C-41/96

In particular, the national court asks the Court of Justice to rule whether Community 3. Volkswagen AG (hereinafter 'VW'), a law precludes the application of a principle German vehicle manufacturer, distributes its of national law concerning unfair compe- vehicles in the European Union exclusively tition according to which a selective distribu- through authorized concessionaires who deal tion system is binding also on third parties directly with the final consumer. The distri- only if both in theory and in practice it is bution contracts signed with those conces- 'impervious', in other words only if the sionaires provide, inter alia, that the latter products covered by the system can be sold are prohibited from selling new vehicles to and are in fact sold to final consumers unauthorized resellers. The plaintiff in the exclusively by authorized resellers. main proceedings, VAG Händlerbeirat eV (hereinafter 'VAG'), is a German association of concessionaires authorized by VW.

Factual and legislative background and the preliminary question

2. For a better understanding of the scope The defendant, SYD-Consult, is an indepen- and sense of the question before the Court, it dent reseller of cars which markets, inter alia, new VW vehicles. It obtains supplies from a German importer who, in turn, buys * Original language: Italian. the cars from an Italian reseller at lower

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both in theory and in practice. That case-law is based on the assumption that the manufac- turer is able to require the authorized reseller to fulfil its contractual obligations only if the system displays no defects since, otherwise, the authorized reseller would be exposed to unfair competition from independent resell- ers. 4. Considering that such conduct amounted to unfair competition within the meaning of Paragraph 1 of the Gesetz gegen den unlaut- eren Wettbewerb (Law against Unfair Com- petition) (UWG), 2 VAG brought proceed- ings for an injunction against SYD-Consult, accusing it of taking advantage of a breach, by the Italian reseller, of the contractual obli- gations imposed on it by the VW selective In other words, as made clear in the order

In the past, particularly in the first half of the 1980s, exactly the reverse process occurred as a result of the differing price and exchange-rate conditions prevailing at that time, in that the Italian parallel traders bought vehicles from German V W concessionaires and marketed them in Italy at competitive prices. 2 — O n the basis of that provision, third parties outside a distri- bution system arc guilty of unfair competition in three cases: when they buy goods covered by the system by providing false information and under a false name; when they incite authorized distributors to breach their contractual obliga- tions; and when they secure a competitive advantage through 6. Before the national court, SYD-Consult the breach of contractual obligations on the part of an autho- rized distributor. contended in its defence that the VW distri- 3 — Commission Regulation (EEC) N o 123/85 of 12 December bution system was not impervious and that, 1984 on the application of Article 85(3) of the E E C Treaty to certain categories of motor vehicle distribution and servicing therefore, by virtue of the case-law just agreements (OJ 1985 L 15, p. 16), now repealed and replaced by Commission Regulation (EC) N o 1475/95 of 28 June referred to, no unfair competition could be

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VAG for its part claimed that the German selective distribution system only if — in case-law in question was incompatible with addition to satisfying the further require- Community law, a fact established by the ments of Paragraph 1 of the Gesetz gegen Court of Justice itself in Cartier. 4 According den unlauteren Wettbewerb (Lav/ against to VAG, therefore, having regard to that Unfair Competition, "UWG") — the selec- judgment and by virtue of the principle of tive distribution system is impervious ('lück- the primacy of Community law over enlos"), specific reference being made to the national law, the enforceability of a selective alternative of the selective distribution sys- distribution system against third parties tem being required to be impervious merely could no longer be made conditional upon in theory, or impervious in theory and in the requirement of imperviousness. practice?'

The preliminary question

7. Therefore, in order to obtain an interpre- tation of that judgment in relation to the present case, the Landgericht Hamburg decided to stay the proceedings pending a 8. The answer sought from the Court in preliminary ruling from the Court of Justice these proceedings thus depends primarily on on the following question: the interpretation of the Cartier judgment which, I repeat, confirmed — in VAG's view — that the principle of imperviousness is incompatible with Community law, in par- ticular as a precondition for the enforceabil- ity of a selective distribution system against third parties.

for certain luxury products, and a company at issue. 5 It noted that, as well as being in the Metro group which was an indepen- important from the procedural point of view, dent wholesaler. Metro succeeded in obtain- in that, where the system is impervious, the ing Cartier products (lawfully) outside the burden of proof is reversed in favour of a selective distribution system set up by the manufacturer who takes action against a latter for the marketing of its products (and third party alleged to be engaging in unfair expressly approved by the Commission), and competition, the criterion of imperviousness sold them through its own sales outlets at takes effect substantively: if the system is lower prices than those charged by the offi- impervious, the manufacturer can take action cial distributors. against an authorized distributor to compel him to comply with his contractual obliga- tions, whereas if the system is defective, exposing the authorized distributor to com- petition from third parties, he is essentially released from compliance with those obliga- tions. 6

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question merely because the manufacturer is That simply means, in my view, that the unable to guarantee its imperviousness. The requirement of imperviousness of a selective Court went on to say that any other solution distribution system, to the existence of 'would lead to the paradoxical result that the which national law attaches certain conse- most inflexible and most tightly sealed distri- quences of a procedural and substantive bution systems would be treated more nature in the field of unfair competition, favourably under Article 85(1) of the Treaty operates solely at national level and is there- than distribution systems that are more flex- fore irrelevant, at least in principle, as ible and more open to parallel transactions'; regards the validity of that system (which is moreover, in any event, the Court made it otherwise in conformity with Community clear that the manufacturer cannot be law) under Article 85 of the Treaty. 10 On required to ensure that its distribution net- that point, the judgment adds nothing; to work is impervious everywhere, given that read it as a condemnation of the requirement the legislation of certain Member States may of imperviousness, under Community law, hinder or even prevent the achievement of therefore seems arbitrary. n that objective. 9

11. Contrary to VAG's contention (both before the national court and in its observa- tions to the Court of Justice), I do not con- sider that the judgment in question held that the principle of imperviousness was incom- patible with Community competition law. 12. I would add that, quite apart from the The Court merely stated, in response to a dicta in Cartier, I do not consider that the precise question from the national court, that principle of imperviousness, as developed in the validity of a selective distribution system, German case-law, can be regarded as liable to for the purposes of Article 85 of the Treaty, conflict with Community competition law, cannot depend on its imperviousness. as contended by VAG.

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to exemptions. In support of its position, ing that the application of a national prin- VAG refers to the Wilhelm and Others ciple which makes the success of an action to case, 1 2 observing that the principle in ques- establish unfair competition, brought by the tion, found only in German law, would con- manufacturer (or by an authorized reseller) flict with the requirement of the uniform against an independent reseller (who has application of Community competition law lawfully obtained goods covered by a selec- within the Community. tive distribution system), depend upon the capacity of the first (or the second) to prove that the system is impervious does not in fact conflict with the requirements and the imperatives of Community competition law and is not liable to negate the useful effect of

The general rule is inspired by the criterion of a competition-based market and therefore not only tolerates but also treats as beneficial parallel imports, that is to say the non- imperviousness of distribution systems. The 14. That said, it should nevertheless be exemption, therefore, imposes nothing but borne in mind that Article 3(11) of Regu- merely, in derogation from the general com- petition rule, allows a manufacturer to enter into a contract with a distributor to the effect 13 — The Court has always looked favourably on the possibility that the system is to be 'impervious', but that of sales outside networks and therefore on parallel imports, does not mean (at least not necessarily) that which arc considered beneficial and necessary to counter excessive inflexibility. See for example the judgment in those 'gaps' in the distribution system are to Joined Cases 100/80 to 103/80 Musique Diffusion Française and Others v Commission [1983] ECR 1825, paragraphs 81

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lation No 123/85, 14 on which is based the 15. Therefore, in the event of the princip- block exemption from the prohibition con- le of imperviousness being interpreted and tained in Article 85(1) of the Treaty of the applied so as to make the success of an selective distribution system set up by VW, action for unfair competition dependent on expressly makes the exemption subject to the proof by the manufacturer or authorized dis- condition that the system is to allow sales tributor that the system is absolutely imper- through intermediaries, and intermediaries vious, in the sense that it also prohibits (or in means resellers operating outside the official any event precludes) transactions by the system but in possession of prior written intermediaries referred to in Article 3(11) of authority. 15 The exemption in the motor Regulation N o 123/85, it would clearly fol- vehicle distribution system is therefore sub- low that the system in question would be ject, inter alia, to the possibility of sales to deprived of the benefit of the exemption agents of final consumers and therefore, of because it would conflict with the regulation course, parallel imports which are the natural and also, a fortiori, with Article 85(1) of the consequence of them. Treaty.

14 — Cited in footnote 5. 15 — In that connection, sec Cases C-226/94 ind C-309/94 Grand Garage Albigeois and Others and Nissan France and Others [1996] ECR 1-651 and 1-677, and, most recently, Case C-128/95 Fontaine [1997] ECR 1-967. In those judgments, the Court also made it clear that Regulation N o 123/85, since it concerns only contractual relations between In short, I consider that the condition of suppliers and official distributors in their networks, cannot imperviousness, which is in principle irrel- in any circumstances be interpreted as prohibiting third parties who arc not intermediaries with a written authority evant to the validity or otherwise of a selec- from carrying on the business of parallel imports of new vehicles of a make for which there is an official distribution tive distribution system under Article 85(1) network (paragraphs 16 to 20). Any action directed towards of the Treaty, is not in any event incompat- preventing the activities of third parties at issue here may therefore be based only on the applicable national law. ible with Community competition law.

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16. In the light of the foregoing considerations, I suggest that the Court give the following answer to the question referred to it by the Landgericht Hamburg:

Community law does not preclude the application of a principle of national law relating to unfair competition under which a selective distribution system is enforceable against third parties only if it is impervious.

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