COMMISSION DECISION of 23 December 1992 relating to a proceeding pursuant to Article 85 of the EEC Treaty against Langnese-Iglo GmbH (Case IV/34.072) (Only the German text is authentic)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty(1) , as last amended by the Act of Accession of Spain and Portugal, and in particular Article 3 (1) thereof,
Having regard to Commission Regulation (EEC) No 1984/83 of 22 June 1983 on the application of Article 85 (3) of the Treaty to categories of exclusive purchasing agreements(2) , and in particular Article 14 thereof, and to Council Regulation No 19/65/EEC of 2 March 1965 on the application of Article 85 (3) of the Treaty to certain categories of agreements and concerted practices(3) , and in particular Article 7 thereof,
Having regard to the application lodged pursuant to Article 3 (2) of Regulation No 17 by Mars GmbH against Langnese-Iglo GmbH & Co. KG on the ground of its being hindered, in restraint of competition, in selling its ice-cream products in Germany,
Having regard to the decision taken by the Commission on 19 December 1991 to initiate proceedings,
Having regard to the Commission Decision of 25 March 1992 - interim measures,
Having given the undertaking concerned, pursuant to Article 19 (1) of Regulation No 17, read in conjunction with Commission Regulation No 99/63/EEC of 25 July 1963 on the hearings provided for in Article 19 (1) and (2) of Council Regulation No 17(4) , the opportunity of being heard on the matters to which the Commission has taken objection,
Having consulted the Advisory Committee on Restrictive Practices and Dominant Positions,
Whereas:
I. FACTS
1. Purpose of the proceeding
(1) In response to an application lodged by Mars GmbH (hereinafter referred to as 'Mars') on 18 September 1991, the Commission decided on 19 December 1991 to initiate proceedings pursuant to Articles 85 and 86 of the EEC Treaty againt Langnese-Iglo GmbH (hereinafter referred to as 'L-I') and Schoeller Lebensmittel GmbH & Co. KG (hereinafter referred to as 'SLG').
(2) The internationally active Mars group of companies manufactures ice-cream bars for the European market exclusively in France. Mars began selling such bars individually and in multipacks throughout Germany in 1990. Mars claims that it is being hindered, in restraint of competition, in selling its ice-cream products in Germany by exclusivity agreements which L-I and SLG have concluded with a large number of retailers.
(3) On 25 March 1992 the Commission stated in a Decision (hereinafter referred to as 'D/25. 3. 92') that, in so far as they concerned the sale, without any further service, of L-I's pre-packaged single-item ice-cream products, the agreements concluded by L-I on the basis of a standard form contract described as a 'supply agreement' prima facie infringed Article 85 (1) of the EEC Treaty.
(4) The purpose of this proceeding is, further to D/25. 3. 92, to adopt a final decision pursuant to Article 85 of the EEC Treaty on the supply agreements. The Commission reserves the right likewise to subject to a final scrutiny such other infringements of the Community competition rules as are referred to in D/25. 3. 92.
(5) The compatibility with the Community competition rules of the exclusivity agreements to which SLG is a party is assessed in a parallel proceeding. SLG notified its standard form supply contract to the Commission on 7 May 1985. By letter dated 20 September 1985 the Comission's Directorate-General for Competition informed SLG that, on the basis of the known facts, which were essentially those set out in the notification, the notified standard form contract was compatible with the competition rules of the EEC Treaty(5) . When this assessment, which was based on the German ice-cream market as a whole, was made, it was assumed that access by other companies to the retail trade would remain assured. By letter dated 29 November 1991 the Directorate-General for Competition announced that the proceeding was being re-opened.
The majority of SLG's shares are in private hands. 49 % of the capital is held directly and indirectly by Suedzucker AG, which also owns 75 % of Milchhof Eiskrem GmbH & Co. KG (hereinafter referred to as 'Eismann') (recital 34). During the 1990/91 financial year Suedzucker achieved a turnover of DM 4 540 million. In September 1991 SLG concluded a cooperation agreement with Jacobs Suchard Manufacturing GmbH & Co. KG (hereinafter referred to as 'Jacobs Suchard'). Jacobs Suchard is a member of the Philip-Morris group, which markets foodstuffs and semi-luxuries throughout the world. The object of the agreement is to develop, manufacture and distribute ice-cream and ice-cream bar products.
2. The undertaking
(6) L-I manufactures and distributes ice-cream and frozen food. In 1991 it generated a gross turnover of DM [ 2 000](6) million (1990: DM [ 2 000] million), of which DM [ 1 000] million (1990: DM [ 1 000] million) with ice-cream.
(7) L-I is a subsidiary of Deutsche Unilever GmbH. In 1990, foodstuffs accounted for the bulk (approximately 70 %) of customer sales by the German Unilever group totalling DM 9 197 million.
(8) The international Unilever group of companies is one of the world's leading consumer goods manufactures. The two parent companies, Unilever NV and Unilever plc, achieved a consolidated turnover in 1990 of Fl 72 117 million. Companies belonging to the Unilever group produce and distribute ice-cream in all Community Member States and in many other countries too. The Unilever group of companies announced in its annual report for 1990 that in future high quality ice-cream products (such as the 'Sky' and 'Magnum' impulse lines) would be manufactured for international distrubution in specialized production facilities.
3. The product
(9) Ice-cream is produced either industrially or by the craft trade from various raw materials in different combinations. It is intended for comsumption by the consumer - with or without further garnishes - in the material form which it acquires in the course of manufacture.
(10) Ice-cream products are divided into individual consumable portions either by the consumer himself, by the seller as a service, or from the outset by the manufacturer. With a few minor exceptions, craft-trade ice-cream falls exclusively into the second category, whereas industrial ice-cream falls into all three categories. Industrial ice-cream is therefore usually categorized by the trade as single-item or impulse ice-cream, take-home ice-cream, and ice-cream for bulk-buying customers or catering ice-cream.
(11) The cold content of an individual portion is quickly used up. Consumption therefore necessarily takes place in the immediate vicinity of the last cold storage facility in which it was kept.
(12) Unlike craft-trade ice-cream, which is offered for sale to the consumer for consumption as a rule at the place of production, industrial ice-cream has at its disposal distribution channels which render the place of consumption independent of the place of production. This ice-cream reaches the consumer on a whole manner of occasions, for which the individual product lines are tailored. In some cases the products differ only in terms of their packaging, in others the composition of the ice-cream is identical but different further ingredients are added to each product, while in others still the products are completely different.
(13) Industrial ice-cream for bulk-buying customers and impulse ice-cream (individual portions or single items pre-packaged by the manufacturer) and craft-trade ice-cream are aimed at satisfying the needs of the consumer outside his home, and hence out of reach of his own freezer. Unlike craft-trade ice-cream and catering ice-cream, industrial impulse ice-cream is not suitable in principle as the subject of further servicing by the seller because it is offered for sale in its final form for immediate consumption at or near the point of sale.
(14) If single items are packaged together by the manufacturer in a multipack, it is no longer consumption outside the home that is being targeted but, as in the case of take-home ice-cream, consumption in the home(7) . The same applies to consumers who purchase for storage one or more cartons containing single items. Multipacks or whole cartons containing single items are only rarely purchased for immediate consumption at or near the point of sale.
(15) The differing requirements of the consumer determine the distribution channel for industrial ice-cream. Take-home ice-cream and multipacks are sold in the vast majority of cases through grocery outlets and by doorstep delivery services, catering packs are intended for the catering trade (in the broadest sense), while impulse ice-cream is sold through all distribution channels(8) . The distribution channel for impulse ice-cream besides the grocery trade and doorstep delivery services, and for catering ice-cream, is known in the industry as the 'traditional' trade. Approximately 55 % of all impulse ice-cream is sold through the traditional trade, approximatly 35 % through grocery outlets and approximately 10 % through doorstep delivery services.
(16) L-I's price list No 5/91 for the grocery trade contains ice-cream in take-home packs, impulse ice-cream and multipacks. A comparison of the 12 multipacks lines with the corresponding impulse lines shows that the price per single item in multipacks is, for two lines ('Magnum' and 'Magnum Weiss') higher than in the case of impulse ice-cream. On the other hand, the grocery trade sells multipacks as a rule at prices which are lower per single item than those of impulse ice-cream.
(17) Industrial ice-cream which is divided into individual portions by caterers out of tubs(9) is cheaper for the retailer per individual portion than impulse ice-cream. However, owing to the service rendered in serving out the ice-cream, selling prices are broadly similar to those charged for single items.
4. The German ice-cream market
(a) The market as a whole
(18) In the early 1960s a number of firms, including L-I, began marketing industrial ice-cream. At that time, craft-trade ice-cream had the market almost to itself. L-I and the other firms involved invested considerable sums in opening up this market, spent mainly on making freezer cabinets available to retail outlets.
(19) The process of the unification of the two parts of Germany which began in November 1989 afforded the manufacturers of industrial ice-cream new marketing opportunities in the former German Democratic Republic. These were seized above all by L-I. Quite apart from this, it is expected that ice-cream sales will increase in Germany in the medium term by 10 to 15 %.
(20) There are no statistics available regarding the sale of craft-trade ice-cream. Estimates have, however, been made by the ice-cream section of the Association of the German Confectionery Industry (hereinafter referred to as 'ice-cream section'). According to these, between 1970 and 1990 sales increased from 85 million to 133 million litres.
(21) The ice-cream section collects from its members(10) statistics on the sale of industrial ice-cream, broken down by quantity (litres/items) and value. The data relating to values are based on the manufacturer's recommended retail price inclusive of VAT. Only the data relating to quantities are given below(11) :
/* Tables: see OJ */
(22)
/* Tables: see OJ */
Germany is as high as 97 %. L-I sells only a very small proportion of the product categroies take-home ice-cream and catering ice-cream as own brands.
(24) L-I has a presence in all product categories and is represented throughout the country in every distribution channel with the exception of doorstep delivery services. A breakdown by distribution channel of sales of impulse ice-cream produces the following picture for 1991 (million litres):
- doorstep delivery services: [...]
- traditional trade: [...]
- grocery outlets: [...]
[...]
(c) Other suppliers
(25) The list of members of the ice-cream section of the trade association of German industrial manufacturers of ice-cream contains 14 names. No other sizeable companies marketing industrial ice-cream in Germany are known to exist.
(26) Besides L-I, only SLG occupies a clearly prominent position on the market. Even the largest of the other companies have a share of less than 10 %, whether of total sales or of sales in product categories other than multipacks. These companies are, moreover, to a large extent suppliers of own brands to the retail trade and to doorstep delivery services. Oetker, L-I and, of late, Mars are the leading suppliers of multipacks.
(d) Distribution channels
- The grocery trade
(27) Almost half of all the ice-cream sold in Germany through the grocery trade is manufactured by L-I (SLG approximately 20 %, Oetker approximately 9 %, own brands approximately 11 %, all others approximately 10 %).
(28) As already indicated (recital 15), approximately 35 % of all impulse ice-cream sales are made through grocery outlets (1991: approximately 54 million litres), of which there are some 92 000. In this distribution channel, L-I's share of the volume of sales comes to approximately [...] %. In this product category L-I's position is particularly strong with a share of approximately [...] %(12) .
(29) In 1991 [...] % of L-I's impulse ice-cream sales in the grocery trade were safeguarded by granting rebates for observing the exclusivity arrangement.
- The traditional trade
(30) The traditional trade can be subdivided into the 'specialized' trade and the 'catering' trade. The specialized trade comprises a large number of different types of sales outlet: petrol stations, kiosks, cake shops, theatres, cinemas, sports venues, etc. Within the catering sector a distinction can be made between the hotel, restaurant and café sector and catering proper (canteens, hospitals, homes, hostels, etc.).
(31) Most of the ice-cream sold through the traditional trade is catering ice-cream and impulse ice-cream and, to a lesser extent, multipacks. Hardly any take-home packs are offered for sale here. Impulse ice-cream is sold through the specialized trade and the catering trade, while catering ice-cream is sold exclusively through the catering trade. The quantities of impulse ice-cream marketed in this sector came to approximately 72 million litres in 1990 and 85 million litres in 1991 (approximately 55 % of all impulse ice-cream sales).
(32) The Commission estimates on the basis of the information in its possession that, of all the sales outlets in the traditional sector, approximately 225 000 carry impulse ice-cream.
(33) In 1991 L-I had, all told, some [ 80 000] impulse ice-cream customers in the traditional trade. L-I's sales volume in this sector came to [...] million litres, of which [...] % (approximately [...] million litres) were sold through appointed wholesale dealers. L-I's share of impulse ice-cream sales in the traditional trade therefore came to approximately [ 50] % in 1991 ([...]) million litres out of a total of 85 million litres). A survey of the traditional trade (ice-cream and frozen food) has shown that, for the period 1987 to 1991, each year about [...] % of L-I's customers of the preceding year were no longer supplied the following year. However, this was mainly due to businesses closing down or to L-I discontinuing supplies. Fewer than [...] % of all customers switched each year to competitors.
(34) It is clear from the above that SLG's position vis-à-vis L-I in the sphere of the traditional trade is stronger than in that of the grocery trade. In addition, Warncke and Milchhof/Eismann are also active throughout the country and a fairly large number of companies are active in the regions. Even Warncke and Milchhof/Eismann have, however, shares of well below 10 % in this sector.
5.The distribution network of Langnese-Iglo GmbH for ice-cream
(35) Ice-cream is distributed to the grocery trade through the central warehouses of the major foodstuffs distributors and through 'brokers'. The broker's function is to supply its customers with the full range of ice-cream available on the market. Brokers typically carry several brands. There are no exclusivity arrangements with brokers.
(36) The broker's function arose from the need of the trade to be able to obtain the full range from one source. It is cheaper to obtain all of one's supplies at once from a broker than to obtain them from several suppliers.
(37) In the traditional trade, there are wholesalers acting on behalf of L-I, [...]. The share of L-I's total sales of impulse ice-cream in this sector accounted for by these wholesalers comes to about [...] %.
(38) Otherwise, sales outlets in the traditional trade are supplied direct by L-I's distribution organization. Since the beginning of 1992, however, the German Unilever group has taken account of the need on the part of certain bulk-buying customers for a grouping of supplies. Its subsidiary Van den Bergh Food Service GmbH & Co. KG has begun supplying ice-cream in this context. For the future, L-I does not rule out the possibility of independent brokers setting up in business in other areas of the traditional trade.
(39) The cost of L-I's distribution system (transport, freezer cabinets, personnel) comes to about [...] % of total turnover; in the traditional trade sector it is as high as [...] %.
6. The supply agreements
(a) Provisions of relevance to the present proceeding
(40) The standard-form contract contains an obligation on the part of L-I to supply customers with 'its current range of ice-cream products'. For his part, the customer is required to store in a freezer cabinet placed at his disposal by L-I only 'Langnese-Iglo products' and to sell 'in his outlet in the way of ice-cream or similar products only products bought direct from 'Langnese-Iglo'.
(41) The customer receives the price list valid at the time of conclusion of the agreement. The composition of the price list changes each year. For example, on the impulse ice-cream price list valid as from 1 January 1990, out of 45 articles 17 were new.
(42) The standard-form contract provides that the agreement is concluded for a 'fixed term'. This term is renewed for one year unless the agreement is terminated in writing by one of the contracting parties not later than six months before its expiry date. If a fixed term is agreed upon which, starting from the entry into force of the supply agreement, extends beyond 31 December of the following calendar year, the agreement ends even without notice after the expiry of a period of five years from the date of its entry into force.
(43) L-I reserves the right 'for profitability reasons' to terminate the agreement at one month's notice if the customer's turnover during the previous 12 month period is less than DM 950.
(b) Distribution channels and product categories concerned
(44) L-I uses the standard-form contract at the retail level in the traditional trade for all product categories marketed through this distribution channel (see recital 31). Agreements to this effect are concluded by L-I solely on the basis of this standard-form contract.
(45) Of its [...] impulse ice-cream customers in this sector, in 1991 approximately [...] had concluded a supply agreement. These customers purchased from SLG [...] million litres of impulse ice-cream.
(46) The Commission has been unable to determinate precisely the sales achieved within the framework of the supply agreements, [...].
- in 1990 approximately [...] million litres ([...] % of 37 million litres),
- in 1991 approximately [...] million litres ([...] % of 45 million litres),
of impulse ice-cream were covered by supply agreements. The sales achieved by wholesalers through supply agreements concluded on behalf of L-I (recital 37) must be added to this amount.
(c) Duration
(47) L-I subdivides supply agreements concluded on or after 1 January 1984 into three groups:
- agreements with a fixed term of five years
- agreements with a fixed term of up to two years, automatically renewable thereafter,
- agreements with a fixed term of more than two but less than five years, automatically renewable, but which terminate after five years at the latest without the need for any notice.
In the summer of 1992 L-I instructed its sales establishments to include the following statement in all new agreements: 'Agreements which are automatically renewable may not run for more than five years. After five years the agreement ends automatically.'
L-I has stated that the average fixed term of supply agreements is 2,5 years.
(d) Whether supply agreements are common in the trade
(48) The manufacturers and wholesalers active in the traditional trade sector usually conclude exclusivity agreements which are broadly similar to L-I's supply agreements. SLG has stated that approximately [...] % of its customers in this sector are bound by contract to purchase ice-cream direct from it alone.
(e) Additional agreements
(49) In conjunction with its supply agreements, L-I concludes additional agreements with certain customers. Under these agreements L-I grants the customers concerned a cost-sharing concession for certain investments. Payment is conditional on the supply agreement running for a certain length of time. In the event of premature termination of the contractual relationship, the customer undertakes to repay the amount pro rata.
(f) Wholesaler contracts
(50) The wholesalers operating on behalf of L-I in the traditional trade sector (see recital 37) conclude in respect of the L-I range exclusivity contracts, the content of which is based on that of the supply agreements. Unlike L-I's standard-form contract, these agreements make no provision as to the period of their validity.
7. Central buying agreements
(51) Within the traditional trade there are central buying agreements for service stations and cinemas.
(52) [...]
(53) [...]
(54) [...]
(55) [...]
8. Installation of freezer cabinets in retail outlets
(56)The large-scale distribution of ice-cream, which is a precondition for the industrial manufacture of this product, requires an unbroken chain of deep-freeze facilities up to the time of consumption. With regard to the traditional trade, L-I inkoves an alleged 'law of the market' which compels manufactures to install freezer cabinets at retail outlets. L-I argues that the grocery trade, on the other hand, has the financial and technical resources needed to provide adequate storage facilities for frozen products.
(57) The terms of loan either form an integral part of the supply agreements, or, in the case of retailers who have not concluded a supply agreement, are taken note of when the equipment is signed for. This display area is made available exclusively for L-I products. Especially in the grocery trade, L-I does not tolerate the equipment being used for any purpose other than its intended one, which forms the basis of the annual round of talks.
(58) Freezer cabinets installed by L-I number about [...], comprising [...] in the traditional trade and [...] in the grocery trade. In 1991 L-I made [...] freezer cabinets available under supply agreements.
(59) The size of the cabinets made available depends both on the volume of sales L-I expects the sales outlets to achieve and on the frequency of deliveries. Cabinets are filled as a rule once a week, but in some outlets even once a day or several times a day.
9. L-I's assessment of the present market position
(a) Barriers to entry
(60) The Commission has learnt of analyses carried out by L-I in connection with the entry of Mars into the market. These analyses were to provide the basis for the defensive strategies L-I judged necessary.
(61) L-I there considered that Mars' market entry into the traditional trade would be 'rendered markedly difficult' by the following factors among others:
[...]
(b) The importance of the supply agreements
(62) L-I argues that the supply agreements are conditioned by the objective needs of distribution. It is able as a result to plan in detail the continuous supplying of a large number of sales outlets and to keep distribution costs down to as low a level as possible. If every sales outlet were free to purchase at will a varying proportion of their stock from third parties, the rhythm of supplies would be seriously disturbed. The efficiency of the transport system could not be assured, and its profitability could be neither planned nor maintained. If the exclusivity were to be abolished, L-I fears that it might have to break off relations with those sales outlets whose sales of L-I products would be such that supplying them no longer made economic sense. A move away from the system of exclusivity would mean a reorientation of the traditional trade. If alternative channels of distribution were exploited. The use of manpower would be substantially reduced; it might possibly increase if manufacturers continued to deliver themselves.
10. Ice-cream in the European Community
(63)
/* Tables: see OJ */
(65) Only Unilever and Mars carry on business throughout the Community; companies in the Unilever group are the largest suppliers in the United Kingdom, Germany, Italy, Spain, the Netherlands, Belgium/Luxembourg, Denmark, Ireland and Portugal. In France the Unilever company is on a par with a Nestlé company, but behind the leading Miko/Ortiz group. The Miko/Ortiz, Artic/Beatrice, Nestlé and Schoeller groups sell ice-cream in more than one Member State.
(66) Contracts similar to the L-I supply agreements are commonly concluded in France, Italy and Denmark as well as in Germany. Manufacturers' tied freezer cabinets are commonly found at retail level throughout the Community.
(67) National content regulations for ice-cream are not harmonized in the Community. The differences that exist, especially those relating to the permitted types of fat (dairy/vegetable fat), may give rise to differences in the product and its cost.
(68) The L-I ranges offered for sale in the individual Member States differ in terms of their content and brand names. The average retail prices of certain Mars and Unilever lines sold in several Member States differ considerably.
(69) According to the information in the Commission's possession, a large part of this trade in ice-cream between Member States takes place between companies belonging to the same group.
II. LEGAL ASSESSMENT
A. ARTICLE 85 (1)
1. Restriction of competition
(70) In the supply agreements L-I is specified as the sole source of supply for the retailer. On the one hand, this clause is directed at the purchase of contract goods (exclusive purchasing obligation) and, on the other, it prohibits the purchase of competing products (prohibition on competition).
(a) Exclusive purchasing obligation
(71) The retailer undertakes to purchase contract goods only from L-I. Because of this contractual prohibition, offers of contract goods from other suppliers cannot be entertained by the retailer. Competition for the retailer between L-I and other suppliers of contract goods is precluded (restriction of inter-brand competition).
(72) Exclusive purchasing obligations also have an indirect effect on competition between suppliers of goods throughout the relevant market (inter-brand competition). They make it more difficult or impossible to set up independent distribution structures such as are necessary if new entrants are to gain access to the relevant market or if an existing market position is to be consolidated.
(b) Prohibition on competition
(73) The contractual requirement that only contract goods be stocked also implies a prohibition on selling goods which compete with contract goods (restriction of inter-brand competition).
(c) Combined effect
(74) The exclusive purchasing obligation and the prohibition on competition are complementary. The combination of both arrangements, as occurs in this case, strengthens the restrictive effects.
2. Likelihood of affecting trade between Member States
(75) Both the exclusive purchasing obligation and the prohibition on competition have as their object and effect the restriction of the retailers concerned to obtaining supplies from L-I. Suppliers of contract goods and of goods competing therewith are precluded, irrespective of their geographical location and the origin of the goods, from competing for the retailers's orders. The supply agreements therefore also tend to insulate the German market from goods from other Member States, e.g. Mars ice-cream products produced in France.
3. Appreciability
(76) The supply agreements fulfil the conditions of Article 85 (1), however, only if they affect competition and trade between Member States to an appreciable extent. Before it can be determined whether this is so, the relevant market within which the supply agreements take effect must first be defined.
(77) The contract goods covered by the exclusive purchasing obligation are 'ice-cream products' of the L-I range. Since L-I concludes supply agreements only at the retail stage of the traditional trade, the product categories that are mainly affected are those of impulse ice-cream and catering ice-cream.
(78) The subject matter of the prohibition on competition is 'ice-cream or similar products'. The prohibition on competition is relevant, however, only in so far as the products concerned compete with contract goods.
(79) It therefore needs to be determined which goods compete with impulse ice-cream and catering ice-cream of the L-I range in which geographical area, and hence are the subject of the supply and demand to which the supply agreements relate.
(a) Product market
(80) The product market includes, in principle, all goods which are perceived by the consumer, on the grounds of their characteristics, price or intended purpose, as being similar. From the consumer's point of view, a distinction can be drawn using these criteria between the following three product categories:
(81) Ice-cream which is supplied as part of catering services forms, because of this feature, a separate product market(13) . This includes essentially(14) a proportion of industrial ice-cream for bulk-buying customers and a proportion of craft-trade ice-cream.
(82) Owing to the product-specific connection between deep-freeze facilities and consumption, the place of consumption of ice-cream is of decisive importance when it comes to determining similarity for competition law purposes. Ice-cream purchased by the consumer must either be consumed immediately at the place of purchase or be stored as soon as possible in a freezer in the consumer's own home. This stock is available, however, only to satisfy need at home. Owing to the lack of availability of the relevant categories of goods to satisfy need outside the home, and in particular to satisfy short-term need aroused spontaneously outside the home, multipacks and take-home packs form a separate product market. This also includes impulse ice-cream which is delivered by doorstep delivery services for storage at home in private freezer cabinets. In the case-law of the Court of Justice it is acknowledged that even identical products can belong to different product markets if they satisfy a specific demand(15) .
(83) From the consumer's point of view, that part of industrial ice-cream for bulk-buying customers and of craft-trade ice-cream which is divided into portions for consumption at or near the point of sale without the provision of any catering services, and industrial impulse ice-cream which is not sold through doorstep delivery services, are identical.
(84) The consumer's point of view is, however, not the sole criterion. Differentiation is necessary in the present case, owing to the different competive conditions at the various stages of distribution and in the sundry coexisting distribution channels through which the products in question reach the consumer, and for the following reasons.
(85) Supply agreements are concluded between L-I and resellers at the retail stage and are directed at competition between manufacturers and/or wholesalers for access to the retail trade. They concern, therefore, the supply of and demand for ice-cream at the stage of distribution, which consists of the grocery trade and the traditional trade.
(86) The grocery trade and the traditional trade are distribution channels for every kind of industrial ice-cream. Craft-trade ice-cream, however, is not offered for sale to these branches of the retail trade, nor is there any demand for it. On a market whose supply side consists of industrial ice-cream manufacturers and wholesalers and whose demand side consists of retailers, there is no trading in craft-trade ice-cream. Consequently, the discussion below as to whether any benefit arising from the application of Commission Regulation (EEC) No 1984/83(16) should be eliminated from the supply agreements pursuant to Article 14 (b) of that Regulation must be confined to the competitive conditions prevailing at the distribution stage affected by the supply agreements. Craft-trade ice-cream which is served up for consumption at or near the point of sale does not, therefore, belong to the relevant product market to be taken into account in the present context.
(87) In relation to industrial impulse ice-cream and catering ice-cream in tubs intended for dividing up into individual portions for consumption at or near the point of sale (scooping ice-cream), the retail trade performs various marketing functions(17) which are conditioned by the different product characteristics and which result in there being only a slight overlap between channels for these two categories of article.
(88) Impulse ice-cream is purchased by the retail trade in the form in which it is resold to the consumer. It is particularly suited to consumer self-service. Catering ice-cream in tubs requires, on the other hand, a further processing operation, namely that of serving it up in individual portions. The added value created thereby is reflected in generally higher trading margins than in the case of impulse ice-cream. These differences mean that impulse ice-cream and catering ice-cream in tubs are offered for sale together to a significant extent only in the catering sector, and even there it is sold for different types of consumption (catering ice-cream in tubs in the context of catering service, impulse ice-cream sold in the street for consumption at or near the point of sale). The grocery trade and the traditional trade, which (together with doorstep delivery services) sell by far the greater part of industrial impulse ice-cream, are generally not geared to selling catering ice-cream.
(89) Impulse ice-cream and catering ice-cream in tubs are different products from the point of view of product technology too. Impulse ice-cream is an end-product which, being a mixture of ice and other ingredients, generally relies heavily on technology and know-how. Ice-cream in tubs is a primary product which acquires its characteristics only by being served up.
(90) The categories of article concerned belong, therefore, to different product markets. The product market that is relevant to the present proceeding comprises industrial impulse ice-cream sold through all distribution channels with the exception of doorstep delivery services(18) .
(91) L-I disputes this delimitation of the product market. It is of the opinion that the delimitation must be effected exclusively from the consumer's point of view. It argues that craft-trade and industrial ice-cream, multipacks and scooping ice-cream all meet the same need.
(92) The legal assessment of the supply agreements would be no different even if the delimitation of the product market were to focus exclusively on the consumer's point of view (recital 83). The producers of craft-trade ice-cream cannot be considered potential purchasers of industrial impulse ice-cream. The supply agreements do not operate in this distribution channel. On the other hand, the agreements also concern catering ice-cream, which is distributed exclusively through the traditional trade. The competition-related effects of the supply agreements on this latter category of article are therefore comparable in this sector to those on industrial impulse ice-cream.
(93) In addition, L-I here fails to take proper account of the fact that the availability of ice-cream is local and the need is spontaneous but short-lived. Even multipacks which the consumer stores at home in his freezer cabinet, along with other ice-cream in take-home packs, are not substitutable for an identical product outside the home because they are not to hand outside the home.
(b) Geographical market
(94) Although the production of industrial ice-cream has displayed a clear trend towards internationalization, distribution is everywhere organized on a national basis. National peculiarities are reflected in different market structures, assortments and prices. Consumers prefer different brands in each country. The supply agreements at issue here and analogous distribution contracts are concluded at domestic level. The requirements governing the manufacture of ice-cream are not harmonized. The relevant market here is thus the German market(19) .
(c) L-I's position on the relevant market
(95) In 1991 the relevant market had a volume of about 140 million litres (total sales of single-item ice-cream, less 10 % doorstep deliveries). L-I's sales on this market amounted to [...] million litres. In 1991, then, its market share was about ( 45] %.
(96) Of the undertakings doing business on the relevant market only SLG and Mars belong to groups of greater commercial importance than L-I, allowing for SLG's cooperation arrangement with Jacob Suchard (recital 5). The other undertakings trading here are all a great deal smaller.
(97) In the grocery and traditional trades L-I has a leading position. In the grocery trade, indeed, this is true not only of the relevant product market but for other ice-cream products and on the related frozen food market. Furthermore, Unilever is one of the leading groups in the grocery trade in Germany, and this gives undertakings in the Unilever group an advantage in their dealings with traders.
(98) The products sold by L-I on the relevant market are mainly branded goods with high recognition rates. This strengthens L-I's position, particularly in its dealings with traders, and helps to offset any power which might be brought to bear by the demand side.
(99) At all levels of distribution there are contracts protecting SLG's market position in different ways: in the traditional trade there are agreements with wholesalers (recital 37) and central buying agreements (recital 51), in the grocery trade there are special conditions agreed annually (recital 29); and throughout the relevant market there are restrictions on the use of L-I's freezer cabinets, which are used to store most of the goods sold (recital 56).
(d) The scale of coverage of L-I's exclusivity agreements on the relevant market
(100) On the relevant market in 1991, L-I sold about [...] million litres under supply agreements (recital 46) and about [...] million litres through tied wholesalers (recital 33). This was about [ 15] % of the total volume sold on the relevant market.
(101) Of the approximately 225 000 traditional sales outlets and 92 000 grocery outlets on the relevant market, L-I has tied about [...] to its own products by means of supply agreements (recital 45); this likewise amounts to about [ 15] %.
(e) The effects of the supply agreements
(102) What has to be examined here is the network of similar agreements concluded by the undertaking under consideration. If this network has no appreciable effect by itself, then the effects of similar networks of agreements concluded by other undertakings doing business on the relevant market will have to be examined too.
(103) In its Notice on Agreements of Minor Importance the Commission set out quantitative criteria giving a concrete meaning to the term 'appreciable'(20) . The Commission there stated that agreements have no appreciable effect, and are not caught by the prohibition in Article 85 (1), if the goods which are the subject of the agreement do not represent more than 5 % of the relevant market, or if the aggregate annual turnover of the participating undertakings does not exceed ECU 200 million.
(104) The supply agreements apply to about [ 15] % of sales outlets and of sales volume on the relevant market. L-I's sales far exceed the ceiling of turnover defining an agreement of minor importance. These facts alone are sufficient to establish that the supply agreements do appreciably restrict the scope for domestic and foreign competitors to establish themselves on the relevant market, or to increase their market share. In this case, then, it is unnecessary to examine the effects of the networks of similar agreements concluded by other undertakings on the relevant market.
(105) L-I refers to the principles stated by the Court of Justice in Haecht I(21) and clarified in Henninger(22) . But the findings in those cases are not pertinent here. It is only where the network of similar agreements concluded by the undertaking under consideration does not by itself have any appreciable effect that the rules developed by the Court require an examination of the cumulative effect of parallel networks. In a case of that kind the thresholds are lower - on the basis of the Court of Justice's judgment in Henninger(23) the Commission has defined lower thresholds for beer supply agreements(24) - but there are also more stringent tests of appreciability. In accordance with the same Court judgments, however, the cumulative effect of parallel networks of agreements will be considered further on, when assessing structures on the relevant market as a whole.
(106) Thus the supply agreements do appreciably restrict inter-brand competition on the relevant market, and are liable appreciably to affect trade between Member States.
(107) This assessment is valid for the supply agreements taken together. Article 85 (1) does not allow individual agreements or networks of agreements to be divided so as to remove a section from the scope of the ban on restrictive practices on the ground that it is 'inappreciable'. The same thing follows from Article 85 (2); its effect is the nullity of restrictive agreements, and for reasons of legal certainty that is not compatible with such a division, particularly where a network of agreements is involved.
B. ARTICLE 85 (3)
1. Block exemption
(108) It must now be considered whether the supply agreements have been exempted from the prohibition pursuant to Article 85 (1) by Article 1 of Regulation (EEC) No 1984/83, on exclusive purchasing agreements. If that is to be so the goods covered by the supply agreements must be 'certain goods specified in the agreement' within the meaning of the Article, and the agreement must not have been concluded for an indefinite duration (Article 3 (d) of the Regulation).
(a) Certain goods specified in the agreement
(109) The goods which are the subject of the exclusive purchasing obligation are 'ice-cream' of the current L-I range (recital 40).
(110) A product range may constitute 'goods' within the meaning of Article 1 of the Regulation (paragraph 38 of the Commission notice concerning Regulations (EEC) No 1983/83 and (EEC) No 1984/83(25) ). Ranges of goods satisfy the test of certainty if they are 'specified by brand or denomination' (paragraph 36 of the notice). The purpose of the certainty requirement is to allow an unequivocal assessment to be made under competition law, and to protect the dealer by preventing the supplier from unilaterally extending the class of goods covered by the agreement.
(111) The range covered by the agreement is clarified in the price list provided when the supply agreement is concluded. Impulse ice-cream lines bearing the Langnese brand-name are thus made the subject of the agreement here. The exclusive purchasing obligation applies to the current range, whose content changes from year to year. But the annual changes in the content of the price list affect only certain articles in the range, so that the range continues to be a clear-cut one(26) . In this respect the supply agreements satisfy Article 1 of the Regulation.
(b) Duration
(112) The supply agreements are concluded for a set duration of not more than two years, to be renewed automatically thereafter (recital (46). They are 'concluded for an indefinite duration' within the meaning of Article 3 (d) of Regulation (EEC) No 1984/83 (see paragraph 39 of the notice), because their termination is made conditional on an uncertain future event. Article 1 of the Regulation consequently does not apply.
(113) It cannot be objected that the supply agreements are concluded for a fixed period in the first place and thereafter for further periods determined by the period of notice required, so that the duration of the agreement is ultimately a definite one. If this were so then an agreement would be 'concluded for an indefinite duration' for these purposes only of it set no date for termination and made no provision for termination at the request of one of the parties. For an assessment of the agreements in terms of competition law the decisive consideration is that the duration depends on the initiative of one of the parties and consequently is not fixed.
(114) The same applies to supply agreements with a term extending beyond five years under an additional agreement (recital 46). But the supply agreements concluded for not more than five years do satisfy this condition of the block exemption.
2. Withdrawal of the benefit of the block exemption
(115) Article 14 of the Regulation provides that the Commission may withdraw the benefit of the block exemption, pursuant to Article 7 of Council Regulation No 19/65/EEC(27) , if agreements which are exempted nevertheless have effects incompatible with the conditions set out in Article 85 (3). The benefit of the block exemption may be withdrawn in particular where access by other suppliers to the different stages of distribution in a substantial part of the common market is made difficult to a significant extent. The primary question to be considered now, therefore, is whether the supply agreements satisfy the criteria pursuant to Article 85 (3). The question whether accessss to the retail trade is made difficult to a significant extent will be examined in the course of this reasoning (recital 140).
(a) Improving the distribution of goods
(116) The fifth recital of Regulation (EEC) No 1984/83 states that exclusive purchasing obligations 'lead in general to an improvement in distribution'. They 'enable the supplier to plan the sales of his good with greater precision and for a longer period, and ensure that the reseller's requirements will be met on a regular basis for the duration of the agreement ... this allows the parties to limit the risk to them of variations in market conditions and to lower distribution costs.' The eighth recital to the Regulation argues that an anti-competition clause is generally necessary in order to achieve the desired improvement in distribution because it compels the reseller to concentrate his sales efforts on the contract goods.
(117) L-I contends that the supply agreements do secure the benefits just described for L-I itself and the other parties to the agreements (recital 62). There is no obvious reason to doubt this as far as L-I is concerned. Whether it is always true of the other party to the agreement, who has to give up his commercial freedom, is an open question.
(118) The fact that agreement may be advantageous to the parties to them is not sufficient to constitute an 'improvement' for the purposes of Article 85 (3). They must rather produce appreciable objective advantages in the public interest of such a character as to compensate for the disadvantages which they cause in the field of competition(28) .
(119) A conceivable gain for the general public might be an intensification of inter-brand competition (sixth recital of Regulation (EEC) No 1984/83). It is true that the supply agreements should considerably strengthen L-I's position with respect to current and potential competitors. But a strengthening of an undertaking which is as important on the market as L-I leads not to more but to less competition, because the network of such agreements constitutes a major barrier to entry to the market (recital 128).
(120) General territorial coverage and regular supply might also be considered possible economic gains from the supply agreements. L-I fears that on grounds of cost it would have to stop supplying sales outlets with low turnovers if those turnovers were to be divided between several suppliers.
(121) The Commission does not deny that for a certain number of outlets this apprehension may be justified. There is no evidence, however, that territorial coverage and regular supply of ice-cream to consumers would be endangered thereby. Suppliers also compete in terms of the cost of their distribution systems. Any decision on L-I's part to stop supplying a sales outlet on grounds of cost would therefore be a consequence of competition, with L-I's share of turnover going to reward the successful competitor. Small local ice-cream manufacturers should be able to supply sales outlets in their immediate neighbourhood at lower cost than manufacturers with country-wide distribution networks. But even in the unlikely event that no competitor were forthcoming to take over L-I's share, the distribution fuction could be assumed by independent dealers who would obtain supplies from a variety of sources and supply all the sales outlet's requirements. The fact that there are no independent dealers of this kind at present is partly due to the exclusive purchasing obligations customary in the trade, which are to be largely prohibited in these proceedings. The opening of the market will also benefit L-I, which will in future be able to supply all or part of the requirements of the sales outlets currently tied to SLG, and by thus increasing the density of its distribution network to offset the increase in costs caused by a reduction in its turnover at individual outlets.
(122) There are no other major commercial considerations which would militate in favour of the supply agreements. The agreements consequently do not contribute to improving the distribution of goods within the meaning of Article 85 (3).
(b) Allowing consumers a fair share of the resulting benefit
(123) Nor is it evident that consumers will derive a fair share of the gains resulting from the restrictive agreements. Consumers might secure a fair share of the benefit only if the pressure of effective competition were to compel the parties to pass on the gains resulting from the restrictive agreements. But because exclusive agreements are customary in the trade, and produce similar and easily-monitored distribution arrangements, that is not the case here.
(124) The exclusive agreements also restrict the choice available to consumers. In a tied sales outlet the customer will find only one manufacturer's range of ice-cream products. Even if there is another tied sales outlet selling another manufacturer's range in the neighbourhood of the first, the alternative this represents is not equivalent to a choice available from an individual outlet. Firstly, it is in no way the rule. Secondly, a consumer who wishes to buy articles from different ranges will find it irksome to have to visit separate outlets in order to do so. He will no take trouble of that kind to satisfy a short-term impulse.
(c) Eliminating competition in respect of a substantial part of the products in question
(125) The Court of Justice has held that competition is eliminated in such a way as to prevent exemption pursuant to Article 85 (3) where there is no effective competition on the relevant market(29) . It must therefore be considered whether there are barriers to entry insulating the relevant market against competition from outside, and what competitive relationships there are inside the market.
- Barriers to access
(126) The relevant market consists of the traditional trade, accounting for about 61 % of total volume, and the grocery trade, accounting for about 39 %. The competitive structures of the two channels are substantially different.
(127) In the grocery trade L-I and SLG hold a leading position, together accounting for more than two-thirds of sales volume, and demand is concentrated; it is consequently difficult for other competitors to establish themselves in the grocery trade or to increase their market share. This is particularly true of manufacturers who do not choose to meet the demand from the trade for own-brand impulse ice-cream. Distribution through the grocery trade requires large sales volumes which few newcomers can hope to achieve. Strong concentration on the supply side also constitutes a barrier to entry, because it increases both the likelihood that established undertakings will take action against newcomers in order to defend their inherited market positions, and the effectiveness of any such action they do take(30) .
(128) In the traditional trade L-I and SLG market well over two-thirds of sales volume. Access to this channel is also to a great extent prevented by the existing exclusive agreements. [...]. The importance of the agreements as barriers to entry depends on the number of sales outlets tied to domestic manufacturers as compared with the number of outlets not so tied, on the volumes covered by these agreements as compared with the volumes sold through free sales outlets, and on the duration of the agreements(31) . It is here that the cumulative effect of all exclusive agreements together has to be considered.
(129) In the traditional trade L-I has tied the major proportion, or [...] %, of its sales outlets (recital 45). It is known that SLG has concluded exclusive supply agreements with about [...] % of its sales outlets in the traditional trade. Given the high shares held by the two undertakings in total sales by the traditional trade, and the fact that agreements of this kind are customary there, it can be assumed that the proportion of total outlets covered by tie obligations is somewhere in the same range.
(130) Of the [...] million litres of impulse ice-cream which L-I sold through this channel in 1991 (recital 24) [...] million litres, or [...] %, were covered by supply agreements (recital 46). Indeed if we add the [...] million litres which L-I supplies to the traditional trade through tied wholesalers, the proportion covered by tie agreements is about [ 50] %. There are no indications that the figures for the traditional trade as a whole differ from the figures for L-I(32) .
(131) The insulating effect of the exclusive agreements could, however, be reduced if they were concluded for short durations. The market structures described above continue to apply at any given time. But there may be competition for the conclusion of exclusive agreements. Competition of this kind can in no way replace free access to the retail trade. Exclusive agreements bring special commercial advantges to the dealer in return for the limitation of his commercial freedom(33) , and it can be seen that in practice the majority of dealers on the relevant market prefer these advantages to the exercise of commercial freedom if the range to be sold involves no commercial risk.
(132) In the competition to conclude exclusive agreements, undertakings whose marketing strategy does not provide for such agreements are placed at a disadvantage. They are compelled to take measures of this kind against their own commecial judgment. The same applies to undertakings seeking to enter the market. Dealers generally have higher expectations for the sales of established products than for the sales of products which have still to prove themselves on the market. Particularly where the exclusive obligation applies to entire ranges, resellers will have little inclination to experiment, and suppliers who might wish to offer partial ranges are prevented from competing for the conclusion of exclusive agreements.
(133) On a market in which exclusive agreements are customary, therefore, short lifetimes for such agreements will reduce their insulating effect only with respect to undertakings whose market position, organization and product range prepare them to compete for the conclusion of similar agreements. In any event agreements with a fixed duration of up to two years and an indefinite duration thereafter cannot be regarded as agreements with short lifetimes. They are at the upper end of what might be acceptable if competition were effective in other respects (Article 3 (d) of Regulation (EEC) No 1984/83).
(134) A further barrier to entry, [...], is the fragmentation of demand in the traditional trade. To run a distribution operation at reasonable cost a considerable number of customers must be secured in a geographically concentrated area which can be supplied from regional warehouses and centres. Because there are no independent middlemen - given the exclusive obligations customary in the trade, there cannot be - a supplier who wishes to establish himself in this branch of the relevant market, or to expand the area covered by an existing operation, within a reasonable time, must collaborate with or take over an existing manufacturer. If a competitor wishes to achieve an appreciable share of the market as a whole within the foreseeable future, only L-I and SLG are available for the purpose. Their market positions are so strong that it is not possible to compete effectively with them by cooperation with any other undertaking. This is true even of enterprises as strong as Jacobs Suchard and Mars. Cooperation of this kind would in any event serve to perpetuate the existing market structures.
(135) An exhaustive account of all the barriers to entry to the relevant market will not be attempted here (other examples would be the technology and know-how needed for the production of impulse ice-cream and the consumer preferences which have built up after many years of experience and advertising); but special mention should be made of the insulating effect on the relevant market as a whole of the restrictions on the use of the freezer cabinets which are everywhere supplied to retailers by the established manufacturers (recital 55).
(136) Clearly, retailers are allowed the use of these freezer cabinets, which are needed for the sale of impulse ice-cream, without having to bear the cost, or at any rate the entire cost, so that by giving up their commercial freedom they avoid having to make the corresponding investments themselves. Even competitors who are ready and willing to follow this customary trade practice are restricted in the competition they can offer. They must persuade dealers either to replace their freezer cabinet or to install further cabinets.
(137) A trader who replaces his freezer cabinet must give up selling the products of his current supplier. He will not do so if the current supplier, like L-I, is strong on the market, and the competitor is less well known or offers only a partial range which does not provide a full alternative to the earlier one.
(138) The possibility of installing further cabinets is limited: there may be no space available, or what space there is may be used for commercial purposes other than the sale of ice-cream. In the traditional trade there will be many sales outlets with no space for further cabinets. It might be thought that in other shops space could surely be found somewhere for a freezer cabinet, even if only a small one, as a general rule; but in fact this view seriously misjudges the constraints under which grocery retailing in particular operates. Firstly, impulse ice-cream cannot be put on offer just 'somewhere'; it is intended for immediate consumption, and must be displayed very close to the check-out desk(34) . And every section of the total surface of a retail store generally has a specific function. The existing freezer cabinets are already geared to the outlet's total requirements. Nor can it generally be expected that sales of ice-cream will increase substantially if further cabinets are installed. The effort and space devoted to a new cabinet is lost to other commercial purposes, without securing additional turnover.
(139) The only circumstance suggesting some degree of openess in the relevant market is its continuing expansion. In so far as this increases turnover at tied sales outlets, it does not help to facilitate market access. The situation is different where new sales outlets open. But the fact that exclusive agreements are customary in the trade means that competition for the new outlets, like competition for existing outlets which become free, is directed only at the conclusion of new exclusive agreements. The opening-up of the new Laender is a practical example of this kind of development. In such circumstances the expansion of the relevant market produces insufficient scope for access from outside or growth inside the market, particularly as far as new competitors and suppliers of incomplete ranges are concerned.
(140) Examination of the exclusive agreements taken together, and of the other economic and legal considerations which have just been discussed, shows that access to the retail level of the relevant market, and thus market entry itself, are rendered very difficult. This alone is sufficient reason to withdraw the benefit of the block exemption (recital 115). The supply agreements contribute in no small measure to the insulation of this market. This assessment is confirmed by the observation that it is clearly a long time since any new supplier succeeded in changing the structure of the relevant market to his advantage.
(141) The conclusion would be the same if craft-trade ice-cream and industrial ice-cream for bulk-buying customers were to be included in the product market (recital 83).
- As far as can be seen, there is no major restriction in the way of persons wishing to enter the market as craft-trade ice-cream producers, but this is quite insignificant in terms of the structure of the market. Manufacturers of industrial impulse ice-cream cannot use producers of craft-trade ice-cream as a vehicle for markt entry.
- In the case of industrial ice-cream for bulk-buying customers, the distribution arrangement customary in the trade is the exclusive agreement, as with impulse ice-cream (recital 44). It has to be borne in mind here that for lines of this kind the traditional trade is the only distribution channel available. In this area, then, the effects of the supply agreements on competition are comparable for all lines.
- Lastly, it would be unreasonable to reply to a manufacturer of industrial impulse ice-cream that market entry in that line was impossible but that there would be less difficulty in marketing other lines.
- Competition inside the relevant market
(142) The barriers to entry to the relevant market just described also prevent any substantial shift in market shares inside the market.
(143) L-I takes the view, however, that there is effective competition at least between itself an SLG.
(144) This is certainly not true of the grocery trade, given L-I's position there (recital 27). Not only has L-I a high share of the volume of sales through this distribution channel, it is commercially strong, it has a major position on the related frozen food market, and it belongs to the Unilever group, which is one of the principal suppliers to the grocery trade on the same geographical market.
(145) As far as the traditional trade is concerned, the competition which exists between SLG and L-I is to a great extent competition for the conclusion of exclusive agreements, which then exclude competition of any other kind for the duration of the agreement.
(146) In general it can be presumed that where there is a duopolistic market structure such as that obeserved on the relevant market here, competition between the duopolists tends to be limited. Any aggressive conduct on the part of either undertaking will very likely produce a corresponding reaction on the part of the other, whose market potential is comparable. The conviction will therefore arise that the maximization of the profits of both will be best served if they refrain from competing with one another.
(147) Thus competition is eliminated in such a way as to prevent exemption pursuant to Article 85 (3), because there is no effective competition on the relevant market. The supply agreements have effects which fail to satisfy the tests of Article 85 (3). In particular, access by other suppliers to the retail stage of distribution is made difficult to a significant extent.
(148) It remains to be considered whether the supply agreements can be divided in such a way that the negative effects just discussed can be attributed to a part of them only, while Article 85 (3) can apply to the rest. It need not be decided here whether in other economic and legal contexts such a division might be necessary. Given L-I's strong market position, which is protected not only by the supply agreements but by various barriers to entry and other agreements too (recital 99), the agreements as a whole fail to satisfy the tests of Article 85 (3). The exclusive agreements concluded with wholesalers who account for [...] million litres out of SLG's sales of impulse ice-cream through the traditional trade (recital 37) are not the subject of the operative part of the present decision, which relates only to the exclusive agreements which L-I concludes with retail traders.
C. PROTECTION OF LEGITIMATE EXPECTATIONS
(149) L-I takes the view that the Commission is bound by the assessment set out in its competent department's administrative letter of 20 September 1985 to SLG. L-I recognizes that that letter reserved the Commission's right to return to the matter if there were any substantial change in the legal or factual circumstances, but argues that that condition is not met: the main market data have remained unchanged since notification in 1985.
(150) As a general observation it should be pointed out that it is the addressee, if anyone, who can invoke an enforceable interest in support of a claim that the assessment made in a letter of that kind should be allowed to stand.
(151) Despite L-S's contention, the factual circumstances have changed in the meantime. The very entry of Mars and Jacobs Suchard are facts which would justify a review of the earlier assessment. A review is likewise necessary because it is only in this new context that it has become clear how closed the market is. The Commission is therefore not prevented from making an assessment of the supply agreements which differs from that in the administrative letter of 20 September 1985.
D. ARTICLE 3 OF REGULATION No 17
(152) In response to the application by Mars, therefore, the Commission must find pursuant to Article 3 (1) of Regulation No 17 that the supply agreements constitute an infringement of Article 85.
(153) The supply agreements are still in force. L-I must therefore be required to refrain from invoking its contractual rights in respect of the exclusivity of sales outlets, and to inform the other parties to the contracts accordingly. In view of the particular circumstances of the case, however, L-I should be given an opportunity to apply to the Court of First Instance of the European Communities for a judicial review of this Decision. This measure should consequently take effect only three months after notification of the Decision.
(154) The order not to invoke the supply agreements would serve no purpose if L-I were permitted immediately to replace the current agreements by new ones. L-I must therefore be prohibited from concluding fresh agreements of this kind for a period sufficient to allow a substantial change in market structures. The Commission is of the opinion that, given the rigid structures of the relevant market as well as the barriers to entry to that market which are outlined above, a period of five years is appropriate. If the market structures change substantially before the expiry of that period L-I is free to apply for an early lifting of the prohibition,
HAS ADOPTED THIS DECISION:
Article 1
The agreements concluded by Lagnese-Iglo GmbH requiring retailers established in Germany to purchase single-item ice-cream(35) for resale only from that undertaking infringe Article 85 (1) of the EEC Treaty.
Article 2
In so far as the agreements referred to in Article 1 qualify for the block exemption declared by Council Regulation (EEC) No 1984/83, the benefit of that block exemption is hereby withdrawn.
Article 3
Lagnese-Iglo GmbH is hereby required within three months of notification of this Decision to inform dealers with whom it has current agreements of the kind referred to in Article 1 of the full wording of Articles 1 and 2, and to notify them that the agreements in question are void.
Article 4
Lagnese-Iglo GmbH may not conclude agreements of the kind referred to in Article 1 until after 31 December 1997.
Article 5
This Decision is addressed to:
Langnese-Iglo GmbH
Dammtorwall 15
D-W-2000 Hamburg 36.
Done at Brussels, 23 December 1992.