C-306/96

O P I N I O N O F MR T E S A U R O — CASE C-306/96

OPINION OF ADVOCATE GENERAL TESAURO delivered on 6 November 1997 *

1. In a selective distribution contract which clauses, in the form both of an obligation to concluded between a supplier and a distribu- export and an obligation not to 'reimport. tor, both of whom are established in the Community; and covers the territory of a non-member country, is a clause prohibiting the distributor from selling, either directly or by reimportation from the non-member country, the contractual products in any other territory, and therefore inter alia in the The facts and the questions referred territory of the Member States, contrary t o Article 85(1) of the Treaty? If such a clause is to be regarded as incompatible with Article 85(1), does that also apply where the supplier markets his own products in the Community territory through a selective distribution net- work covered by a Commission exemption decision under Article 85(3)?

I - 1986

JAVICO v YSLP

YSLP also concluded in respect of the East of Russia and Ukraine and details of the European markets two distribution con­ products by distribution point'. tracts, one for the territory of the Russian Republic and Ukraine, and the other for Slo­ venia, with Javico International AG (herein­ after 'Javico'). Javico is established in Ger­ many and specialises in commercial There are further clauses intended to under­ distribution in the markets of Eastern pin Javico's obligation to guarantee that the Europe. It should be noted that Javico does products go to no destination outside the not belong to the network of distributors of territories specified in the contract. 2 In fact, YSLP products for the common market. nearly all the provisions of the contracts between the parties are devoted to the obli­ gation to sell the goods at specified locations and to penalties for any breach of that obli­ gation.

3. The contract concluded in February 1992 covering distribution in Russia and Ukraine contains the following two clauses:

The May 1992 contract for distribution in Slovenia contains the following clause:

'1. O u r products are intended for sale solely in the territory of the Republics of Russia and Ukraine. 'In order to protect the high quality of the distribution of the products in other coun­ tries of the world, the Distributor agrees n o t to sell the products outside the Territory o r to unauthorised dealers in the Territory'.

4. Shortly after the contracts in question effecting any sales in a territory other were concluded, YSLP detected within than the contractual territory, and hence Community territory (particularly in the any sale in the Union, either by direct United Kingdom, Belgium and the Nether­ marketing or by re-exportation from lands) products sold to Jāvico for distribu­ the contractual territory? tion in Russia, Ukraine and Slovenia. The contract was then terminated and proceed­ ings were brought by YSLP before the Tri­ bunal de Commerce (Commercial Court), Nanterre, for inter alia compensation for the damage suffered. The action was successful at first instance and the German companies appealed to the Cour d'Appel, Versailles, contending, first, that the contractual clauses infringed were void, being contrary t o (2) In the event that the said Article 85(1) Article 85(1) of the Treaty, and, second, that prohibits such contractual provisions, the exemption decision of 16 December 1991 must it be interpreted as not being was irrelevant. applicable where the supplier otherwise distributes his products on the territory of the Union by means of a selective distribution network which has been the subject of an exemption decision under Article 85(3)?'

5. To enable it to give judgment in the pro­ ceedings before it, the national court consid­ ered that a preliminary ruling should be obtained from the Court of Justice on the interpretation of Article 85(1) of the Treaty. The first question More particularly, it referred the following questions to the Court:

8. First of all, I shall briefly examine the claim that Regulation N o 1983/83 is appli- cable to the agreements at issue. The lack of any connection between that regulation and the present case is clear from its scope, as described in Article 1. The block exemption provided for by the regulation relates in fact 7. According to YSLP, the export obligation to agreements 'whereby one party agrees does not fall within the scope of Article 85 with the other to supply certain goods for of the Treaty because the contract relates resale within the whole or a defined area of only to organisation of trade in the products the common market only to that other'. 4 A n in non-member countries, without reference essential precondition for applicability is to trade between Member States. Even if it therefore that the exclusive territory be a were conceded that Article 85 was appli- part or the whole of the common market. 5 cable, it would have to be acknowledged that The contracts between YSLP and Javico, the damage was not appreciable and that, in however, are for distribution of the former's any event, the disputed contracts fell within products solely in the territory of non- the category of exclusive distribution con- member countries. It follows that the agree- tracts to which, by virtue of Regulation N o ments at issue do not fall within the scope of 1983/83, 3 Article 85(1) is not applicable. As the block exemption provided for by Regu- regards the prohibition of re-exportation to lation N o 1983/83. the Community, YSLP recognises — as does the Commission — that such a condition may fall within the prohibition laid down in Article 85(1) of the Treaty, but only where imports are economically feasible and trade between Member States is adversely affected; Application of Article 85(1) of the Treaty those conditions are not in their view ful- filled in this case, having regard to the struc- ture of the market and the obstacles which the goods would encounter 'when actually being reimported into the common market. In Javico's view, on the other hand, the con- 9. Turning to the importance of Article 85(1) tracts in question are designed specifically to of the Treaty for the purpose of appraising restrict competition within the common the agreements at issue, I would point o u t market and, in any event, adversely affect first of all that, in order to establish whether competition, with the result that they are an agreement falls within the scope of that certainly contrary to Article 85(1). provision of the Treaty, it is necessary, b y

10. As the national court points out in its order for reference, since the prohibition of The export clauses must therefore in prin- marketing outside the contractual territory ciple be regarded as prohibited as far as their relates to any State whatsoever, whether or purpose is concerned. not in the Community, what is particularly (if not exclusively) important is the prohibi- tion of bringing or reintroducing YSLP products into the territory of the Commu- nity. The contract is almost entirely devoted to detailed rules prohibiting marketing of the 11. The foregoing observation is consistent products outside the contractual territory with the judgment of the Court in which it and it cannot be denied that the intention of was observed, in relation to a clause similar to the one at issue here, that the obligation imposed by the distributor to export prod- 6 — Appraisal of compatibility in successive stages, first by refer- ence to the subject-matter and thereafter to the effects of the agreement, is an established procedure in the case-law of the Court: see my Opinion in Case C-250/92 DLG [1994] I-5644, point 16; see also the judgment in Case C-234/89 7 — Indicative of the fact that the disputed clauses are essentially Delimiti! [1991] ECR I-935, paragraph 11. It need hardly be intended to preclude distribution of the contractual products pointed out that Article 85(1) does not require, to be appli- in the common market is the penalty clause to which Javico cable, that the agreement have an anti-competitive object and is subject only if the products are found outside the territory effect, the two requirements being alternatives: see Case of the 'Eastern countries', it therefore being irrelevant that C-219/95 P Ferriere Nord [1997] ECR I-4411, paragraphs 14 the products might go to a final destination outside the con- and 15. tractual territory but remain within Eastern Europe.

8 — See Joined Cases 29/83 and 30/83 Cram and Rheinzink v Commission [1984] ECR 1679, paragraphs 24 to 31. In the contested decision, the Commission observed that 'a restric- tion of competition which results from the obligation to resell in a specific country may itself affect trade between Member States to an appreciable degree owing to the fact 13. Assessment of the anti-competitive effect that the subsequent seller is established in the common mar- must take account of a number of factual cir- ket, within which he must remain free to sell the goods where he wishes depending on the circumstances and inter cumstances such as the level of competition alia on the prices quoted to him': see Commission Decision 82/866/EEC of 14 December 1982 relating to a proceeding existing in the market, regardless of the under Article 85 of the EEC Treaty (IV/29.629 — Rolled agreement at issue, and the economic and zinc products and zinc alloys), OJ 1982 L 362, p. 40. 9 — To that effect, sec Commission Decision 68/376 of 6 Novem- legislative context in which the agreement is ber 1968, Rieckermann/AEG (OJ 1968 L 276, p. 25). to operate, so as to identify any specific 10 — On page 364, the 21st Report on Competition Policy 1991 refers to the case of Iqbal, in which the Commission con- possibility that competition in the common sidered that a contract whereby the reseller of pharmaceuti- market might be affected. With regard t o cal products was required to market them only in a speci- fied non-member country was not contrary to Article destination clauses, over the years the Com- 85(1), the purpose of that rule not being 'to prohibit vertical agreements which restrict intra-brand competition between mission has been developing an approach the Community as a whole and third countries in order to enable the manufacturer to have an independent price policy adapted to the conditions prevailing on those third countries' markets'. It would appear that in that specific case the use of the export clauses was unconnected with any action specifically designed to prevent trade between Mem- 11 — See Case 56/65 Société Technique Minière v Maschinenbau ber States. Unless particular significance is attached to the Ulm [1966] ECR 235, Case 23/67 Brassiere de Hocchi v latter comment, and subject to all reservations owing to the Wilkin [1967] ECR 407, and Delimitis, cited in footnote 6. lack of information available to me, the Iqbal solution, 12 — This is the well-known de minimis rule first enunciated by which moreover was not recorded in the decision but, it the Court (in Case 5/69 Vött v Vervaecke [1969] ECR 295, seems, only in an Article 6 letter, seems to me to be difficult paragraph 7) and then codified by the Commission in its to reconcile with the approach underlying the CRAM judg- notice of 3 September 1986 on agreements of minor impor- ment just referred to. For a similar assessment, see L Van tance which do not fall under Article 85(1) of the Treaty Bael and F. Bellis, Il Diritto della Concorrenza nella Comu- establishing the European Economic Community (OJ 1986 nità Europea, Turin, 1995, p. 126, in particular note 24. C 231, p. 2), since updated (OJ 1994 C 368, p. 20).

13 — See Commission Decision 64/233/EEC of 11 March 1964 on an application for negative clearance submitted under 14. Appraisal of the relevance of Article Article 2 of Council Regulation N o 17 (IV/A-ŪŪ061 85(1) is a matter for the national court, —Grosfillex/Fillistorf, JO 9 April 1964, p. 915). The importance of customs duties as a necessary factor in which will refer to the factors just men­ assessing the probability of reimportation emerges from the Commission decisions in which account is taken of the tioned, which derive from the case-law of the existence of free trade agreements: see Decision Court of Justice. The order from the national 76/159/EEC of 15 December 1975 relating to a proceeding under Article 85 of the EEC Treaty (TV/847 —SABA, OJ court does not allow us to go into further 1976 L 28, p. 19), in which the prohibition of exports to third countries and reimports from such countries is detail, in that it does not examine important regarded as not covered by Article 85(1) in view of the two­ factual details which are disclosed only by fold levy of customs duties and the fact that the products are not sold in the third countries at lower prices than those charged in the Member Sutes. That prohibition was, how­ ever, allowed only until 1 July 1977, precisely because it was envisaged that from that date the customs duties on trade with EFTA countries would be abolished. To the 14 — See the abovementioned decision in Grosfillex-Fillistorf, in same effect, see Decision 77/100/EEC of 21 December 1976 which the Commission concedes that a limitation of com­ relating to a procedure under Article 85 of the EEC Treaty petition would arise if the prices charged by the producer (IV/5715 —Junghans, OJ 1977 L 30, p. 10) and Decision on the Swiss market were lower than those charged by him 78/253/EEC of 23 December 1977 relating to proceedings in the common market. See also the abovementioned SABA under Article 85 of the EEC Treaty (IV/171 et seq. decision and the decision of 19 December 1974, 75/94/EEC — Campari, OJ 1978 L 70, p. 69). More recently, the con­ Goodyear Italiana (OJ 1975 L 38, p. 10), in which resale in clusion of free-trade agreements between the Community the Community territory of the reimported product was and non-member countries, with the resultant elimination deemed unlikely since 'there are not, nor ... are there likely of customs duties and other obstacles to the crossing of to be in the foreseeable future, such differences in price ... frontiers, has prompted the Commission to require distri­ between the EEC and other countries as to allow such bution agreements not to contain prohibitions on conces­ additional charges to be absorbed'. Regarding the impor­ sionaires from exporting to such countries: see the Com­ tance of the difference in prices in assessing the probability mission Notice under Article 19(3) of Regulation N o 17 in of re-export from non-member countries, see also Decision the Chanel case (OJ 1994 C 334, p. 11). 94/987/EEC Tretorn (OJ 1994 L 378, p. 45).

In the present case, the lower prices charged on the markets of non-member countries mean that the hypothesis of re-exportation to another Member State cannot be entirely ruled out. In any event, therefore, it may also be true in the case of YSLP products that, in 15. The application of Article 85(1) is sub­ view of the commercial policy of large ject to a further condition: an adverse impact groups which obtain products by buying on trade between Member States. According throughout the European market, there is to settled case-law, to be capable of having necessarily a harmful effect on trade between an adverse effect, an agreement must make it Member States. 18 possible to foresee with a sufficient degree of probability, on the basis of a set of objective elements of law or fact, that it may have an influence, direct or indirect, actual or poten­ tial, on the pattern of trade between Member States such as to give rise to the fear that it is 16. In short, I consider that the answer to capable of hindering the attainment of the the first question from the national court single market. That influence must also not must be that Article 85(1) of the Treaty must be insignificant, 15 without it thereby being be interpreted as prohibiting a clause which, necessary to prove actual harm: it is suf­ in a contract for the distribution of products ficient if the nature of the agreement is such in a territory outside the European Union, that such an effect might be caused. 16

17 — See Commission Decision 70/332/EEC of 30 June 1970 15 — See Joined Cases 56/64 and 58/64 Consten and Grundig relating to a proceeding under Article 85 of the EEC Treaty, [1966] ECR 299, and the more recent judgments of the Kodak (OJ 1970 L 147, p. 24). Court of First Instance in Case T-77/92 Parker Pen [1994] 18 — See Commission Decision 93/252/EEC of 10 November ECR II-549, paragraph 39, and Case T-77/94 VGB and 1992 relating to a proceeding under Articles 85 and 86 of Others v Commission [1997] ECR II-759, paragraph 132. the EEC Treaty, Warner Lambert/Gillette (OJ 1993 L 116, 16 — Sec most recently Fernere Nord (cited in footnote 6). p. 21).

It must then be borne in mind that the The second question imperviousness of a selective distribution system is not an essential condition for it to be lawful in the light of Article 85, inter alia because that would lead to 'the paradoxical result that the most inflexible and most tightly sealed distribution systems would be treated more favourably under Article 85(1) 17. By its second question, the national than distribution systems that are more flex- court seeks to ascertain, in the event that the ible and more open to parallel transac- disputed clauses fall within the scope of tions'. 19 Moreover, such a characteristic like- Article 85(1), what importance is to be wise cannot be justified by the requirement attached to the fact that the producer has a of effective protection of competition. As I selective distribution system within the have had occasion to observe in the past, 20 Community for which the Community has according to settled case-law of the Court of granted an exemption under Article 85(3). In Justice, the possibility of sales outside the other words, the national court is asking network may even be beneficial, by keeping whether the inapplicability of Article 85(1) a certain part of the market available to par- to the disputed destination clauses may be allel transactions, thus tempering excess inferred from the exemption granted to the rigidity of the system, particularly as regards selective distribution system for the area of prices. Obviously, the existence of parallel the Community. trade may have disbenefits for the selective distribution system, but those are merely consequences, in the last analysis, of choices made by the producer, who will be able to appraise their effects through cost-benefit analysis and, if appropriate, either to opt for a free distribution system or restructure the 18. As a preliminary point, I would observe specialised distribution system, or else make that to assert that Article 85(1) is inappli- changes to prices, by standardising them, and cable to the contracts in question by virtue therefore eliminating 'upstream' the sole of the existence of a selective distribution system enjoying an exemption granted by the Commission means, essentially, that that system must be hermetically sealed, prevent- 19 — Case C-376/92 Metro SS-Großmärkte v Cartier [1994] ing any form of parallel imports, at least ECR I-15, paragraph 26. 20 — See my Opinion in Cartier (cited in the foregoing foot- from the non-member countries concerned. note), points 21 and 22.

The exemption decision is not capable of 21 — See Delimitis (cited in footnote 6), paragraphs 44 to 46. Spe- cifically with regard to the need for a restrictive interpreta- guaranteeing 'cover' for distribution agree- tion, see Case T-9/92 Peugeot [1993] ECR II-493, para- graph 37, and Case C-266/93 Volkswagen [1995] ECR ments not subject to examination by the I-3477, paragraph 33. Commission and not expressly exempted by 22 — Council Regulation N o 17 of 6 February 1992, First regu- lation implementing Articles 85 and 86 of the Treaty (OJ, it. In the first place, since exemptions consti- English Special Edition 1959-62, p. 87). tute a derogation from the prohibition in 23 — Regarding the direct applicability by the national court of Articles 85(1) and 86 of the Treaty, see Case 127/73 BRT Article 85(1), the provision containing the [1974] ECR 51 and Delimitis (cited at footnote 6), para- graphs 45 to 47. Regarding the exclusive power of the fundamental rule concerning agreements Commission to adopt decisions applying Article 85(3), see restricting competition, exemption decisions, the last-mentioned judgment, paragraph 44. The case-law referred to was 'codified' in the Commission Notice o n be they individual or block exemptions, can cooperation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty (OJ 1993 only be interpreted restrictively and cannot C 39, p. 6). be applied to cases other than those 24 — For agreements postdating 13 March 1962, the date of entry expressly contemplated. That principle is jus- into force of Regulation N o 17, exemption is conditional on prior notification, with the exception of agreements tified not only by a clear rule of interpreta- exempted from the obligation of notification under Article 4(2) of the same regulation, but the agreements concluded tion but also by the need not to encroach between YSLP and Javico do not fall into the category.

(2) Where Article 85(1) of the Treaty prohibits such clauses, it must be interpreted as likewise applying where the supplier markets his products in Community territory through a selective distribution network which has been the subject of an exemption decision under Article 85(3).

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