C-142/84

BAT AND REYNOLDS v COMMISSION

O P I N I O N O F M R ADVOCATE GENERAL M A N C I N I delivered on 17 March 1987 *

Mr President, substantial part of Europe — should be Members of the Court, managed on a joint basis.

* Translated from the Italian.

OPINION OF MR MANCINI — JOINED CASES 142 AND 156/84

BAT AND REYNOLDS v COMMISSION

KG v Commission [1977] ECR 1875, paragraph 13). It might be said, Rembrandt further observes, that the two statements are The provision distinguishes two classes of contradictory. In fact, the principles laid persons entitled to institute proceedings: down by them are complementary: in order persons to whom a measure adopted by a to institute proceedings against the rejection Community institution is addressed and of a complaint, the complainant must show persons who, in so far as they do not fall that, even if it does not constitute a into that category, must prove that the decision, the measure in question affects measure is of such a kind as to be of 'direct it 'directly and individually' (Metro and individual' concern to them.

Morris. The applicants do not therefore category to the second, which is governed have the locus standi to bring an action; and by much more complex, and in any event that conclusion is confirmed by the different, principles. judgment of 10 June 1982 in Case 246/81 Lord Bethell v Commission [1982] ECR 2277, in which an action brought in a case bearing many similarities to this one was Which should be chosen? In my opinion, it declared inadmissible. is impossible to resolve the dilemma for so long as one keeps on deriving binding rules from the case-law of the Court.

OPINION OF MR MANCINI — JOINED CASES 142 AND 156/84

March 1985 in Case 298/83 CICCE v Commission [1985] ECR 1105, paragraph 18). In the second place, on the other hand, the Court has always considered whether the contested measure was of direct and individual concern to the complainant (see In discharging that duty, however, it is judgments of 28 January 1986 in Case necessary: (a) for the Commission to have 169/84 Cofaz and Others v Commission the power to make a technical assessment to [1986] ECR 391, paragraph 22 et seq., and determine whether it is appropriate to of 22 October 1986 in Case 75/84 Metro v initiate an investigation and whether the Commission [1986] ECR 3021, paragraph 19 conditions for imposing the prohibitions et seq.). provided for in the Treaty are fulfilled; and (b) for the Commission to exercise those powers lawfully, that is to say in conformity with the purposes which justify them and the rules which govern them.

which its attention was drawn in the light of and Philip Morris had been granted a the purposes and in conformity with the negative clearance or an exemption, BAT criteria provided for by law. and Reynolds, despite having submitted a complaint of the same kind, would be able to challenge those measures only in so far as they fulfilled the condition laid down in the last part of the second paragraph of Article 173. My view is that such a disparity is Accordingly, it seems to me that the unjustified. I do not see why the existence position of a person who challenges the of a complaint is sufficient to give rise to the rejection of his complaint is no different right to bring proceedings against a refusal from that of a person who brings an action on the part of the administration; and it against a negative clearance or the grant of does not seem to me that, for that purpose, an exemption, in other words against any decisive importance can be attributed to measures which, formally, are not of the more or less active role played by the concern to him, but — and this is the undertaking in the course of the procedure important point — essentially entail the prior to the action before the Court (contra, dismissal of his application. However, it judgment of 20 March 1985 in Case 264/82

But that is not all. It is to be noted that the situation in which an individual is prompted to lodge a complaint (legitimate interest) That is precisely the situation in this case. It and the situation brought about by the is common ground that the new agreements rejection of the complaint (interest in between Rembrandt and Philip Morris have bringing an action) do not always coincide had at least some impact on the Community in the manner referred to in the first Metro cigarette market. On the other hand, BAT judgment. For example, Mr van Dijk, a and Reynolds occupy an important position tobacconist, complains to the Commission in that market. Moreover, they are the about an increase in the prices of cigarettes major competitors of Philip Morris and of which he imputes to monopolistic Rothmans, which Rembrandt controls in- manoeuvres on the part of a number of directly. Those facts prompted the two manufacturers. Without undertaking an companies to state in their applications that investigation, the Commission finds out that the Commission's acquiescence has been the increase is due to the introduction of detrimental to them; and that is a sufficient new taxes and therefore declines to charge reason for concluding that their applications the manufacturers with conduct incom- are admissible. patible with Community law. Will Mr van Dijk be able to institute proceedings against such a reply? The answer is no; unless — but the hypothesis is practically impossible — he succeeds in maintaining in 3. Rembrandt's objection is therefore limine litis that his essential interests have unfounded. However, it has the merit of been harmed by the failure to adopt an having brought to light a problem which has anti-trust measure. not been sufficiently explored and is of some considerable importance to the decision to be adopted in this case: what rights do complainants have and what obli- gations are incumbent upon the Commission In short, whatever may be said, an interest when it rejects an application? in bringing an action is always necessary. That does not mean — and this is where Rembrandt is mistaken — that the circum- stances underlying the rejection of the complaint must be of direct and individual It should be remembered that the concern to the applicant — the fact of Community legislature's intention in issuing submitting a complaint is in itself sufficient Regulation No 17/62 was (a) to ensure that to ensure that the measure adopted will be 'third parties whose interests may be of concern to the complainant. The result of affected by a decision [are] given the oppor- that necessity, on the other hand, is that he tunity of submitting their comments must show the possible repercussions (and beforehand'; (b) to ensure 'that wide not therefore the specific impact, as the IBM publicity is given to decisions taken'; and (c) judgment purports to say) of the effects of to ensure that 'all decisions taken . . . under that measure on his legal position. In other this regulation are subject to review by the words, a person who lodges a complaint Court of Justice' (recitals 11 and 12 in the under Article 3 has a right to bring an preamble — emphasis added). In the later

regulation, No 99/63, the first of those for which the Commission plans to reject purposes was confirmed and further details the application. Moreover, the laying down were given. In the fifth recital in the of a time-limit for their reply would preamble thereto, it is stated that it is otherwise be meaningless. Time-limits are desirable 'to enable [complainants] to submit imposed when it is necessary to reach a their comments where the Commission particular result rapidly; and experience considers that on the basis of the infor- shows that the reopening of an investigation mation in its possession there are insuf- which has just been closed cannot be, or ficient grounds for granting the application'; rarely is, a matter of urgency. and Article 6 provides that in such circum- stances the Commission 'shall inform the applicants of its reasons [for forming that opinion] and fix a time-limit for them to submit any further comments in writing'. It is not enough. In a case such as this one, it seems to me, the obligation to give notice of the reasons satisfies two interests: it enables the addressee to check whether the matters of which he has complained have Interpreting that provision for the first time been correctly assessed and it enables the (in GEMA, supra), the Court held that the Commission to establish whether, on the communication provided for therein is basis of the comments submitted to it, 'the intended only for information purposes. information in its possession' is sufficient to Indeed, the measure 'implies the disconti- justify discontinuance of the proceedings. If nuance of the proceedings without, the scope of those purposes is reduced, as it however, preventing the Commission from is in the GEMA judgment, Article 6 is to a reopening the file if it considers it advisable, considerable extent deprived of useful effect. in particular where, within the period Finally, I should add that the view which I allowed . . . the applicant puts forward fresh prefer is in conformity with the provisions elements of law or of fact. The . . . argument of Article 19 (3) of Regulation No 17/62 that an applicant under Article 3 (2) of with respect to the other cases in which the Regulation No 17 is entitled to obtain a Commission considers that it is not under a [definitive] decision . . . on the existence of duty to apply the prohibitions provided for the alleged infringement cannot, therefore, in Articles 85 and 86. be accepted' (paragraph 17).

the course of these proceedings, the adopted in the past. But — the question defendant has forcefully reiterated those might be asked in reply — if that was the principles and on the basis of them has case, why apply to BAT and Reynolds the maintained that the actions are inadmissible approach followed in the Demo-Studio to the extent to which they call upon the Schmidt case? Court to make an order compelling it to adopt a measure in conformity with the interests of the applicants. Thus, there are a number of contradictions; and the circumstances surrounding the background thereto are profoundly disturbing. The essential features thereof That objection is certainly well founded.

23). That fact having been recognized, Commission uses the magic word 'decision', however, it must immediately be added that but it cannot be challenged if that word is the practice which the Commission purports not used. In short, the situation is entirely to follow is without any doubt incorrect remote from the intention to protect third since it is contrary to the objectives of the parties and to ensure 'wide publicity' anti-trust provisions and is not in harmony expressed by the legislature in the preambles with the rules of sound administration.

On the between Rembrandt and Philip Morris was contrary, from the provisions of the regu- such as to present unprecedented problems lations referred to (particularly Articles which would certainly be of general interest. 9 (3) and 19 of the first and Article 6 of the On this point, the Commission does not second), it is apparent that, when it intends agree: in its defence (see paragraph XIV, closing the file in an investigation, it is p. 25) it states that the content of the obliged: (a) to notify the complainant of its contested letter is in line with the practice reasons for forming that intention; (b) to

(4) violation of fundamental rights, in so In conclusion, on the basis of the results far as the decision was adopted on the arrived at in parts 2 and 3 of this Opinion, I basis of considerations in respect of consider that the Commission was under an which the applicants had no way of obligation to reject BAT's and Reynolds's expressing their views. complaints by a definitive measure and that the actions brought against the decision of 22 March 1984 are admissible only in so far 5. In view of their connection with the as they seek a declaration that it is void. argument dealt with in part 3 of this Opinion, I shall consider the last two criticisms first. As far as the fourth is 4. In support of their applications, BAT and concerned, BAT and Reynolds observe that Reynolds put forward an enormous number 'a person whose interests are perceptibly of arguments. With a little effort, however, affected by a decision taken by a public they can be classified in four groups authority must be given an opportunity of reflecting four main criticisms. For their making his point of view known' (judgment part, the Commission's defence submissions of 23 October 1974 in Case 17/74 and the observations of the intervening Transocean Marine Paint Association v companies coincide substantially, for which Commission [1974] ECR 1063, paragraph reason I shall be able to consider them 15). The Commission failed to disclose to together in nearly all cases. the two companies a number of items of

BAT AND REYNOLDS v COMMISSION

And, the in the letter of 16 December 1983, with the Court added, the fact that the Commission result that the addressees were not able to held separate meetings with Philip Morris is express their views on them. not open to criticism. Similar meetings were in fact also held with the complainant companies; and, in addition, there was no reason to suspect that they were motivated I shall now consider the question of good by covert reasons extraneous to Community faith and essential procedural requirements. law (paragraphs 11 to 17). The Commission is said to have acted in breach of those principles by closing the file under the influence of factors extraneous to the proceedings and after holding meetings Those considerations cannot be faulted and with representatives of Philip Morris of do not call for comment.

BAT's and produce: (a) the texts of the 1981 Reynolds's applications were inspired by the agreements, of the statement of objections conviction that the complainants must be and of the documents which the provided with the same information and Commission wrongly considered to be accorded the same safeguards as those covered by business secrecy; and (b) all the available on the one hand to the investi- documents showing the real reasons for its gating authority and, on the other, to the volte face. companies under investigation.

This difference would constitute an exceptional measure of legal position is then confirmed in Article and therefore one which could be adopted 19 and in the procedural rules contained in only if the Commission's reasons were the the later Regulation No 99/63. subject of doubts and suspicions such as to give the impression that there had been a misuse of powers. But that is not the case here. In particular, the so-called volte face'in That is not all. If the applicants' view were 1983 was entirely lawful in the light of the upheld, it would transform the investigation case-law according to which the statement into a sort of direct confrontation between

individuals making accusations and indi- fundamental rights having been resolved, it viduals defending themselves. By contrast, is now time to consider the central issue. Article 89 of the Treaty is designed to For that purpose, however, it is first of all ensure that only the Commission inves- appropriate for me to review, in more detail tigates cases of alleged infringements of that I could have done at the beginning, the competition rules. The Commission is principal characteristics of the companies therefore the master of the procedure, and involved and their market (A), the 1981 all the complainants can do is cooperate agreements (B), the 1984 agreements (C), with it. Admittedly, the right to be informed and the various stages of the long and of the reasons for which their complaints complex procedure prior to the have been rejected is conferred upon them commencement of the action (D). by law; but that right — which is accorded to them because they have an interest co- inciding with that pursued by the legal order and distinguishes them from the third parties whom the Commission allows a hearing — also marks the furthest limit of their participation in the investigation. (A) All the protagonists in this case are engaged mainly in the manufacturing and marketing of cigarettes. BAT is the largest tobacco manufacturing company in the A brief comment is called for on the alle- western world, having its headquarters in gation of infringement of essential the United Kingdom. Reynolds is an procedural requirements. The fact that the American company whose interests extend contested measure contains information not to the food industry. Rembrandt is a South given in the communication under Article 6 African company which invests in various is irrelevant because the matters in question commercial activities. Philip Morris is the relate to the criticisms made by BAT in its largest American exporter of cigarettes and reply and are a reiteration of the reasons possibly the leading multinational in the already put forward by the Commission. industry. Finally, the two companies which This proves that the Commission set out the are parties to the agreement are British: essential reasons which prompted it to close Tobacco Holding, a holding company and, the file and that the addressee had an wholly owned subsidiary of Rembrandt, and opportunity to inform it of its views. Finally, its subsidiary, Rothmans, which is engaged it hardly needs to be pointed out that the almost exclusively in the manufacture and passage taken from the Transocean sale of cigarettes,. 50% of them being for judgment relates explicitly to measures European consumption. adopted with respect to companies which are the subject of a complaint. Far from supporting BAT's and Reynolds's view, it thus confirms that undertakings under investigation are entitled to special protection that cannot be extended to third parties. As far as the market is concerned, it is appropriate to quote in the first place from a report which the Commission presented to the Parliament in February 1982 (COM(82) 61 final, p. 7). It states that 6. The problems of procedure, compliance 'notwithstanding the abolition of customs with formal requirements and observance of duties . . . and the implementation of two

Belgium and Luxembourg Netherlands

1980 1981 1982 1980 1981 1982

Philip Morris 8.7 10.3 * 7.0 8.8 10.0 Rothmans International 47.8 47.4 * 49.0 48.9 47.2 R.J. Reynolds 10.0 10.0 10.2 BAT 10.2 10.1 * 23.0 24.1 24.5

T h o s e details s h o w , a c c o r d i n g t o t h e Morris could be regarded as having C o m m i s s i o n , t h a t t h e C o m m u n i t y m a r k e t is performed outstandingly, whilst the other ' s t a g n a n t a n d oligopolistic'; so m u c h so t h a t undertakings were left more or less at the 'in t h e absence of significant price c o m p e - starting post. T o a considerable extent, the tition o r r e s e a r c h b r e a k t h r o u g h s , advertising same observations apply to the Benelux and corporate acquisition [are] the principal markets. means of increasing market share' ( s t a t e m e n t of objections, paragraph VIII, p. 14 — (B) Let us now consider the 1981 emphasis added). At the end of the period agreements. In consideration of a payment under consideration, in fact, only Philip or USD 350 million, Rembrandt trans-

OPINION OF MR MANCINI — JOINED CASES 142 AND 156/84

BAT AND REYNOLDS v COMMISSION

(2) Rembrandt may transfer its Rothmans (a) To inform it about and provide a copy shares only if it sells the whole portfolio of any amendment or modification 'for cash payable on closing' to a single made to the agreements promptly after purchaser or to at least 10 purchasers they become effective; who are independent of each other and all of whom are independent from Rembrandt, provided that none of them holds more than 10% of the voting rights in Rothmans. Before proceeding with any sale, Rembrandt must offer to (b) To notify it within 48 hours of any Philip Morris or to a third party increase in its holding of shares in designated by the latter a right of first Rothmans or any other acquisition of refusal, indicating the conditions voting rights causing the threshold of thereof; 25% to be exceeded. In the light of such notifications, the Commission will review the competitive situation in the Community tobacco market and adopt (3) The same rules apply to Philip Morris; such measures as it considers necessary. At the request of the Commission, Philip Morris will, for three months as from the date of the increase or (4) (a) If it intends to sell its Rothmans acquisition, apply a 'hold separate' shares to a single purchaser, agreement with regard to its and Rembrandt must cause that Rothmans's respective interests, that will purchaser to offer to acquire the assure maintenance of the status quo in whole portfolio of Rothmans shares that market; belonging to Philip Morris 'at the same average cash price per equity share as applies to Rembrandt's sale'; (c) Not to have any representative on the Board or any other management body of Rothmans; (b) If Rembrandt does not exercise its right of first refusal, Philip Morris may designate a third party to purchase a number of one-vote Rothmans shares (ordinary 'B' shares) equal to at least half of the (d) Neither to seek nor accept from four-vote shares (ordinary 'A' Rothmans or Rembrandt any infor- shares), so as to be able to exercise mation that might influence the three-quarters of the voting rights behaviour of any of the companies in its deriving from possession of group. ordinary 'A' shares, except as regards the appointment or removal of Rothmans directors.

BAT and Reynolds replied that those obser- (2) Whereas the 1981 agreements gave vations were inconsistent with the content Philip Morris a power of veto over an of the statement of objections since almost effective majority of shares in Rothmans all the features which the Commission had by means of its shares in Tobacco then considered to be contrary to the Treaty Holding, under the new agreements remained in the new agreements. Thus, the Philip Morris is no more than a clauses concerning rights of first refusal and minority shareholder (paragraph 22); the transfer of Rothmans shares had remained almost unaltered. BAT, in particular, observed that the restrictions inherent in those stipulations would dissuade any really independent third party (3) Several provisions of the new from acquiring any shareholding. They were agreements enable Philip Morris: (a) to designed to achieve a specific aim: to ensure take control of Rothmans; (b) to that any potential purchaser was subject to re-establish itself in a position of parity prior control by Philip Morris. 'In fact, with Rembrandt in the event of a sale of Philip Morris can ensure ... that any shares by Rembrandt; (c) to sell to a purchaser of part or all of the Rothmans designated third party shares repre- shares is harmless to or, more importantly, senting 34.5% of the voting rights in prepared to cooperate with Philip Morris'. Rothmans (paragraph 23); As against provisions of that kind, the weak and incomplete undertakings obtained by the Commission could be of little effect.

(4) There is no doubt that those rules allow Philip Morris a possibility of modifying its status as a minority shareholder, in The administrative procedure concluded order to obtain control of Rothmans; with the letter of 22 March 1984 containing however, as provisions in themselves the decision whereby the Commission they do not have the effect of distorting

competition within the meaning of submissions — infringement of Articles 85 Article 85 (paragraph 24); and 86 by virtue of a manifest error of assessment and of Article 190 by virtue of an inadequate statement of reasons — I shall consider only the criticisms relating to the subject-matter of the contested measure, (5) Under the new arrangements, namely the 1984 agreements and the clauses Rembrandt will be able to exercise its contained in them. I also think it is super- Rothmans voting rights without having fluous to set out the arguments which the regard to Philip Morris's policies. There applicants base on the possibility available to is therefore no reason to believe that it Philip Morris of changing its position within is not in Rembrandt's interest to seek to Rothmans and to consider what effects such make Rothmans as successful and a change might have on the competitive profitable a company as possible relationship between the two companies. In (paragraph 25); that connection, it is sufficient to bear in mind that Philip Morris must inform the Commission of any initiative capable of changing the status quo and that the Commission may also intervene with respect (6) While Philip Morris would not wish to to events which are not intended by the endanger the value of its investment in parties but are capable of affecting their Rothmans, it retains a considerable commercial rivalry. interest in checking by its own industrial and commercial efforts any advance in Rothmans market share in the common market. Only by an effort of that kind will it be in a position to exercise its pre-emptive right in respect of Rothmans shares on the most That does not of course mean that I am favourable purchase terms, should the disregarding the terms of the long-standing Commission not raise objections against debate as to the applicability of Article 85 to the exercise of that option (paragraph agreements concerning concentrations 26); between companies, and therefore the favour with which such a prospect is regarded by a number of legal writers, the doubts harboured by the Commission in that connection, the almost general consensus as to the need for the matter to (7) An abuse of a dominant position be governed by specific rules and the (Article 86) cannot be said to have consequent resentment felt by all parties taken place inasmuch as, for the reasons towards the Council which persists in given above, Philip Morris is not, under keeping the proposals made to it by the the new agreements, in a position to Commission locked away. I also presume control Rothmans's commercial activi- that, if the question were put to it, the ties (paragraph 29). Court would tend towards an affirmative answer. Evidence to that effect is provided by the judgment of 13 July 1966 in Case 32/65 Italy v Council and Commission [1966] ECR 389, at p. 408, according to 7. Let us return to the BAT and Reynolds which, in the absence of a set of rules applications. In considering the first two allowing a derogation to be adopted and

subject to the presence of the other factors because they allow Philip Morris and described, 'the wording of Article 85 makes Rothmans — that is to say two of the the prohibition applicable... to [any] largest companies in the industry — to coor- agreement between a number of under- dinate their activities. The Commission itself takings' (emphasis added). acknowledged, in criticizing the 1981 agreements, that if an undertaking invests substantially in the shares of a competitor, the two parties to the sale will no longer 'deliberately harm each other's interests'. Things have not changed since then. Of However, it is undeniable that in this case itself—it is true — possession of 2 5 % of that problem does not exist. The the voting rights in a joint stock company is Commission does not in principle deny that not contrary to the anti-trust rules; it Article 85 is applicable to the 1984 cannot, however, fail to infringe those rules agreements; it confines itself to maintaining, if that company is a rival and, what is more, on the one hand, that the agreements do a leader in an oligopolistic situation. not contain elements such as to constitute an infringement of the provision and, on the other, that although the agreements may be capable of leading to a merger, the under- takings given by the parties to the And that is not all. As a result of the Commission provide it with the means of conditions governing the transfer of monitoring and halting any manoeuvre Rothmans shares, Philip Morris enjoys a intended to bring about that result. On the privileged position in the contest for control latter point — that is to say regarding the of Rothmans; at the same time, it is in a Commission's expectations or the efficacy of position to prevent other parties from the instruments with which it has provided participating in that contest with any chance itself — there is not much that the Court of success and, if Rembrandt does not can say. The Court is interested above all in exercise its right of first refusal, it even has the first statement which refers not to the the right to choose the future purchaser. future but to the present: that is to say to Those restrictions too are obviously the agreements as they operate here and designed to induce Philip Morris and now. Rembrandt to collaborate or, at least, not to obstruct each other; and, that being so, there can be no doubt that, by ignoring the likelihood that the agreement would rule out any conflicts between the parties, the Commission made an erroneous assessment That having been clarified, I move on to an of it. analysis of the two submissions. As regards infringement of the provision regarding agreements, the applicants observe that, notwithstanding its oligopolistic nature, the Community cigarette market has remained competitive as a result of several factors : the As regards the failure to apply Article 86, dimensions of the undertakings operating in BAT and Reynolds point out that 'the it, the market shares held by them, the concept of abuse is an objective concept'; it methods employed in marketing the implies that 'the behaviour of an under- product, and so forth. However, the 1984 taking in a dominant position [is] such as to agreements upset this delicate balance influence the structure of a market where,

as a result of the very presence of the Commission is required to state the reasons undertaking in question, the degree of on which its decisions are based, competition is weakened' (judgment of 13 enumerating [both] the facts forming the February 1979 in Case 85/76 Hoffmann-La legal basis of the measure and the consider- Roche v Commission [1979] ECR 461, ations which led it to adopt the decision'; paragraph 91 of the decision). For the and paragraph 31 goes on to say that purpose of establishing the existence of an although decisions may be reasoned in a abuse, therefore, the extent of the control summary manner, the Commission must exercisable by an undertaking does not give an account of its reasoning if it goes count; what does count is that the latter 'appreciably further than the previous operates in such a way as to weaken compe- decisions'. tition which has already been adversely affected as a result of the position acquired by that undertaking. Nor is it necessary that the weakening of competition should be considerable; rather, what is decisive is that In the present case, in order to reject BAT's the conduct of the undertaking appreciably and Reynolds's complaints, the Commission affects trade between the Member States. was obliged to state that control of 25% of the voting rights in a rival company holding a dominant position in an oligopolistic market is not in breach of the prohibitions contained in Articles 85 and 86. The The Commission is therefore mistaken to lawfulness of that principle is at the very maintain that if the investing company is not least dubious; however, its extraordinary in a position to influence the undertaking in importance for the business world and which it has a holding then there is no hence, on the basis of the judgment cited, abuse. However, even someone who shares the need to clarify every aspect of it in a that view in the abstract could not fail to comprehensive and incisive manner are agree that in the present case there is beyond doubt. However, the decision is influence. To reach that conclusion, all that laconic to the point of coming very close to need be done is to look beyond the finding concealment. It should be added that that Philip Morris's holding amounts to the Commission has recognized the 25% and assess its potential distorting effect considerable possibilities of manoeuvre in the light of the whole agreement — thus available to Philip Morris under the taking account also of the right of first conditions governing the transfer of refusal and, more generally, of the Rothmans shares, but it has failed to explain conditions governing the transfer of why their inclusion does not at present have Rothmans shares. the effect of distorting competition.

void. I do not believe that in such cases the administrative proceedings'. The statement Court is entitled to verify all the conditions of reasons on which a decision adversely required for the application of Articles 85 affecting a person is based has, in the last and 86; I do not believe that to be the case analysis, only one purpose, namely to because two factors militate against such a 'provide the person concerned with the verification: on the one hand, the negative information necessary to enable him to content of measures whereby a file is closed decide whether or not the decision is well and, on the other, the strictly technical founded' (judgment of 11 July 1985 in Case nature of the assessment which must be 42/84 Remia v Commission [1985] ECR carried out by the administrative authority. 2545, paragraph 26). Within the limits imposed by those factors, the examination required of the Court must necessarily conclude with recognition of the fact that the decision of 22 March 1984 takes account of all the disputed circum- In that respect, therefore, the decision to stances and is therefore free of manifest reject BAT's and Reynolds's complaints errors. appears to be properly reasoned. It is obvious, however, that that does not of itself mean that the contested holding has been proved to be innocuous; nor, in that connection, is it relevant to say, as Philip The second submission, on the other hand, Morris says, that according to the law of calls for a more detailed discussion. Let me one of the Member States (Germany) 25% summarize it in one sentence: the applicants represents the threshold below which charge the defendant with failing to show anti-trust practices are in principle presumed why a holding in the capital of a direct impossible. It is self-evident that, by contrast competitor and leader in a significant part with national provisions, the provisions of of an oligopolistic market, albeit a holding the Treaty relate to the whole common representing only one-fourth of the votes, market and their object is above all to cannot adversely affect competition between prevent restrictions on competition from the parties. adversely affecting trade between the Twelve by isolating their markets.

economic importance is ictu oculi extremely No such examination — as we. know — great. In rejecting the complaints lodged by took place; but the documents before the BAT and Reynolds, the Commission should Court are sufficient to show those clauses in therefore have shown that the agreements an unfavourable light. Thus, it seems clear were not capable of producing harmful that they were not necessary for, or did not consequences, in particular regarding the in any event play any part in; securing contractual freedom of any other under- conclusion of the agreement and. they are taking operating in the cigarette market. But not designed to protect Philip Morris's the Commission did not do so; and, from investment, whatever those involved may that point of view, there is no doubt that its say. The first proposition is borne out by measure is subject to a serious defect as their content, which relates only to the regards the statement of the reasons on detailed arrangements for any transfer of which it is based. Rothmans shares to third parties, and the second has been proved by the Commission

In the statement believe that that principle is applicable in of objections, it will be remembered, the circumstances other than those considered Commission defined the conditions attached by the Court in that case, and it therefore to the old agreements as being 'themselves applies to clauses which, like the one at restrictive of competition' and 'open-ended issue here, form part of an agreement for in nature' because they took no account of the purchase of a shareholding. They too the 'size, market strength or competitive can procure for the parties to them 'an intentions of the acquiring party',However, unjustified advantage'; and it is a fact, as is my impression is that from 1981 to 1984 the stated in the Remia judgment cited earlier, restrictions on the access of third-parties to at paragraph 17, that the intrinsically lawful the equity of Rothmans became even more purpose of the agreement in which they stringent. Replying to the letter of 16 appear does not mean that they are immune December 1983, BAT stated in fact that the from an examination designed to determine new clauses were intended to ensure 'that whether they are compatible with the any eventual purchaser of the [Rothmans] prohibitions contained in Article 85. shares . . . is subject to prior control by

I could go into this matter further and in particular dwell upon the no less perverse Naturally, the Commission does not agree. effects of the right conferred upon Philip In its rejoinder, indeed, it had Morris to designate a purchaser; but such acknowledged that, if Philip Morris did not an investigation would be pointless. To exercise its right of first refusal, the establish whether the conditions at issue are purchase of Rothmans shares would become contrary to Article 85 (1) or, conversely, do 'singularly unattractive' to the competitors; not limit competition with the other oligop- but that significant admission was corrected olists was a matter for the Commission. Nor at the hearing. That right — we were may it be said that the Commission did not told — 'is simply a right to be notified that do so, because the undertakings obtained Rembrandt is prepared to sell its shares, and from the contracting parties were intended a right to bid, so Philip Morris may bid'; to provide it with a guarantee that those Rembrandt remains free to sell to the clauses would present no danger; it was the highest bidder and there is no reason to Commission itself which admitted that those doubt that the shares will ultimately be undertakings — which, moreover, were acquired by 'whoever offers the most given after the agreement was entered money* (transcript of the hearing, p. 72). into — did not influence its views regarding the lawfulness of the agreement.