C-53/92

3. The nail guns manufactured by Hilti are a technologically advanced means of making secure fastenings in the construction indus­ try. The guns are used together with car­ 2. The complaints to the Commission which tridge strips, cartridges and nails as a led to the opening of proceedings against 'powder-actuated fastening' (or 'PAF') sys­ Hilti were made by Bauco (UK) Ltd and tem which fires the nails into different mate­ Profix Distribution Ltd (then named 'Euro- rials as required; such a system is not how­ fix'). Both Bauco and Profix intervened in ever suitable for use with all types of materials. The cartridges provide the explo­ sive power of the system, and each cartridge strip holds a number of cartridges, which * Original language: English. enables the gun to be repeatedly used with­ 1 — Case T-30/89 Hilti v Commission [1991] LCR II-1439. out the need to reload cartridges. Nails 2 — Commission Decision 88/138/EEC of 22 December 1987 relating to a proceeding under Article 86 of the EEC Treaty which are compatible with the guns manu­ (IV/30787 and 31.488 — Eurofix-Btmm v Hilti), OJ 1988 L 65, p. 19. factured by Hilti are manufactured and sup-

I-669

OPINION OF MR JACOBS — CASE C-53/92 P

plied by other firms, as well as by Hilti itself. 5. The abusive conduct alleged by the Com­ Bauco and Profix are two such independent mission consisted in Hilti's exercise of its manufacturers of nails which can be used in market power as a producer of nail guns, car­ Hilti nail guns. In what follows, all refer­ tridge strips and nails in such a way as to ences to 'cartridge strips' and 'nails' are to hinder the entry into and penetration of the components intended to be used in nail guns market for nails by independent nail produc­ manufactured by Hilti. Such components are ers, or otherwise to damage their business. referred to in the Commission's decision as Such conduct will however only be contrary 'consumables'. to Article 86 if Hilti did indeed occupy a dominant position on at least one of the mar­ kets in question.

8. The delimitation of a relevant product market, for the purposes of establishing the existence of a dominant position within the For the purposes of such an appraisal, more­ meaning of Article 86 of the Treaty, is a com­ over, not only the range of relevant products plex operation involving both findings of (the 'relevant product market') but also the fact and the evaluation of those facts in the geographical extent of the market must be light of economic principles and legal crite­ considered. In Hilti's submission, the Com­ 4 ria. In an appeal from a judgment of the mission's decision erred in its identification Court of First Instance, pursuant to of the relevant product markets, and Hilti Article 168a (1) of the Treaty, this Court is of now appeals against those parts of the judg­ course limited to the consideration of points ment of the Court of First Instance which of law. It will be recalled that Article 51, first upheld the Commission's identification of paragraph, of the Statute of the Court of Jus­ those markets. Hilti does not however now tice provides that: contest the Commission's identification of the relevant geographical market.

'An appeal to the Court of Justice shall be limited to points of law. It shall lie on the grounds of lack of competence of the Court of First Instance, a breach of procedure

7. The Commission identified, in its deci­ sion, three distinct relevant product markets 4 — See in particular the discussion in Whish, Competition Law in which Hilti was found to be dominant: (2nd edition; London 1989), pp. 278-287.

9. Although that limitation clearly applies to all appeals from the Court of First Instance 10. The current jurisdiction of the Court of to this Court, special factors may be relevant First Instance in competition matters was in appeals in competition cases which origin­ originally exercised by this Court under ate in decisions of the Commission finding Articles 173 and 175 of the Treaty, and was infringements of Articles 85 and 86 of the transferred to the Court of First Instance by 5 Treaty. In particular, it is to be noted that in the Council Decision of 24 October 1988 such cases the Court of First Instance has 8 establishing a Court of First Instance. It is itself had the task of reviewing the legality of clear from the preamble to that Decision that a Commission decision based, on the one the reason for the establishment of a Court hand, upon findings of fact and, on the other, of First Instance was to enable the task of on a possibly complex economic assessment. examining complex factual issues to be car­ Issues such as those which arise in the ried out by the Court of First Instance rather present case of the delimitation of the rele­ than by the Court of Justice. Thus the Deci­ vant market and the existence of a dominant sion of 24 October 1988 first recites that position in that market require the applica­ Article 168a of the Treaty empowers the tion of criteria about which economists may Council to attach to the Court of Justice a disagree. It is to be noted that judicial review Court of First Instance 'called upon to exer­ on such issues is more limited than on pure cise important judicial functions'. It further

recites that, 'in respect of actions requiring take over a substantial part of this Court's close examination of complex facts, the jurisdiction. Thus it is significant that Art­ establishment of a second court will improve icle 3 of the Decision of 24 October 1988 the judicial protection of individual inter­ speaks of the 'exercise' by the Court of First ests'; and it states that 'it is necessary, in Instance of the jurisdiction conferred on the order to maintain the quality and effective­ Court of Justice by the Treaties, and that the ness of judicial review in the Community preamble refers, as we have just seen, to a legal order, to enable the Court [of Justice] 'transfer' of jurisdiction to the Court of First to concentrate its activities on its fundamen­ Instance. tal task of ensuring uniform interpretation of Community law'. Finally, it states that it is necessary to 'transfer to the Court of First Instance jurisdiction to hear and determine at first instance certain classes of action or proceeding which frequently require an examination of complex facts', including actions brought by natural or legal persons in competition matters. The Council Deci­ 12. Accordingly, it seems to me that, at least sion of 8 June 1993 9 sets out some of in competition cases, it is appropriate to con­ the same considerations in transferring strue strictly the requirement in Article 51 of to the Court of First Instance, in most the Statute that appeals to the Court of Jus­ cases with effect from 1 August 1993, 10 tice are limited to points of law. On that other classes of action brought by natural or basis, therefore, I now turn to consider legal persons. Hilti's individual grounds of appeal.

wrongly inferred the existence of separ­ (4) Similarly, in paragraph 71 of the judg­ ate markets for cartridge strips and nails ment the Court of First Instance from the fact that there have since wrongly upheld a finding of non- the 1960s been independent producers interchangeability based on the co­ of nails for use in nail guns and the fact existence of different fastening methods that cartridge strips and nails are specif­ over an extended period of time. ically manufactured, and purchased by users, for a single brand of gun. The Court of First Instance failed to apply the correct test for defining a relevant product market in spare parts or com­ ponents and ignored the question of demand substitutability as between dif­ ferent fastening systems. (5) In rejecting, in paragraph 74 of the judgment, evidence produced by Hilti tending to show interchangeability between different fastening systems, the Court of First Instance misconstrued the legal burden of proof.

(2) In paragraph 69 of the judgment, the Court of First Instance reached the con­ clusion that PAF systems constitute a relevant product market without quan­ tifying the number of cases in which other fastening systems could be substi­ (6) In paragraphs 73 and 76 of the judg­ tuted for PAF systems. ment, the Court of First Instance wrongly concluded that the Commis­ sion's findings are corroborated or at least not refuted by certain evidence produced by Hilti, namely an opinion prepared by a Mr Yarrow, a survey con­ ducted by a firm called Rosslyn Research and an econometric analysis by a Professor Albach.

15. The first issue raised by the appeal is whether separate markets can be said to exist in the cartridge strips and nails used in Hilti guns, or whether the guns and their consum­ ables are to be considered as an indivisible whole. Hilti submits that the Court of First Instance failed to apply a rule for the deter­ mination of whether there is a separate mar­ ket for the supply of spare parts of a product which, Hilti suggests, was laid down by this 1 The Court concluded that there existed a Court in the Hugin case. 1It is of course separate market for spare parts because there clear that a submission that a legal rule has were independent undertakings, specializing been ignored or misconstrued raises a point in the maintenance and repair of cash regis­ of law which can be considered on an appeal ters, and in the sale and reconditioning of old to this Court. machines, which themselves required spare parts, such undertakings comprising a dis­ tinct class from the buyers of the machines: 11 — Case 22/78 Hugin v Commission [1979] ECR 1869. see paragraph 7 of the judgment in Hugin. In

I-675

OPINION OF MR JACOBS — CASE C-53/92 P

19. It is true that, in order to identify the 18. However, as both Bauco and the Com­ markets for nails and cartridge strips as rele­ mission point out, Hugin is not to be inter­ vant markets in which Hilti is dominant, it

I - 676

HILTI v COMMISSION

may be necessary to consider Hilti's position The second ground of appeal in markets which are closely related to the markets for cartridge strips and nails. As we have seen, in its decision the Commission identified the market in nail guns as a rele­ vant product market in which Hilti also held a dominant position. If Hilti is dominant in such a market, it is clear that that can only serve to reinforce its position in the markets for components such as cartridge strips and nails. Conversely, Hilti's position in the lat­ 21. As we have seen, the Commission found ter markets will be weaker if PAF systems that Hilti occupied a dominant position in compete with non-PAF systems in a wider the markets for nails and cartridge strips as market, comprising both kinds of system, in well as in the market for nail guns. Hilti does which Hilti is not dominant. not now contest the Commission's findings as to its large market share in nails, cartridge strips and nail guns, and the other advan­ tages, such as patent protection and a well- organized distribution system, which in the Commission's view served to maintain and reinforce its position in those markets.

Hilti suggests that, in the absence of a find­ ing that the number of such cases is more than a few, or indeed more than trivially small, the Court of First Instance is not enti­ tled to infer that PAF and other fastening 23. Thus Hilti submits that the Court of systems are not interchangeable. First Instance erred in law in upholding the Commission's finding that PAF and other fastening systems are not readily substitut- able for one another. In its various grounds of appeal, Hilti makes a number of submis­ sions on the issue of substitutability.

25. It would appear however that that sub­ mission is contradicted by the wording of paragraph 69 itself, which continues:

24. In the first place, in its second ground of '... It is evident from the documents before appeal Hilti alleges that the Court of First the Court that in many cases there is no real­ Instance has failed to make any finding istic alternative either for a qualified operator which quantifies the number of cases in carrying out a job on site or for a technician which PAF systems cannot readily be instructed to select the fastening methods to replaced by other forms of fastening system. be used in a given situation.' [my emphasis]

I - 678

HILTI v COMMISSION

Furthermore, in paragraph 71 of the judg­ product market on an examination of the ment it is stated that the Commission's find­ following evidence: (i) the differing qualita­ ings: tive characteristics of the products at issue, as described by the Commission; (ii) the co-existence of different fastening systems on the market over an extended period of time; (iii) the expert opinion prepared by Mr Yar­ row; and (iv) the survey by Rosslyn Research. The Court of First Instance more­ over considered and rejected the conclusions '... leave no real doubt as to the existence, in of the econometric analysis carried out by practice, of a variety of situations, some of Professor Albach. which inherently favour the use of a PAF system whilst others favour one or more other fastening systems.' [my empha­ sis]

'As the Court has repeatedly emphasized ... for the purposes of investigating the possibly 28. It must none the less be examined dominant position of an undertaking on a whether, in reaching its conclusions, the given market, the possibilities of competition Court of First Instance took account of all must be judged in the context of the market the relevant factors. If relevant factors were comprising the totality of the products not taken into consideration, the Court of which, with respect to their characteristics, First Instance will have erred in law by bas­ are particularly suitable for satisfying con­ ing its conclusions on insufficient reasoning. stant needs and are only to a limited extent It is clear that a failure to take relevant fac­ interchangeable with other products. How­ tors into consideration in reaching a conclu­ ever, it must be noted that the determination sion of law is in itself an error of law which of the relevant market is useful in assessing might render the judgment liable to be whether the undertaking concerned is in a annulled. It is to be noted that, in such a position to prevent effective competition case, this Court is not reviewing the findings from being maintained and behave to an of fact made by the Court of First Instance, appreciable extent independently of its com­ but rather examining whether sufficient find­ petitors and customers and consumers. For ings have been made to support the legal this purpose, therefore, an examination lim­ conclusions drawn. It seems to me moreover ited to the objective characteristics only of that the identification of the relevant product the relevant products cannot be sufficient: market, for the purposes of a finding of the competitive conditions and the structure dominance, must be regarded as a conclusion of supply and demand on the market must of law rather than as a pure finding of fact. also be taken into consideration.'

I.-681

OPINION OF MR JACOBS — CASE C-53/92 P

producer has a large share in that market, it mally be relevant in establishing the exist­ will not be able to act independently of other ence of a dominant position. It is true that it producers in setting its prices if doing so will not always be appropriate to address the would immediately attract other suppliers question in the context of the delimitation of into the market who would be able to under­ the relevant market. It appears that the cut its price. It is however to be noted that in Court has considered the structure of supply some cases a very large market share will in in relation to that issue only where it was itself amount to a barrier to entry, since it dealing specifically with the elasticity of sup­ may be difficult for alternative suppliers rap­ ply between different products. In contrast, idly to meet the demand of those who would barriers to market entry or penetration gen­ like to break away from the undertaking erally have been dealt with under the head­ 14 with the largest market share. ing of the undertaking's 'position on the rel­ evant market' or the 'structure of the 19 relevant markets'. It appears however that the question will usually have to be addressed, either in relation to the definition of the relevant markets or in relation to the strength of the undertaking's position on those markets.

I-682

HILTI v COMMISSION

(1) The demand for fastening systems tures of PAF systems, in paragraph 62 of its decision, is sufficiently clear and convincing to justify the conclusions which the Com­ mission draws from them. Paragraphs 71 and 72 of the judgment then continue:

33. The Court of First Instance based its conclusions regarding the demand for differ­ ent fastening systems on two principal find­ 'Those findings leave no real doubt as to the ings of fact: the Commission's description of existence, in practice, of a variety of situa­ the different qualitative features of the prod­ tions, some of which inherently favour the ucts concerned, and the fact that the different use of a PAF system whilst others favour fastening systems have co-existed for a sub­ one or more other fastening systems. As the stantial period of time. As we have already Commission notes, the fact that several dif­ seen, in its third ground of appeal Hilti sub­ ferent fastening methods have each contin­ mits that a finding that PAF systems have ued for long periods to account for an specific features distinguishing them from important share of total demand for fasten­ other systems could not in itself be sufficient ing systems shows that there is only a rela­ to establish the conclusion drawn by the tively low degree of substitutability between Commission, and upheld by the Court of them. First Instance, that the systems are not sub- stitutable for one another. Similarly, in its fourth ground of appeal Hilti maintains that a finding that the different systems have co-existed over an extended period of time could not in itself justify the conclusion that the systems are not interchangeable, an infer­ ence which Hilti claims is contained in the In such circumstances the Commission was second sentence of paragraph 71 of the judg­ entitled to base its conclusions on arguments ment. which took account of the qualitative charac­ teristics of the products at issue.'

Instance stated in paragraph 72 of the judg­ certain expert evidence adduced by Hilti ment that 'in such circumstances' the Com­ relating to the demand for fastening systems, mission was entitled to base its conclusions namely the opinion of Mr Yarrow, the sur­ on the qualitative characteristics of the prod­ vey by Rosslyn Research and the economet­ ucts, where the circumstances in question ric analysis of Professor Albach. In its fifth clearly include the co-existence of different and sixth grounds of appeal, Hilti attempts fastening systems over long periods of time. to show that the treatment by the Court of Contrary to Hilti's submission in its fourth First Instance of that additional evidence was ground of appeal, therefore, the Court of contrary to legal principle or manifestly First Instance did not rely upon the finding erroneous in its reasoning. I shall consider of co-existence taken in isolation. those submissions below. It must however first be considered whether the Court of First Instance failed to deal with any relevant issue concerning the supply of fastening sys­ tems.

40. I would add that, if the judgment had been found defective in any of these respects, that would not have resulted in the annul­ ment of the Commission's decision but in 38. However, Hilti has not raised the issue the case being referred back to the Court of of supply substitutability in its appeal. It is First Instance in accordance with Article 54 true that Hilti relies on the sentence from the of the Statute. Michelin judgment which states that 'the competitive conditions and the structure of supply and demand on the market must also be taken into consideration'. But the issue of supply substitutability is nowhere specifi­ cally identified in Hilti's pleadings. Nor was the issue separately addressed by the Com­ mission in its response, or by Bauco. The The fifth ground of appeal absence of any specific submissions on the issue suggests that it was not treated as being specifically raised in the appeal, and that it would not therefore be appropriate for this Court to deal with it.

41. In its fifth ground of appeal, Hilti takes issue with the assertion made in paragraph 74 of the judgment that 'the evidence produced by the applicant is not such as to weaken the findings made by the Commission'. Hilti submits that it was required only to put for­ 39. I conclude therefore that Hilti has not ward evidence suggesting an alternative identified any relevant issue, relating either explanation for the Commission's findings; it to the structure of supply or to the structure was not required to produce evidence which of demand or to the competitive conditions would 'weaken' those findings. Hilti con­ on the market, which the Court of First cludes that the Court of First Instance Instance failed to consider in its judgment. applies in that paragraph 'the wrong legal Hilti's submission that the Court of First burden of proof'.

'... The choice of the best fixing method to use is made on the basis of a specific fixing Hilti contends that the use of the term 'con­ application on a specific site .... In view of ceivable' indicates that the Commission was the great many factors that enter into this basing its finding on mere supposition. It choice and of the fact that fixing elements are suggests that to refute a mere supposition it normally a very small part of building costs, suffices to prove circumstances which cast the indications are that the prices of the ele­ the facts established by the Commission in ments of different fixing methods are not the a different light: see paragraph 16 of the only or crucial element in the choice of Court's judgment in CRAM and Rhein- 20 which fixing method to employ for a partic­ zink. ular job. Therefore it is not conceivable that small changes in the price of a nail gun, nail and/or cartridge would cause an immediate and large shift to or from al ernative fixing methods.' [my emphasis]

43. In my opinion, however, an examination of the Commission's reasoning in para­ graphs 63 to 65 of its decision does not sup­ port the contention that the Commission was basing its conclusions upon mere suppo­ sition. In paragraphs 61 and 62 of the deci­ It can be seen that the Commission's state­ ment that it is 'not conceivable' that small changes in prices would lead to an immediate 20 — Joined Cases 29/83 and 30/83 CRAM and Rheinzink v Commission [1984] ECR 1679. and large shift between fixing methods is

I-686

HILTI v COMMISSION

46. It may of course not always be easy to draw the dividing line between issues of fact and questions of law. The distinction is much 44. In my view, therefore, the Court of First debated in national legal systems; in its Instance was correct in its assumption that it appeal Hilti appears to suggest that this was for Hilti to show that the new evidence Court should follow the practice of certain it had adduced did indeed cast doubt on the national courts and regard manifest errors of findings of the Commission. Hilti's submis­ fact, in some circumstances, as amounting to sion that the Court of First Instance applied errors of law. However, it seems to me that the wrong legal burden of proof must there­ in appeals against decisions of the Court of fore be rejected. First Instance this Court can properly take a restrictive view of the notion of 'infringe­ ment of Community law by the Court of 21 — Cf. the remarks of Advocate General Sir Gordon Slynn in First Instance' in Article 51 of the Statute. Joined Cases 100-103/80 Musique Diffusion Française v Commission [1983] ECR 1825, pp. 1930-1931. This Court must avoid a situation in which it

I-687

OPINION OF MR JACOBS — CASE C-53/92 P

would have to carry out a further review of judgment itself, and it will be sufficient for findings of fact where it was alleged that an this Court to review the reasoning contained error of fact was manifest. That would have in the judgment. the effect of subverting the purposes for which the Court of First Instance was estab­ lished. For reasons which I have already given, that consideration applies with partic­ ular force in competition cases, where the decision of the Court of First Instance is itself a review with very broad scope of a 22 reasoned decision of the Commission.

I-688

HILTI v COMMISSION

49. Difficult cases may of course arise in the effect that the Commission's conclusions which this Court will have to determine the are: extent to which it is prepared to review the reasoning used by the Court of First Instance in its assessment of the facts which have been established. As I have already mentioned, it seems to me that this Court would be entitled to take a restrictive view of its appellate jurisdiction in appeals on com­ petition matters, given the purposes of the establishment of the Court of First Instance 'corroborated by the opinion prepared by and the fact that in competition proceedings Mr Yarrow and the survey conducted by there will already have been two reasoned Rosslyn Research Ltd, ... inasmuch as they decisions. On any view of the scope of this disclose the existence of a large number of Court's appellate jurisdiction, however, it nail gun users who could see no realistic cannot have been intended for the Court to alternative to the PAF system in circum­ go behind the findings of fact made in the stances corresponding to most of those in judgment of the Court of First Instance, which nail guns have in fact been used'. where that judgment is reviewing findings made by the Commission.

To that statement, Hilti objects that the interpretation of the survey conducted by Rosslyn Research is 'manifestly wrong' and 'based upon a simple mistake in arithmetic'. According to Hilti, rather than disclosing the 50. With those considerations in mind, I existence of large numbers of such nail gun now turn to the errors alleged by Hilti in its users, the survey shows that only a minority sixth ground of appeal. of nail gun users encounter situations in which they can use no alternative fastening system, and only in a fraction of the cases in which they use nail guns.

54. Finally, Hilti takes issue with the state­ ment in paragraph 76 of the judgment which criticizes the methodology employed in the econometric study by Professor Albach. It appears that the methodological difficulties 53. Identical considerations apply in my in question were addressed in an oral state­ opinion to the second allegation in Hilti's ment made by Professor Albach at the hear­ sixth ground of appeal, which concerns para­ ing, an extract from which is cited by Hilti in graph 75 of the judgment. In that paragraph its appeal. It seems to me that it is manifestly the Court of First Instance criticises the for the Court of First Instance, and for the methodology adopted in the opinion of Mr Court of First Instance alone, to consider Yarrow and in the survey by Rosslyn whether the doubts which had been raised Research, arguing that the questions put to were adequately resolved by Professor construction undertakings in the survey: Albach's evidence at the hearing.

'are not apt to provide an answer to the fun­ 55. I therefore reach the conclusion that damental question in this case, namely none of the submissions made by Hilti in its whether slight but significant differences in sixth ground of appeal can be regarded as the price of nails are likely to shift demand raising a point of law which can be consid­ to a significant extent'. ered on an appeal.

I-690

HILTI v COMMISSION

The seventh ground of appeal Albach. However, the fact that the Court of First Instance did not draw the same conclu­ sions does not indicate that it failed to have regard to that evidence.

59. Finally, it is to be noted that Bauco's submission that the fine imposed on Hilti should be increased does not call for consid­ eration. It is clear that an intervener before the Court of First Instance may only seek an order in support of or opposing, in whole or 57. As we have already seen, the Court of in part, an order sought by one of the par­ First Instance held that the Commission's ties, and that on an appeal it may not seek in conclusions regarding the relevant product its response a different form of order from markets were corroborated rather than that sought at first instance. 23 Bauco is refuted by the expert evidence adduced by accordingly not entitled to seek an order Hilti. It does not seem to me however that it increasing the amount of the fine, whether in can be said to have disregarded that evidence; its original intervention before the Court of rather, the Court of First Instance considered First Instance or in its response to the the evidence but drew from it different con­ appeal. clusions from those put forward by Hilti. In paragraph 4.58 of its appeal, Hilti sets out what it considers to be the most relevant conclusions to be drawn from the evidence 23 — See Article 116 (4) of the Rules of Procedure of the Court of First Instance, and Article 116 (1) of the Rules of Proce­ analysed by Mr Yarrow and Professor dure of the Court of Justice.

I - 691

OPINION OF MR JACOBS — CASE C-53/92 P

Conclusion

60. I am accordingly of the opinion that the Court should:

1. dismiss the appeal;