61975C0026
OPINION OF MR ADVOCATE-GENERAL MAYRAS
DELIVERED ON 29 OCTOBER 1975 (
1
)
Mr President,
Members of the Court,
I — Facts
Under the Royal Decree of 15 March 1968, all motor vehicles — whether produced or assembled in Belgium or imported into that country — must satisfy certain technical requirements fixed by this regulation in order to be used on the public highway.
It is for the Minister for Transport or his representative to issue an approval for each type of vehicle.
It is for the manufacturer or, where he is established abroad, for his sole authorized agent in Belgium, to check that every new vehicle of an approved type conforms to the specifications required for such approval.
This technical inspection is authenticated by issuing a certificate of conformity and affixing a typeshield on to such vehicle.
Until 15 March 1973 the inspection of used vehicles was undertaken by the State testing-stations.
Following an instruction from the Minister for Transport the official departments have, since this date, ceased issuing certificates of conformity in respect of imported vehicles where they have been registered abroad for less than six months.
It is, therefore, the manufacturer's authorized agent in Belgium who undertakes to inspect such vehicles, as well as new vehicles.
These circumstances apply to General Motors Continental NV, the registered office of which is at Antwerp. This undertaking is one of the wholly-owned subsidiaries for the three Benelux countries of the American company General Motors Corporation.
For the purposes of the royal decree of 15 March 1968, it was appointed the sole authorized agent in Belgium of the motor-car manufacturers belonging to the General Motors Group and, in particular, of Adam Opel AG, which is itself a wholly-owned subsidiary of the American company.
The Belgian firm is responsible for obtaining approval for all types of vehicles produced by the General Motors Group, which are assembled in or imported into Belgium. As regards motor cars made by Opel and Vauxhall which are manufactured in Europe, it applies for general approval.
For vehicles of the American type it generally applies for low-volume type approval, valid for up to 10 units per year.
It carries out approval procedures on all the vehicles of these different types sold by its authorized dealers.
However, in its capacity as sole authorized agent it also issues certificates of conformity in respect of General Motors' vehicles which are not imported through its standard distribution system but by individuals or dealers who are not its approved agents, where such vehicles are new or, since 15 March 1973, have been registered abroad for less than six months.
At the period in question the inspection formalities concerning Opel vehicles which are assembled in Belgium or imported new by General Motors Continental were carried out by the sales department of that company ‘as a courtesy and at no expense to the consumer’.
On the other hand, as regards the vehicles which formed the subject of parallel imports, the costs in question were obviously invoiced to the importers.
During the period from 15 March to 13 July 1973 General Motors Continental required payment of a sum of BF 5000 plus BF 900 VAT for the inspection and certification expenses for these cars.
This sum corresponded to the rate established on the basis of the cost involved in the approval and inspection formalities for vehicles of the American type imported into Belgium. It is undeniable that the cost is considerably lower in the case of vehicles manufactured in Europe.
This rate was nevertheless applied to five cases of parallel imports of new Opel vehicles which took place after 15 March 1973.
Following a complaint from certain of the owners of these vehicles GMC decided, as from 1 January 1973, to reduce to BF 1000 (excluding tax) the inspection costs of the European vehicles which are imported in this way, at least as regards certain categories of owners, such as members of the Diplomatic Corps and officials of international organizations.
Subsequently, after carrying out a study of the real level of the inspection costs, the rate applicable to these vehicles was fixed at BF 1250 plus BF 187, with effect from 1 August 1973.
At about the same period, GMC refunded the excess amount to the owners of the five Opel vehicles who had been obliged to pay the previous rate.
However, as the attention of the Commission of the European Economic Communities had been drawn to these facts, an inquiry was ordered to be held, of which GMC was informed on 17 August by an official from the Directorate for Competition.
Approximately one year later, on 26 July 1974, the Commission on its own initiative set in motion against this undertaking the procedure provided for by Regulation No 17/62 of Council implementing Articles 85 and 86 of the Treaty.
After the grounds of complaint set out by the Commission had been communicated to the undertaking concerned, which had given its reply, the decision which forms the subject of the present action was adopted on 19 December 1974.
Article 1 of this decision finds that between 15 March and 31 July 1973, General Motors Continental intentionally infringed Article 86 of the Treaty by charging a price that was abusive for the issue of certificates and shields which it was required to issue under Belgian law after inspecting Opel vehicles to check their conformity with the generally approved type and after determining the identification of such vehicles.
Under Article 2 of this decision, a fine of 100000 u.a. that is, BF 5000000, is imposed on General Motors Continental in respect of the above infringement.
The applicant in the first place asks the Court to annul the decision, and, alternatively, to discharge it from payment of the fine.
II — Market to be taken into consideration and existence of a dominant position
In support of its principle conclusions General Motors Continental puts forward three submissions based on the infringement of Article 86.
The first of these submissions deals with the very existence of the dominant position which, according to the Commission, the applicant: ‘has… with regard to application for general type approval and the issue of certificates of conformity and type-shields acquired in Belgium, both for new Opel vehicles and those registered abroad for no longer than six months in a substantial part of the common market’.
The applicant contests the claim that it holds a dominant position within the meaning of Article 86 of the Treaty. It explains its submissions by criticizing the definition of the market in question adopted by the Commission which is too narrow and artificial.
The activity of the department which consists in obtaining administrative approval for a specific type of vehicle and of carrying out approval procedures for vehicles of this type before they are used on the public highway does not in itself constitute a market. Like the activities involved in the guaranteeing of new vehicles or the after-sales maintenance service, the technical inspection imposed by the government is ancillary to the sale of motor cars. It is, therefore, the entire market in new car sales in Belgium which should be considered, on which it is clear that, in the light of competition from a large number of makes, General Motors Continental does not hold a dominant position.
I find it impossible to accept the applicant's reasoning on this point. Of course, I do not dispute that the precise definition of the ‘market in question’ is of fundamental importance for the purpose of assessing the existence of a dominant position. The requirement for such a definition is shown by your case-law and marked by the Sirena case (Judgment of 18 February 1971, Case 40/70 [1971] ECR), the Deutsche Grammophon case (Judgment of 8 June 1971, Case 78/70, [1971] ECR), the Commercial Solvents case (Judgment of 6 March 1974, Joined Cases 6 and 7/73 [1974] ECR 249) and in particular by the Judgment of 21 February 1973, Continental Can (Case 6/72 [1973] ECR 246).
In this respect it is true that the after-sales services, that is, the guarantee and maintenance of new vehicles, are only activities ancillary to the sale of such vehicles.
The conditions in which the manufacturers and their dealers undertake to perform such services constitute not unimportant factors in determining the buyer's choice. The guarantee offered to the buyer of a new car and the undertaking on the part of the approved dealers to carry out all the necessary maintenance and repairs, generally at rates which are authorized by the manufacturer, form part of the conditions of sale and constitute one of the parameters of ‘inter-brand’ competition on the overall market in motor cars of different makes.
On the other hand, the review of the technical standards fixed by the national authority which must be carried out before any vehicle is put on to the public highway, satisfies an obligation which is imposed by the government. Whatever the make of vehicle, the buyer must always be assured that it satisfies the requirement laid down by the rules in force.
In the end it is unimportant to him whether the inspection has been carried out by the government, the manufacturer or authorized agent. In principle, therefore, this factor does not affect competition on the motor car sales market taken as a whole.
It could therefore be doubted whether in themselves such approval procedures constitute a market. They clearly do not where the inspection is carried out by the administration. The concept of the ‘market’ should also be set aside where, while entrusting the obligation to inspect to the manufacturers or their authorized agents, the State compels them to apply a rate which is fixed on the basis of the real cost of the inspection procedures.
On the other hand, does the same apply where the undertakings responsible for this inspection are free to fix the rates for such inspections on the basis of commercial criteria and to profit therefrom?
At first sight, hesitation over this question is justified if emphasis is laid on the nature of the approval procedure as an obligation towards the public which is imposed by the State for a purpose which is in the general interest; road safety.
Therefore, should it not be concluded that the undertakings which are under this obligation but which thereby have the sole right to carry out this inspection are among those referred to in Article 90 (1) of the Treaty?
If this is accepted, that is, to use the term employed by this article, that the State has granted these undertakings ‘special or exclusive rights’ their behaviour nevertheless remains, in appropriate cases, subject to the rules on competition set out in Article 85 et seq. of the Treaty.
This is the precise area in which, in this instance, the question arises of the dominant position which is said to be held by General Motors Continental.
As sole authorized agent, this company had the monopoly of all technical approval procedures in respect of all motor cars produced in Belgium by the General Motors Group used on the public highway, whether new or previously registered abroad for less than six months. This exclusive right is not matched by any duty to apply a particular rate imposed by the State as regards the price charged to the buyers of the vehicles. In effect each manufacturer or authorized agent is free to fix the level of payment for the service which corresponds to the approval procedure. It is in this way that the applicant company acted.
It is therefore on this market in services that the pricing policy which is adopted by the undertakings may affect competition not, that is, the ‘inter-brand’ competition between different makes of motor cars but the ‘intra-brand’ competition, which is competition on the market for the sale of vehicles produced by the manufacturer — or the manufacturers of the same group — represented by the sole authorized agent.
By the combined effect, first, of the Belgian rules which confer on the manufacturers or their sole authorized agents the exclusive right to carry out approval procedures, and secondly, of the organization of the European subsidiaries of General Motors Corporation and, finally, of the so-called selective distribution system, it is clear that potential competition exists between Opel (GM) vehicles on the basis of this price factor constituted by the costs attaching to the approval formalities.
The applicant accepts that in the system of selective and no longer exclusive distribution, ‘intra-brand’ competition must be respected and that it is even a condition for granting an exemption under Article 85 (3).
When, on 30 December 1971, the applicant notified to the Commission its contracts as a ‘GM. vehicle dealer’, it in fact specified that ‘all the distributors who form part of the network must not only compete with distributors selling other makes of vehicles, but also with distributors selling the same make of vehicle… the (sales concession and vehicle service) agreement clearly shows that this purpose (to satisfy_the customer) can only be achieved through competition, including competition between distributors of the same make’.
Furthermore, it is on condition of the maintenance of competition within a make that the Commission authorized on 13 December 1974 the distribution agreements concluded by another German manufacturer, the ‘Bayerische Motoren-Werke’ company. In its decision we find:
‘The standard BMW agreements do not empower the undertakings which are parties thereto to eliminate competition in respect of a substantial number of the products in question.
First, they only concern BMW vehicles which are in competition with a certain number of other vehicles throughout the common market.
Secondly, it has already been shown that competition between BMW products and between such products and those in competition therewith, exists within the BMW distribution network …’
It is in fact clear, as you recalled in Etablissements Consten SARL and Grundig-Verkaufs-GmbH v Commission of the European Economic Community (Judgment of 13 July 1966, Joined Cases 56 and 58/74, ECR [1966] 324) that ‘Although competition between producers is generally more noticeable than that between distributors of products of the same kind, it does not thereby follow that an agreement tending to restrict the latter kind of competition should escape the prohibition of Article 85 (1) merely because it might increase the former.’
I believe that these considerations also apply within the sphere of application of Article 86.
Although it is possible to accept the Commission's submission that the price fixed for the approval procedure of imported vehicles does not affect competition between the various makes of motor vehicles offered for sale in Belgium, nevertheless by requiring, in respect of parallel imports of vehicles of one make a rate for the approval procedure which is considerably higher than that applied to vehicles of the same make which are produced or assembled in the country or imported through its own network of approved dealers, a sole authorized agent may distort competition at the level of the distributors, favour its own distribution network and slow down parallel imports from the other Member States.
Therefore, at his stage of my consideration of the case, I am inclined to accept that General Motors Continental, the sole authorized agent in Belgium for the manufacturers of the General Motors Group and thereby alone entitled to carry out the approval procedures laid down by the national regulations for the issue of certificates of conformity for the vehicles produced by this Group, holds, as a result of this fact alone, a dominant position on the market in services in a substantial part of the common market.
III — Abuse of a dominant position
Has the applicant abused this dominant position? It contests this view by maintaining, first, that neither the object nor the effect of the activities complained of is to affect competition adversely.
The applicant makes this submission on the basis of an interpretation of both Articles 85 and 86, which seek to maintain effective competition within the Community, although by different means.
It therefore maintains that if, under Article 85 (1), an agreement between undertakings is only covered by the prohibition contained in that article on the condition, inter alia, that it has as its ‘object or effect the prevention, restriction or distortion of competition within the common market’, that same condition must be required in the application of Article 86. Therefore, the activities of an undertaking holding a dominant position which have neither this object nor this effect does not constitute an infringement.
This argument rests, Members of the Court, upon an erroneous interpretation of Article 86. The concept of the dominant position in itself implies a certain restriction of competition which the authors of the Treaty did not go so far as to prohibit as such. They were content to penalize its abuse, the effect of which is necessarily to narrow the field of competition in the market to an even greater degree, and even to eliminate competition completely.
The condition expressly laid down by Article 85 as regards agreements or concerted practices is, therefore, by implication but certainly inherent in the concept of abuse of a dominant position. It is therefore sufficient to consider whether certain conduct can constitute such an abuse.
In this respect the second paragraph of Article 86 gives a list, which is not exhaustive, of the abusive practices which fall de piano within the ambit of the prohibition set out by the Treaty. The activities for which complaint is made to General Motors Continental correspond precisely to one of the examples set out in this provision under (a), which refers to an undertaking ‘directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.’
The Commission claims that the applicant was carrying out such a practice by charging ‘a price that was abusive’ and, therefore, inequitable in return for the approval procedure which it carried out on certain Opel vehicles imported into Belgium.
It cannot be contested that the rate applied by General Motors Continental during the period from 15 March to 31 July 1973 for the issue of certificates of conformity in respect of these motor vehicles of European manufacturer was clearly abusive. The applicant has itself accepted this since, after studying the real cost of these procedures, it brought into force as from 1 August 1973 a new rate which was one quarter of the old rate. It seems clear to me, therefore, that to require BF 5000, excluding tax, as remuneration for approval formalities on Opel vehicles manufactured in Germany amounts to the imposition of an unfair price within the meaning of subparagraph (a) of the second paragraph of Article 86.
This finding is sufficient to establish the existence of an infringement. Where an undertaking enjoys a monopoly — even if the origin of this situation is to be found in a delegation by the State of a power vested in the government — its dominant position is abused by the mere fact that the undertaking imposes unfair prices on trading conditions. This emeges from your judgments of 11 March 1974(BRTv SV Sebam and NV Fonior, Case 127/73, ECR [1974] 317) and 30 April 1974(Saccbi, Case 155/73 [1974] 430).
In these circumstances it is entirely unnecessary to consider whether the actual object or effect of the applicant's activities was to affect competition within the common market adversely.
Having established this, it is to satisfy the applicant that I shall examine the argument which it seeks to base on the fact that since, at the time in question, the price of Opel cars excluding tax was appreciably lower in Belgium than in the Federal Republic of Germany, the cost of the approval procedure was irrelevant In any case, neither the Belgian dealers nor private customers had any interest in buying Opel cars in Germany rather than in Belgium.
Let me raise a serious doubt on this point.
In fact four years earlier, the Opel company had recorded a sudden and considerable increase in sales in the Netherlands of new Opel vehicles delivered to its approved German dealers and, by a circular dated 7 February 1969, it drew the attention of its dealers to the possible consequences of this situation. It reminded these dealers that ‘such exports seriously endanger the existence of Opel dealers abroad and that, by way of retaliatory measures, such vehicles delivered by approved Opel dealers to non-approved dealers abroad would be re-purchased and offered for sale in the Federal Republic of Germany at, as at present occurs in the Netherlands, prices which are considerably lower than the domestic prices imposed. Such a re-importation into Germany of vehicles exported by approved Opel dealers would gravely imperil the retail price maintanance system. The consequences of such a development would be incalculable’.
According to the Adam Opel company this circular subsequently formed the subject of an exchange of views between various members of the Opel sales department and a certain number of approved Opel dealers in the Federal Republic of Germany. Discussion also took place on this subject between Opel and General Motors Continental of Antwerp, the ‘associated company qualified for the distribution of Opel vehicles through the network of its approved sellers in the Benelux countries’ in particular, therefore, in Belgium and the Netherlands. Nevertheless, many of the German distributors continued to export and Opel adds that they did not suffer any retaliatory measures.
However, on 29 September 1970, the same day on which it notified these agreements to the Commission, Opel reminded its German ‘area managers’ to refrain immediately from recommending in any way to the approved dealers that they should stop exporting. At the same time it ‘confirmed’ to these approved dealers that they are not only entitled to sell in their sales and assistance areas, but also to deliver in other areas.
It is true that this correspondence relates to an earlier period and concerns parallel imports into the Netherlands. However, it is possible that in Belgium in 1973 similar imports could still have been attractive.
Moreover, the applicant accepts that the number of requests for certificates of conformity had increased considerably after 15 March 1973 and it was this fact which led it to re-open the study of its ‘approval procedure system, including the costs involved therein’.
As regards the question whether the abuse was of such a nature as to affect trade between Member States, I consider that there can be no doubt as to the reply. The vehicles for the checking of which an excessive price was charged were parallel imports from Germany. This fact alone shows that intra-Community trade was at issue. Moreover, the condition that trade between the Member States must be affected is only a criterion which goes to jurisdiction; its purpose is to define the respective scope of national law and Community law in matters of competition.
Finally, the finding that a dominant position has been abused can only be based on purely objective criteria. It follows from this that the arguments based by the applicant on the special circumstances which explained why the rate in force on 15 March 1973 for the approval procedures of vehicles manufactured in the United States was applied in error to the approval of vehicles which were manufactured in Europe and which were the subject of parallel imports into Belgium are irrelevant as regards the legal existence of the infringement.
The same applies to the argument based on the repayment by the applicant a short time later of sums wrongly charged to the five owners of Opel cars which had been imported in this way.
On the other hand, these considerations are of decisive importance where it is necessary to consider whether the Commission was justified in imposing on General Motors Continental a fine of 100000 u.a.
IV — The legality of the decision to the extent that it imposes a fine on General Motors Continental
Under Article 15 (2) of Regulation No 17 of the Council, the Commission is entitled to impose fines on undertakings which, intentionally or negligently, have infringed Article 85 (1) or Article 86 of the Treaty. The contested decision finds that General Motors Continental abused its dominant position intentionally and not only through negligence.
Although in the strict sense of the term the fines prescribed by Regulation No 17 are not in the nature of criminal-law sanctions, I do not consider it possible, in interpreting the term ‘intentionally’, to disregard the concepts which are commonly accepted in the penal legislation of the Member States.
The use of this term necessarily implies that the author of the infringement has acted intentionally with the will to-commit an act which he knew was unlawful and prohibited by the Treaty and conscious of the unlawful consequences of his behaviour.
The concept of international conduct contrasts with mere negligence in the same way as wrongful acts committed intentionally contrast with those committed negligently.
Thus, the first concept can only be applied where the consequences of the action which gives rise to a claim for damages are intended, or are at least accepted as necessary by the undertaking against which the action is brought.
On the other hand the concept of negligence must be applied where the author of the infringement, although acting without any intention to perform an unlawful act, has not foreseen the consequences of his action in circumstances where a person who is normally informed and sufficiently attentive could not have failed to foresee them.
How must the behaviour of General Motors Continental be described in this instance?
It must first of all be pointed out that the rate applied in five cases of parallel imports of Opel vehicles had not been established intentionally in order to distort competition and knowingly to handicap these imports in relation to those made directly by the applicant or by its approved agents.
This rate, which was established on 1 September 1972, only concerned General Motors vehicles of American manufacture.
Before 15 March 1973 it had never been applied to vehicles manufactured in Europe and in particular never to Opel vehicles. In its reply to the statement of complaints the applicant company stated, without being contradicted, that between 1 September 1972 and 15 March 1973 no owner of this make of car had requested the issue of the certificate of conformity and typeshield, most probably because at that period the approval procedure was still normally carried out by the State testing-stations.
It is only after these stations ceased, on the instructions of the Minister for Transport, to carry out this task in respect of vehicles registered abroad for less than six months that the applicant received requests for certificates of conformity for vehicles of European manufacture imported by private customers.
As at this time it had failed to foresee that Opel cars which were the subject of parallel imports would be submitted to it for approval and as it had also failed to carry out in advance a proper study of the real costs involved in such procedures the department responsible for them applied, no doubt wrongly but as a result of what must merely be regarded as an error, the rate which was then in force.
It is difficult to find in this behaviour an intention to infringe Article 86.
This view can only be strengthened by the manner in which, after becoming aware of this error when informed of the complaints of certain vehicle owners adversely affected by the application of a rate which was regarded as excessive, the applicant company took action, first, to fix for the future a new rate which was adapted to the real cost of the approval procedures necessary for vehicles of European manufacture and, secondly, made good the damage suffered by the owners in question.
In fact, it took the decision to reduce provisionally with effect from 1 June to BF 1000 the amount required for the approval procedures necessary for these cars, at least where they belonged to members of the diplomatic corps or to officials of international organizations. It must be understood that this did not constitute a general measure, but it at least sought to settle the few disputed cases which had arisen.
At the same time — and before the Commission had informed the applicant of its decision to hold an inquiry — the results of the technical and financial study of the cost of the approval procedure which was undertaken without delay enabled General Motors to bring into force, as from 1 August 1973, the rate of BF 1250, excluding tax, applicable to all European-manufactured vehicles of the General Motors Group.
However, in the five cases in which the earlier rate had been wrongly charged repayments were made as from the beginning of August.
Without altering the fact that the conditions necessary for an infringement, albeit a minor one, of Article 86 to exist had been satisfied by the initial charging of unduly excessive sums, the facts to which I have just referred lead me to maintain that this infringement was not international.
In spite of this might the Court none the less take the view that, although no intention to infringe this Article has been demonstrated, the applicant acted negligently and that therefore the fine imposed is — at least in principle — justified under Article 15 (2) of Regulation No 17?
The Commission requests you to do so; I do not consider that the Court has the power to change the grounds of the decision.
No doubt in the context of actions over the penalties prescribed by this provision in relation to infringements of the rules on competition the Court has unlimited jurisdiction which enables it, on the basis of the gravity and duration of the infringement of Article 86, to consider in particular whether or not the amount of the fine imposed by the Commission is justified. The Court is also entitled, inter alia, to take mitigating circumstances into account and to reduce the amount of the pecuniary penalty. On the other hand, it may be that, since the Court takes a more serious view of the matter than the Commission, it may be led to increase this penalty.
However, before arriving at such a view the Court is first and foremost judge of the legality of the decision adopted by the Commission. Where, as in the present case, the Commission has expressly adopted, as the legal basis of the fine imposed, an infringement which it maintains was intentional, the Court must, before it even considers the amount of the fine appropriate to the seriousness of the unlawful conduct, decide upon the legal category into which that conduct falls. If the Court concludes that the infringement was not intentional it must for that reason find that the ground for the decision is erroneous and must draw the necessary conclusion, which is to order the annulment of the decision in so far as it has imposed a fine. However, in my opinion the Court cannot go further and substitute the quality of negligence for that of intention on which the Commission based its decision.
If the Court should not share this view and considers that it is entitled to make a finding of negligence against the applicant, it would then be necessary to consider the amount of the fine in the light of this assessment, which differs from that made by the Commission. In that case the infringement ought to be regarded as much less serious than the Commission believed it to be. The circumstances to which I have referred in order to find against the existence of ‘intention’ would at least favour a substantial reduction in the amount of the fine, which should only constitute a nominal penalty.
However, I only suggest this to you as an alternative solution.
I am therefore of the opinion that
1.
The contested decision should be annulled to the extent to which it imposes on General Motors Continental a fine based upon an intentional infringement;
2.
that the remaining conclusions in the application should be rejected;
3.
that each party should bear its own costs.
(
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