C-170/83

C O M P A C T DEL D o r r . I N G . M A R I O A N D R E O U & C. SAS, having its registered office in Savigno, Bologna, Italy,

o n the interpretation of Articles 1 a n d 3 of Regulation N o 6 7 / 6 7 / E E C of the Commission of 22 M a r c h 1967 on the application of Articles 85 (3) of the T r e a t y t o certain categories of exclusive dealing agreements,

T H E C O U R T (Fourth C h a m b e r )

composed of: T . K o o p m a n s , President of C h a m b e r , K. Bahlmann, P. Pescatore, A. O'Keeffe a n d G. Bosco, J u d g e s ,

Advocate G e n e r a l : C. O . Lenz Registrar: H . A. Rühi, Principal Administrator

gives the following

On the same day Hydrotherm undertook By the same contract Hydrotherm in a "production contract" to obtain the undertook that in the licensed territory it products covered by the contract only would not directly or indirectly represent from Compact and to buy a minimum of or do business with other manufacturers, 100 000 items a year from Compact. retailers or makers of radiators, hot- plates or convectors made from alu- minium or aluminium alloy. Pursuant to the contract Hydrotherm had the trademark "Ghibli" registered in its own name in several permitted Hydrotherm also agreed to place a firm countries, including the Federal Republic order with Compact amounting to of Germany. approximately D M 1 000 000. The first

JUDGMENT OF 12. 7. 1984 — CASE 170/83

six-monthly deliveries were to take place March 1967 on the application of Article from September 1977 to March 1978 85 (3) of the Treaty to certain categories inclusive in the quantities and on the of exclusive dealing agreements (Official dates fixed by Hydrotherm. Journal, English Special Edition 1967, p. 10).

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Common Market but also countries Commission of the European Com- outside the European Community? munities, represented by its legal Adviser, Norbert Koch, and Ingolf Pernice, a member of its legal Department, on 28 3. In order for Article 3 (b) (1) of Regu- October 1983 by the Government of the lation No 67/67 to apply, must the French Republic, represented by Jean- parties have adopted terms on the Paul Costes, of the Secretariat General exercise of an industrial property right of the Interministerial Committee for (in this instance a trademark) which Questions of European Economic suggest that it may be used to prevent Cooperation, and on 8 November 1983 or hinder goods to which the contract by Compact, represented by Paolo relates and which are properly Mengozzi, Advocate at Bologna and at marked or placed on the market from the Corte di Cassazione, Professor of being obtained or sold, or is it suf- International Law at the University of ficient for the purposes of that Bologna. provision that the use of the trademark to prevent or hinder parallel imports is not dealt with in the contract? Upon hearing the report of the Judge- Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any 4. Is Article 3 (b) (1) of Regulation No preliminary inquiry. 67/67 applicable even if the parties to the contract do not legally have the power, by exercising the trademark rights, to prevent goods to which the By order of 1 February 1984 the Court contract relates, and which are assigned the case to the Fourth Chamber properly marked or placed on the pursuant to Article 95 (1) and (2) of the market, from being obtained or sold? Rules of Procedure.

(a) The principle is clearly laid down in the case-law of the Court that the unity of the conduct on the market of the In addition to those points there is a parent company and its subsidiaries practical argument: undertakings which outweighs the formal separation between grant exclusive rights to deal in their those companies resulting from their products in large territories, often separate legal personality. That principle including countries outside the Com- also applies where one of the parties to munity, are mostly small-sized under- the contract is composed of three entities takings. To exclude application of the bound inter se by a natural person who regulation to such undertakings would runs the other two undertakings and mean rendering the regulation ineffective where the same natural person is both in the very circumstances in which the the majority shareholder and sole fully needs it is meant to satisfy are parti- liable partner in two limited partnerships. cularly acute. The three entities form one economic unit and must be treated as a single undertaking. A contract concluded by such an undertaking with an exclusive dealer should be treated as an agreement between two undertakings for the purposes of Article 1 of Regulation No 67/67. (c) It is clear from the grounds of the order for reference that the third issue is of primary importance for resolving the first two issues. The Bundesgerichtshof placed great emphasis on the principle of interpretation which requires a provision to be given its fullest effect and (b) Regulation N o 67/67 is applicable maximum practical value. Since the to an exclusive dealing agreement Court has ruled out the possibility of covering territory situated outside the using industrial property rights to Community. Its purpose is to recognize prevent parallel supplies, the question the validity of exclusive dealing must be asked whether it is right for agreements covered by the regulation on Article 3 (b) (1) of Regulation No 67/67 account of their positive effect on intra- to be robbed of all its practical value in Community trade and their contribution assuming that its aim is to prevent the to the development of competition application of the block exemption only between different brands. The fact that where an industrial property right is such an agreement covers non-member actually used to impede parallel supplies countries as well does not ipso facto and not also where the mere possibility diminish the positive function of the exists of being able to attempt to do so.

Regulation No 67/67 cannot be In this regard the question whether construed as defining those exclusive agreements of the kind in question are in dealing agreements which, on the principle unlawful must be answered in assumption that they are in principle the negative owing to the historical and unlawful under Article 85 (1) of the institutional link between Regulation No Treaty, are permitted exceptions. It can 67/67 and the decisions of the Court of be seen from the fourth and fifth recitals Justice, the rationale and scope of the of the preamble to the regulation that in regulation and the relationship between the Commission's view the exclusive the regulation and article 85 (1) of the dealing agreements defined in Article 1 EEC Treaty. may but do not have to be caught by Article 85 (1) and that it is not necessary expressly to exclude from the category as defined those agreements which do not fulfil the conditions of Article 85 (1). The decisions of the Court of Justice The Court of Justice has held that the cited by the Bundesgerichtshof in its sole function of the regulation is to order for reference started a gradual define the scope of application of the process which ended in the recognition competition rules to such agreements in Community law of the principle of the and to facilitate their application in view "exhaustion" of rights in commercial or of the large number of individual industrial property. At the time of the applications for exemption submitted to adoption of Regulation No 67/67 that the Commission before the adoption of

As from 1966 the Court of Justice held that exclusive dealing agreements that affect trade between Member States are not incompatible per se with EEC competition law. In distinguishing be- tween open and closed exclusive licences the Court gradually formulated the view that such agreements are unlawful only where they confer absolute territorial protection and exclude the possibility of parallel supplies. The Court subsequently Even if its relationship to Article 85 (1) is hesitated to declare such agreements disregarded, the regulation should be incompatible by nature with Article 85 construed in the light of the decisions of (1) and ruled that they simply had no the Court of Justice. It is a characteristic effect as against importers of goods feature of the most commonly used lawfully bearing trademarks. Although exclusive dealing agreements that they trademark rights present monopolistic are entered into in conjunction with the features, they must be judged positively grant of trademark rights which are as they help to promote competition meant to protect the dealer against direct between brands. In a case concerning competition from third parties or from plant-breeders' rights the Court held that the licensor and to enable the dealer to the grant of an open exclusive licence is bear the risk and expense of marketing not in itself incompatible with Article 85 the new product. Without that link to (1). That principle also applies to other trademark rights exclusive dealing industrial property rights since the Court agreements could not fulfil their positive pointed out that breeders' rights do not economic function which was the reason have characteristics of so special a nature for the adoption of Regulation N o as to require, in relation to the 67/67. T o construe the regulation as competition rules, different treatment. excluding exemption whenever an ex-

The Government of the French Republic submits observations only on the third, fourth and fifth questions and leaves it to It must be borne in mind that the finding the Court to answer the first two of the German court of appeal that questions as it considers fit. the agreements in question contain restrictions on competition likely to have an appreciable effect on trade between Member States has been answered, in particular by the argument based on the In assessing the legality of a contract Commission's notification of the closing with reference to Regulation No 67/67 a of its file on the application for negative distinction should be made between, on clearance on the ground that although the one hand, the actual terms of the the agreement notified was caught by contractând the measures adopted in its Article 85(1) it came within the terms"of performance and, on the other hand, the Article 1 (a) and Article 2 (a) of Regu- practices of the contracting parties. The lation No 67/67. Since the Commission traditional distinction drawn by the considered Regulation No 67/67 ap- Court of Justice between the existence plicable, the appeal court did not and exercise of industrial property rights investigate whether the agreements in operates in the contractual context; question were by their nature caught by extra-contractual practices must be Article 85 (1) and there was no great treated quite differently. advantage to be gained by Compact in challenging that finding. Since the Court of Justice is requested to give a ruling on the question whether Regulation No 67/67_is applicable to contracts such as those at issue in the main proceedings, it (a) Article 3 (b) (1) of Regulation No should consider not only the individual 67/67 excludes an agreement from provisions of the regulation but also the exemption if the contracting parties requirements for their application and in make parallel imports difficult, in particular the relationship between particular where they exercise industrial Article 85 (1) of the Treaty and the regu- property rights in order to do so. Such lation. It is well known that in applying restrictions or such an exercise of rights Regulation N o 67/67 the Commission must be clear from the contract. The assumes that contracts such as those in eventual application of Article 3 (b) (1) question are by their nature likely to fall to an agreement presupposes that certain foul of Article 85 (1). If the Court of terms of the agreement are intended to Justice wishes to provide the national erect, or in practice inevitably produce, court with an answer which takes obstacles to parallel imports of products account of the true needs of interpret- that have been properly marked and ation in the main proceedings and look placed on the market. To assert that the

absence from an agreement of terms the market, it is not caught by Article 3 whereby the parties undertake not to (b) (1); the same holds true if the parties exercise their industrial property rights to also do not legally have the power to prevent parallel imports leads then to prevent parallel imports. erect obstacles to such imports amounts to charging them with unlawful intention. Those considerations do not exclude the possibility of examining the parties' conduct with reference to Article If an agreement contains terms covered 85 of the Treaty. by Article 3 (b) (1) or leads to practices covered by that provision, the fact that the parties do not legally have the power to implement them does not render the provision in question inapplicable to the (b) Exemption is not dependent on the agreement. effectiveness of the means of resisting parallel imports. It is not excluded merely because the contracting parties possess property rights with which they Where obstacles to trade in goods are could prevent such imports. Conversely, caused by the parties' conduct but do not the existence of terms envisaging such directly arise from the agreement, it is action would preclude exemption. not caught by Article 3 (b) (1) of Regu- lation No 67/67; in that case the legality of the obstacles erected must be examined independently with reference The parties' sharing of the trademark to Article 85 of the Treaty. rights available in the various countries cannot be regarded as an intention to partition the Common Market. There are practical reasons why this is done, including the sharing of the expenses of (c) If the terms of the agreement are obtaining, maintaining and protecting covered by Article 3 (b) (1) or actually the property rights. The contract must be lead to the erection of obstacles to examined in the light of its terms and parallel imports through the exercise of their normal effect and not in the light of the trademark rights, the agreement does their presumed unlawful effect. The fact not escape application of that provision. that the parties do not legally have the On the other hand, actual use of the power to prevent parallel imports by the trademark to hinder parallel imports that exercise of the trademark rights does not does not arise from the agreement is not render Article 3 (b) (1) of Regulation No sufficient to render Article 3 (b) (1) 67/67 inapplicable a priori. The various applicable. possible situations must be distinguished.

(a) It is clear from the wording of Article 1 of Regulation No 67/67 of the (c) The purpose of Article 3 (b) (1) is Commission and Article 1 of Regulation to ensure that parallel supplies can take No 19/65/EEC of the Council of 2 place. In view of that aim, referred to in March 1965 on the application of Article the ninth recital of the preamble to the 85 (3) of the Treaty to certain categories regulation, the actual exercise of an of agreements and concerted practices industrial property right with the view to (Official Journal, English Special Edition impeding parallel supplies is sufficient to 1965-1966, p. 35) that the exemption exclude block exemption. An agreement applies only to agreements to which only to that effect is not necessary. However, two undertakings are party to the the mere fact that the possibility is open exclusion of those where one contracting to a dealer to use a specific property party is composed of several legally right, even if this may lead to an abuse, independent undertakings. is hot sufficient to render the exemtion inapplicable, for the benefits of an exclusive dealing agreement are often dependent on the grant of appropriate licences.

that parallel supplies can take place in (b) If several legally independent every case, the determining factor is not undertakings together forming the lawfulness of the restrictions on such one of the two parties to the supplies but only the actual use of exclusive dealing agreement and industrial property rights to prevent bound inter se at the personal them. level form a single economic entity for the purposes of the agreement, this does not preclude the application of Regulation No 67/67. (e) The mere theoretical possibility that industrial property rights may be exercised in the way described in Article 2. Regulation No 67/67 applies to 3 (b) (1) of Regulation No 67/67 is exclusive dealing agreements covering not sufficient to exclude the block a defined area of the Common exemption. That approach would cer- Market provided that the other tainly reduce the legal uncertainty which requirements of the regulation are may exist where the validity of a contract fulfilled and irrespective of whether or depends on the actual conduct of the not the agreements also cover parties but would mean that exclusive territory outside the Community. dealing agreements coupled with the grant of licences would on the whole no longer be exempted. The regulation would lose much of its value. The 3. In oder for Article 3 (b) (1) of Regu- provision excluding the application of lation No 67/67 to apply and block the block exemption on the ground of exemption to be excluded, the the actual conduct of the parties can exclusive dealing agreement in certainly cause practical difficulties; question need not contain terms on without it, however, there would be no the hindering of parallel imports guarantee that the conditions for the through the exercise of industrial grant of an exemption are actually property rights. fulfilled. The Court of Justice has not raised any objection to the cor- responding provision of Article 3 (b) (2) of Regulation No 67/67. 4. The application of Article 3 (b) (1) of Regulation No 67/67 does not presuppose that the parties have legally enforceable means of hindering purchases or sales of products to which the agreement (f) The questions submitted by the relates and which are properly Bundesgerichtshof require the following marked or otherwise properly placed answers : on the market.

At the hearing on 29 March 1984 Hydrotherm, the appellant in the main proceedings, represented by Bernhard Mielen, Rechtsanwalt, Frankfurt am (b) Regulation No 67/67 is not Main, Compact, the respondent in applicable to agreements covering the main proceedings, represented by countries outside the Community. The Heinz-L. Bauer, Rechtsanwalt, Frankfurt wording of Article 1 (a) precludes the am Main, and the Commission, application of the regulation to represented by Ingolf Pernice and agreements covering the entire Common Norbert Koch, presented oral argument Market. Such agreements must be and answered questions put to them by considered case by case; they might the Court. restrict competition more than agree- ments which affect only a defined area of the Community. In essence Hydrotherm's submissions were as follows : The same is true of "mixed" agreements covering territory outside the Com- (a) Regulation No 67/67 does not munity. In so far as they restrict com- apply to an agreement to which several petition, such agreements do not fall into legally independent undertakings are the category of agreement envisaged by party. This is quite clear from the actual the regulation; they must therefore be wording of Article 1 (1) of the regu- examined to ascertain whether individual lation, which refers to agreements to exemption is possible. which only two undertakings are party. No other interpretation is possible.

An assignment of the trademark is of restricting trade; Article 3 must neither necessary nor usual and must be therefore be applied if this actually examined pursuant to an application for happens. individual exemption; the assignment to the other party of all the industrial (e) In order for Article 3 (b) (1) of property rights is in itself an exercise of Regulation No 67/67 to apply, the those rights. parties to the agreement need not actually use the trademark or other (d) Article 3 (b) (1) of Regulation No industrial property rights. 67/67 is applicable even if under The regulation is intended to exempt Community law the parties to the typical cases in a simplified manner; a agreement may not use the industrial case in which the parties to an agreement property rights in order to prevent enable themselves to exercise industrial parallel imports. property rights in order to impede trade is not a typical case and does not justify In many cases it is quite possible to block exemption. create a de facto restriction on free trade by unlawful means. The validity of an agreement cannot depend on the actual conduct of the A different interpretation of Article 3 of parties to it. the regulation would have no sense: as a matter of law, industrial property rights The Advocate General delivered his may never be exercised for the purpose opinion at the sitting on 20 June 1984.

Decision

1 By an o r d e r dated 28 J u n e 1983, which was received at the C o u r t on 3 August 1983, the Bundesgerichtshof [Federal C o u r t of Justice] referred to the C o u r t for a preliminary ruling u n d e r Article 177 of the E E C T r e a t y five questions o n the interpretation of Articles 1 (1) (a) and 3 (b) (1) of R e g u - lation N o 6 7 / 6 7 of th Commission of 22 M a r c h 1967 on the application of Article 85 (3) of the T r e a t y to certain categories of exclusive dealing agreements (Official J o u r n a l , English Special Edition 1967, p. 10).

4 Difficulties also arose in the performance of the second agreement. At one point Hydrotherm refused to accept further goods from Compact whereupon Compact terminated the contract and claimed damages.

5 The court which tried the case at first instance, the Landgericht [Regional Court] Frankfurt am Main, decided in its judgment of 13 September 1979 that the agreement between the parties was void because it was contrary to Article 85 of the EEC Treaty. According to the Landgericht, the block exemption provided for by Regulation N o 67/67 was not applicable, since Article 3 of the regulation precluded such exemption where trade in the products covered by the agreement might be hindered by the exercise of industrial property rights.

6 After appealing to the Oberlandesgericht [Higher Regional Court], Frankfurt am Main, Compact notified the agreement to the Commission, which, in a letter dated 31 March 1982, confirmed that it fell within the block exemption provided for by Regulation N o 67/67.

JUDGMENT OF 12. 7. 1985 — CASE 170/83

s According to the Oberlandesgericht, the fact that the licensed territory included some countries which were not members of the Community was irrelevant to the question whether Regulation No 67/67 was applicable since that regulation concerned only intra-Community trade. Nor did the agreement in question cease to qualify for block exemption as a result of Article 3 of Regulation N o 67/67, which excluded such exemption where the contracting parties exercised industrial property rights to prevent dealers or consumers from obtaining from other parts of the Common Market goods to which the contract related which were properly marked or otherwise properly placed on the market. The fact that Hydrotherm had registered the trademark "Ghibli" did not enable it to prevent parallel import by using that trademark. In any event, that would not have been permissible in view of the decision of the Court of 18 February 1971 in Case 40/70, Sirena v Eda, [1971] ECR 69. Moreover, there was no evidence suggesting that Hydrotherm had used the trademark "Ghibli" to prevent or obstruct parallel imports. The negative clearance granted by the Commission on 30 March 1982 led to the same conclusion. Although the findings and assessments of the Commission were not binding on the national court (judgment of the

HYDROTHERM v COMPACT

Court of. 10. 7. 1980 in Case 99/79, Lancôme v Etos, [1980] ECR 2511), it could nonetheless take account of the facts found in the clearance.

9 Hydrotherm appealed on a point of law against that judgment to the Bun- desgerichtshof. After examining the issues raised regarding the Community rules on competition, the Bundesgerichtshof decided that the application of Regulation N o 67/67 to the agreements at issue raised various questions concerning the interpretation of that regulation. The Bundesgerichtshof, being a court against whose decisions there is no judicial remedy under national law and thus required by the third paragraph of Article 177 to request the Court of Justice for a preliminary ruling on any questions of interpretation which may arise, therefore submitted the following questions to the Court:

T h e first q u e s t i o n ( t h e t e r m " u n d e r t a k i n g " )

10 In Article 1 (1) of Regulation N o 67/67 Article 85 (1) of the Treaty is declared inapplicable to agreements "to which only two undertakings are party". There is doubt about the applicability of that provision because the agreement at issue was concluded between Hydrotherm on the one hand and three different persons — Mr Andreoli, a natural person, and the under- takings Compact and Officine Sant'Andrea — on the other. It is an undisputed fact that Mr Andreoli has complete control of both those under- takings.

n In competition law, the term "undertaking" must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal. The requirement of Article 1 (1) of Regulation N o 67/67 is therefore fulfilled if one of the parties to the agreement is made up of undertakings having identical interests and controlled by the same natural person, who also participates in the agreement. For in those circumstances competition between the persons participating together, as a single party, in the agreement in question is impossible.

1 2 The answer to the first question must therefore be that Regulation N o 67/67 must be applied even if several legally independent undertakings participate in the agreement as one contracting party provided that those undertakings constitute an economic unit for the purposes of the agreement.

T h e s e c o n d q u e s t i o n ( t e r r i t o r i a l s c o p e of t h e a g r e e m e n t )

is Regulation No 67/67 is designed to regulate an aspect of competition in the general context of the area to which the EEC Treaty, and more particularly Article 85, which refers to competition "within the Common Market", applies. The requirements of the regulation are therefore satisfied when the object of the agreement is to establish the territorial scope of the exclusive dealership right within the framework of a "defined area" of the Common Market, provided always that such territorial delimitation as expressed in such a way that there remains a real possibility of competition — and thus of parallel imports — between the territory for which the exclusive dealership is granted and the remainder of the Community, which is not disputed in this case. The fact that non-member countries are included in the territory covered by the exclusive dealership does not therefore alter the requirements for the application of the regulation.

i6 The answer to the second question must therefore be that the regulation on block exemption is applicable where the obligations entered into cover not only a defined area of the Common Market but also countries outside the Community.

The third, fourth a n d fifth questions (use of t h e trademark right)

i7 The exclusive dealing agreement at issue is characterized by the fact that one party granted to the other the right to use a trademark for the precise purpose of carrying out the agreement. In this regard the Bundesgerichtshof raises the question whether, and in what circumstances, the exercise of an industrial property right may bring such an agreement within the terms of Article 3 (b) (1) of Regulation No 67/67 which excludes block exemption. In

2i The prohibition laid down in Article 3 can therefore apply only if either the terms of the agreement itself or the actual conduct of the parties suggest that an industrial property right is being exercised abusively in order to create absolute territorial protection. The mere possibility of such use, arising from

HYDROTHERM v COMPACT

the fact that the parties have not adopted any express provisions in their agreement, is therefore not a sufficient reason for excluding an agreement form block exemption.

22 The answer to the third, fourth and fifth questions must therefore be that Article 3 (b) (1) of Regulation No 67/67 must be interpreted as excluding an agreement from block exemption only if it is clear from the actual terms of the agreement or from the conduct of the parties that they intend to use, or are in fact using, an industrial property right in such a way as to prevent or impede, with the aid of that right, parallel imports into the territory covered by the exclusive dealership. The fact that an agreement does not contain any provision to prevent abuse of an industrial property right is not in itself a sufficient reason for excluding that agreement from the application of Regu- & lation N o 67/67.

Costs

23 The costs incurred by the Government of the French Republic and by the Commission' of the European Communities, which have submitted obser- vations to the Court, are not recoverable.

dealing agreements must be applied even if several legally independent undertakings participate in the agreement as one contracting party provided that those undertakings constitute an economic unit for the purposes of the agreement.

2. Regulation No 67/67 is applicable where the obligations entered into cover not only a defined area of the Common Market but also countries outside the Community.

3. Article 3 (b) (1) of Regulation No 67/67 must be interpreted as excluding an agreement from block exemption only if it is clear from the actual terms of the agreement or from the conduct of the parties that they intend to use, or are in fact using, an industrial property right in such a way as to prevent or impede, with the aid of that right, parallel imports into the territory covered by the exclusive dealership. The fact that an agreement does not contain any provision to prevent abuse of an industrial property right is not in itself a sufficient reason for excluding that agreement from the application of Regulation No 67/67.

Koopmans Bahlmann

Pescatore O'Keeffe Bosco

Delivered in open court in Luxembourg on 12 July 1984.