisions N o 533/82 and N o 1698/82 were vitiated by a misuse of powers affecting them must be upheld, without its being necessary to investigate whether the considerations advanced by the Commission were capable of justifying the application of different abatement rates to the single-product undertakings and the integrated undertakings. Consequently, those two decisions must be declared void.

31 Since the individual decisions addressed to Thyssen AG on 30; March and 20 July 1982 concerning the reference-production figures and production quotas for the second and third quarters of 1982 were based on Decisions N o 533/82 and N o 1698/82, in so far as they concern the abatement rates for concrete reinforcement bars, those individual decisions must also be declared void in accordance with that applicant's pleadings.

Costs

establishing for undertakings in the iron and steel industry a monitoring system and a new system of production quotas in respect of certain products and Commission Decision No 1698/82/ECSC of 30 June 1982 adjusting the abatement rates for Category V products for the third quarter of 1982 in respect of certain undertakings; 2. Declares that the individual decisions addressed by the Commission on 30 March and 20 July 1982 to Thyssen Aktiengesellschaft con­ cerning its reference-production figures and production quotas for the second and third quarters of 1982 are void in so far as they concern the abatement rates for Category V; 3. Orders the Commission to pay the costs.

Mertens de Wilmars Koopmans Bahlmann

Galmot Pescatore Mackenzie Stuart O'Keeffe

Bosco Due Everling Kakouris

Delivered in open court in Luxembourg on 21 February 1984.

For the Registrar