61983C0243
OPINION OF ADVOCATE GENERAL
SIR GORDON SLYNN
delivered on 13 February 1985
My Lords,
This case comes to the Court by way of a reference for a preliminary ruling under Article 177 of the EEC Treaty dated 21 October 1983, by the Vice-President of the Tribunal de commerce, Brussels, in summary proceedings for an injunction in an action pending before the Tribunal.
The principal facts found in the reference are as follows.
The plaintiff, Binon & Cie SA (Binon) carries on a business in Charleroi selling books, stationery, office equipment and educational toys. Until 29 January 1982 it held a franchise from Club SA, and since that date it has carried on its business under its own name without a franchise.
The defendant, Agences et messageries de la presse SA (AMP) is a public limited company with a share capital of BFR 300 million. 48.841% of its share capital is owned by Hachette SA, a French company. AMP and Hachette own respectively 9.35% and 24.55% of the share capital of a Belgian retailer of newspapers and periodicals ‘Lecture générale SA’, and AMP owns 98.03% of the shares in SA AMP Transports which is apparently a carrier.
AMP distributes within Belgium newspapers and periodicals. The Vice-President accepted that, leaving aside subscriptions, AMP or its affiliates distributed something like 70% of Belgian newspapers and periodicals, having almost a monopoly of the distribution of such foreign publications. These figures had been given in an opinion of the Belgian Conseil du contentieux économique (Council for economic disputes) of 10 May 1983.
Under an agreement dated 12 March 1976, AMP and publishers of newspapers and periodicals adopted a selective distribution system. Anyone who wished to open a retail outlet was required to apply to a regional consultative committee, consisting of representatives of the various sections of the industry, including AMP. Most publishers adopted the opinion of that committee as to whether approval should be granted for a new outlet and refused to supply anyone not so approved. The Tribunal de commerce of Brussels declared that arrangement as being contrary to the competition rules of both Belgian and Community law by judgments given on 8 July 1982{Maria Danken v Drukkerij Het Volk & Consorts) and on 15 November 1982 (Club SA v AMP & Consorts, Journal des tribunaux, 5 February 1983, p. 100), the latter decision being confirmed as to its result by the Brussels Court of Appeal on 20 December 1983, though it seems not so much in regard to the structure as to the application of the system established.
The arrangement was also reviewed by the Conseil in its report of 10 May 1983 at the request of Club SA. The Conseil found that AMP and the publishers represented on the regional consultative committees abused the dominant economic power which they possessed in respect of the distribution and retailing of newspapers and periodicals. The Council recommended that: (1) the maintenance of the system introduced after the agreement of 12 March 1976 should be prohibited; (2) if a selective distribution system was introduced, (a) it should not be such as to prevent or seriously impede competition between publishers, (b) it should be based on qualitative criteria relating to the services offered and such criteria should be applied without discrimination and with adequate transparency to persons claiming the right to be supplied.
As a result of that opinion, the defendant and the undertakings engaged in the distribution of newspapers and periodicals concluded an agreement with the Minister for Economic Affairs on 24 June 1983 whereby those undertakings undertook to comply with the opinion of the Council for economic disputes; the terms of that agreement and the names of the signatories were published in the Moniteur belge of 17 August 1983, p. 10360.
The Tribunal found that AMP adopted new sets of conditions for individual rather than collective acceptance by publishers, wholesalers and retailers, and it is not, apparently, in issue that these were applied from February 1983.
The Court has been shown the Rules for the distribution of the press by retail sale and various standard forms of contract which are referred to briefly in the Order for Reference. There is no issue as to the terms of these, and the dispute centres on their effect and their method of application.
Under the Rules anyone wishing to open a new retail press outlet has to submit an application to AMP on a special form available from AMP on request; AMP delivers a reasoned opinion on the desirability of the application, which it submits to each of the publishers concerned; each publisher has to notify AMP of its agreement or refusal within 8 days, failing which the publisher is deemed to have followed AMP's opinion (Article VI). The criteria which AMP is to follow in examining such applications are laid down in Article III of the Rules. They are: (1) any new retail outlet must carry a permanent minimum assortment of 350 titles; (2) the premises must allow enough space to the press and permit display of the permanent assortment of titles; (3) under the heading ‘professional capacity’, it is required that the retailer be able to run his business well and stay open every day of the week and make certain arrangements for holidays; (4) there must be a minimum distance between the projected retail outlet and any existing one, of 250 metres in urban communes and 500 metres in rural communes; (5) under the heading ‘potential’, the maximum number of retail outlets is fixed, saving exceptions such as for sparsely populated areas, broadly at 1 per 1200 inhabitants, although there are two for communes between 1200 and 2400 inhabitants. Finally, Article V of the Rules provides that the retailer must only sell the newspapers and periodicals on a retail basis and not reassign, resell, hire or loan them; he must also sell them at the prices fixed by the publisher and indicated by AMP.
AMP's General Conditions for the supply of newspapers and periodicals to retailers provide that the retailer must sell the newspapers and periodicals at the prices fixed by the publisher and indicated by AMP (Article 5). Article 10 contains a prohibition on reassignment whereby the retailer undertakes to sell his supplies exclusively by retail from his premises and not to reassign, resell, hire or loan them, on pain of being refused all further supplies immediately and without notice.
The Court has been shown three different standard-form AMP contracts for publishers, one for Belgian publishers, one for foreign publishers of weeklies and one for foreign publishers of monthlies and other publications. Condition 5 of the contracts for foreign publishers gives AMP the exclusive right to sell their newspapers to bookshops and vendors in Belgium and clause 5 of the contract for Belgian publishers gives an exclusive right to sell to retailers, so that the publishers give up the right to supply Belgian retailers. A breach of that clause, the referring judge found, would be actionable in damages. In return AMP undertook with the publishers to terminate supplies to any retailer who dealt with the publications in any way other than by retail sale at the publisher's fixed price.
It was said at the hearing that foreign publishers do sign this kind of contract. Belgian publishers usually do not enter into a written agreement, but if they do so it is on the same terms mutatis mutandis as those contained in the foreign publishers' contract, giving AMP an exclusive right of sale.
From 8 March 1983 to the date of the reference, Binon had asked AMP to supply newspapers and periodicals distributed by the latter and had been refused. Binon had also failed to obtain supplies from individual publishers and from foreign press agencies. On 7 July 1983 Binon applied to the Tribunal for an order (a) that AMP was in breach of the Belgian rules of fair competition and that its conduct, in short, violated Articles 85 and 86 of the EEC Treaty; and (b) that it should cease refusing to supply the plaintiff.
Although he did not deal with all the issues which fall to be dealt with by the national court where Articles 85 and 86 are in issue, the judge made a number of findings which were obviously influential in its decision to make the reference, and on the basis of which it seems to me that the reference must proceed, even though some of the findings are challenged by AMP, which contends that the new practice and conditions adopted by AMP in no way violate the Treaty.
AMP relies on the fact (a) that in a decision of 7 December 1983, the President of the Tribunal de commerce recited an offer by AMP to supply Binon at kiosks at the Metro at Charleroi, and (b) that in a decision of 3 January 1984, the President accepted that AMP acted as a ‘commissionnaire’, that a selective distribution system for newspapers was compatible with Article 85 unless abused and that it was not obvious that qualitative criteria of selection were necessarily unlawful.
In reply it can be said that the Brussels Court of Appeal on some of these matters appears to have taken a very different view from the judgments on which AMP relies — it did not reverse the Commercial Court's finding on 15 November 1982 that AMP was an independent middleman, and not a mere sales agent deprived of any autonomy quoad the publishers.
The judge in the present case found that the refusal to supply by the publishers was, with one exception, not expressed, but ‘the evasive tone and the biased attitude of most of the replies must be regarded as a refusal’ since no publications were supplied. AMP did not apply the criteria adopted for approving outlets in respect of Lecture générale SA, in which Hachette and AMP had an important interest — ‘the plaintiff in fact has proved that in the centre of Charleroi, Lecture générale distribution outlets were created which did not comply with the minimum geographical criteria’. Lecture générale could set up chains or outlets in derogation from the rules, which would make it impossible for independant retailers, to whom the rules would be applied, to obtain rights of sale. Lecture générale would be likely to get favourable treatment.
The court concluded that ‘the defendant has a de facto monopoly which contradicts its claim that the newspaper publishers are free to supply directly whomsoever they wish. That freedom is wholly theoretical, since the publishers in question refuse to make use of it. In this case there is therefore concerted action which appears to be motivated by the existence of Article 5 of the general conditions for publishers reserving (to AMP) the exclusive right to sell to booksellers and newsagents in Belgium; any publisher connected with the defendant but wishing none the less to supply a distributor directly renders itself liable to an action for breach of contract by the defendant. It is clear that the defendant's position on the Belgian market is such that rupture with it would result in very serious disadvantages for the publisher in question and even perhaps in its disappearance from the Belgian market’.
Satisfied on these findings that issues of Community law needed to be resolved the judge accordingly referred the following questions to the Court:
(1)
Is it compatible with Articles 85 and 86 of the Treaty establishing the EEC for a group of undertakings or a number of undertakings whose conduct is identical and which constitute an important part of the relevant market (in this case, the market in daily and weekly newspapers and periodicals in Belgium) to maintain a practice whereby, in the absence of express intervention or action on their part, a specialized undertaking is entrusted either impliedly or expressly with the task of selectively regulating the distribution of their products by requiring retailers wishing to sell those products to submit an application for approval and by deciding whether to grant that application by reference to both qualitative and quantitative criteria, namely a criterion based on the distance from one sales outlet to another and a criterion requiring a minimum number of inhabitants per sales outlet, thus limiting competition within the relevant market?
(2)
Is it compatible with Articles 85 and 86 of the Treaty establishing the EEC that in Belgium the distribution of foreign newspapers and periodicals is entrusted to a single undertaking which is in such a position as to be responsible for the distribution of more than 50% of foreign publications in Belgium and that the contracts which that undertaking requires both newspaper publishers and retailers to sign are drawn up so as to enable it to demand rescission of the contract or to refuse distribution of the publications in question if the publisher under contract supplies certain non-approved retailers directly, or to withdraw approval from retailers who reassign or resell or effect any sale other than a retail sale or any hire or loan?
(3)
Is it compatible with Articles 85 and 86 of the Treaty establishing the EEC that the distributor in question reserves the right to fix prices and compels retailers to respect the prices laid down?
(4)
Is it compatible with Articles 85 and 86 of the Treaty establishing the EEC that the newspaper distributor in question is a Belgian company in which an important share is held by a finance group governed by foreign law which itself controls various undertakings publishing daily newspapers and periodicals in France, while that finance group and the Belgian distributor jointly hold shares in a Belgian company having as its purpose the retail distribution of newspapers and periodicals in Belgium, it being established that the distributor applies less strict criteria for approval to that retailer than to others?
AMP and, particularly, the Federal Republic of Germany, which has intervened in respect of the third question, have stressed the importance of a free and autonomous press in a democracy. The widest range of newspapers should be available to the widest range of readers. As basic principles, these are not in issue.
Both again argue that there are special features about the press, and its distribution, which have to be taken into account. Thus, newspapers have a short ‘shelf life’. In the nature of things, substantial numbers of copies have to be available to meet potential demand, which frequently results in copies in the retailers' hands being unsold. As a practical reality, the publisher is bound to take these back, either not charging for them or crediting the retailer with their price on return. Both publisher and retailer incur expense in the transmission of these unsold copies, and the Federal Republic argues strongly that the necessary corollary of this is that the publisher should be allowed to fix both the quantities he distributes and the prices at which he sells. Both AMP and the Federal Republic stress the need for a permanent and stable system of distribution based on the calculation of likely demand.
The Commission accepts much of this but contends that these arguments do not establish that the system of distribution of the press is thereby excluded from the ambit of Article 85 or Article 86 of the Treaty, whatever weight they may have if an application were made, which so far has not been made, for exemption under Article 85 (3).
Binon's position, broadly, is that the termination of the 1976 agreement has not changed the real position. Either because AMP has a dominant position on the market in the distribution and retailing of the press, or because it has participated in agreements or concerted practices with others which have as their object or effect the prevention or restriction of competition, AMP has violated and continues to violate the Treaty. Alone or with others, it has prevented, and has the power to go on preventing, Binon from selling newspapers and periodicals in Belgium on the basis of terms which cannot be justified. On any view, AMP, or AMP as part of the Hachette group, has a large part of the market. The fact that some publishers may now be willing to appoint Binon as their retailer, or that AMP may be willing to make a discretionary exception for Binon in Charleroi, does not change the overall position.
To the extent that all the facts have not yet been found, the Court is not able to give as definitive an answer as it would be able to do, for example, if a Decision of the Commission were being challenged before it. The answers to the questions posed, therefore, in some respects have to be conditional on further investigation and findings of fact by the national court.
The first question
The first question asks whether it is possible to be consistent (a) with Article 85 and (b) with Article 86 of the Treaty for (i) a group of undertakings or (ii) a number of undertakings whose conduct is identical and who between them constitute an important part of the relevant market to maintain a practice under which a specialized undertaking can operate a selective distribution system under which only those retailers will be supplied who (1) make application and (2) satisfy both qualitative and quantitative criteria, thus limiting competition within the relevant market. The only two criteria specified are limitations by distance and by number of inhabitants.
Although the question seems in the first place to be directed to the conduct of the publishers, the publishers in fact are not parties to the proceedings before the national court. It is, as I see it, however, necessary to consider the arrangements in question as between the publishers, as between them and AMP, and as between AMP and the retailers.
The two Articles of the Treaty have to be considered separately. So far as Article 85 is concerned the relevant basic issues are whether there was (i) an agreement between undertakings (which all the dramatis personae appear clearly to be) or (ii) a concerted practice, which have respectively as their object or effect the prevention, restriction or distortion of competition within the common market and which may affect trade between the Member States. Under Article 86 the issue is whether one or more undertakings has a dominant position in a substantial part of the common market, whether that position is abused and if so, whether it affects trade between Member States.
For the purposes of Article 85, AMP contends that there is neither an agreement nor a concerted practice which affects competition within the common market.
It is said, first, that the previous arrangement by which the publishers and AMP acted through a regional committee has been abrogated, even if that arrangement fell foul of the article. This, however, is not a conclusive answer as to the previous agreement. It is possible for an agreement which has been terminated to continue to have effects which are contrary to the provisions of Article 85, and it is for the national court to consider whether that is the position here. (Case 51/75 EMI v CBS [1976] ECR 811).
AMP then contends that there is here no agreement of the kind prohibited, and indeed there is no general agreement between AMP and the publishers, there are merely specific agreements, either written or oral, for the publisher to provide specific titles to AMP for distribution. The retailers themselves merely sign acceptance of the general conditions.
Nor, it is argued, is there necessarily a concerted practice merely because a number of publishers entrust the sale of their papers to the same wholesaler on the same terms. Parallel conduct may be an indication of such a practice, seen in the light of the relevant product and the number of undertakings involved, if it produces conditions of competition which do not correspond to the normal conditions in the market. It is, however, no more than an indication. So long as there is no direct or indirect contact between undertakings, they may adapt their conduct intelligently to that of their competitors in order to meet the existing competition (e.g. Cases 48/69 ICI v Commission [1972] ECR 619; Joined Cases 40 et seq. /73 Suiker Unie v Commission [1975] ECR 1663; Case 172/80 Züchner v Bayerische Vereinsbank [1981] ECR 2021). All that happened here is that publishers entrusted their distribution to a wholesaler on terms justified by the ‘perishable’ nature of the product, the need to avoid as far as possible, but to take back where necessary, unsold copies, to reduce costs and to ensure the optimum number of sales outlets. These are all justified objectives.
Thirdly, it is said that the Court has recognized that a selective distribution system may not violate Article 85. This is so not just in respect of complex technical or high-quality goods, or those requiring aftersales service (Case 26/76 Metro v Commission [1977] ECR 1875; and Case 31/80 L'Oréalv De Nieuwe AMCK [1980] ECR 3775) but also specifically for newspapers (Case 126/80 Salonia v Poidomani and Giglio [1981] ECR 1563). In the latter case the emphasis was not so much on the nature of the product as on the objective qualities of the retailer and his method of operation and on the demands imposed by the system of distribution needed. Moreover Salonia did not require that these objective criteria be qualitative; they may be quantitative in nature. All the present criteria are justified by the need to maintain an efficient and economical supply of newspapers.
Fourthly, it is said that there was no concerted practice between the publishers and AMP since AMP is merely the agent of the publisher, an integral part of the economic unit which constitutes its business, and is not an independent trader carrying financial risks of its own. AMP relies on the Commission's Notice of 24 December 1962, sometimes called ‘the Christmas message’, which agreed to treat a contract with a commercial agent therein defined as not being covered by Article 85. It is said that it is not to the point that several publishers appointed the same agent on the same terms (Suiker Unie), or that such an agent guarantees payment to the principal by the eventual purchaser. If the reality is that the principal sells to the client rather than to the agent, the agreement with the agent falls outside Article 85, and it is not significant that it is the agent who lays down the conditions of distribution. Only if the agreement with the client itself violates Article 85 will that Article come into play.
AMP is only such an agent and no agreement or arrangement between AMP and the publishers is capable of falling within Article 85.
Finally, since here Belgian newspapers are primarily concerned, and foreign publications are treated no differently, there is nothing capable of affecting trade between Member States which can harm the achievement of the objectives of a single market between the Member States (Joined Cases 56 and 58/64 Consten and Grundig v Commission [1966] ECR 299 and Case 13/77 Inno v ATAB [1977] ECR 2115 at p. 2148).
In my opinion, the conclusions which AMP seeks to draw from the jurisprudence it cites, to an extent beg the very questions raised.
Article 85
(i)
It is clearly not possible to say that the distribution and retailing of newspapers and periodicals in itself falls wholly outside the ambit of Article 85. It is in each case a question for the national court to decide whether the agreements or the practices adopted are in breach of that Article.
Accordingly, it is for the national court to decide firstly (a) whether there was a horizontal agreement between the publishers and (b) whether there was an agreement between the publishers and AMP; secondly, whether parallel conduct on the part of the publishers in conjunction with AMP constitutes a prohibited concerted practice, or whether it is merely, as AMP contends, an intelligent commercial reaction to a competitor's behaviour, which does not interfere with normal competition, in which latter case, as AMP submits, it will not be unlawful.
In the present case the judge was influenced by the fact (a) that all the publishers gave exclusive distribution rights to AMP and refused to supply directly to retailers and (b) that when application was made for new kiosks all the publishers came to the same conclusion. Although the matter is in the first place for the national court, it seems to me that (a) the scheme adopted, by which every application was to go to AMP, whose advice became binding if objection was not received within eight days, (b) the way it was applied, even if some publishers insisted on applications going direct to them, and (c) the fact that some publishers delayed a reply to Binon's application to sell their newspapers pending the setting up of a special committee of publishers to lay down their policy on distribution are factors pointing to there being at least a concerted practice if not an agreement between the publishers or the publishers and AMP.
(ii)
It is also for the national court to consider whether the giving of an exclusive right to AMP and the adoption of identical conditions of distribution was necessary to achieve the aim of each individual publisher, or whether those provisions were merely adopted as part of the concerted practice to limit distribution to one wholesaler, and to exclude both other wholesalers, and other than approved retailers, on a common basis. Put another way, the question is whether the granting of exclusive rights and the adoption of identical conditions of distribution were justified in order to maintain the system of distribution of newpapers which it is contended is essential.
If these provisions were adopted as part of a concerted practice, such a procedure would not cease to be unlawful by reason of the fact that the terms in question were laid down not directly by the publishers but were adopted by them on the basis of rules established by AMP. It is obviously relevant in this regard to enquire whether these rules were adopted after any form of consultation or agreement between the publishers or their representatives and AMP.
(iii)
Again it is a question for the national court as to whether AMP is really an independent trader or whether it is to be seen simply as a commercial agent of the publisher, forming part of his economic unit, and negotiating for the publisher's account, whether in AMP's own name or the publisher's name. In this regard it is necessary to ascertain precisely what expenses AMP meets, what its remuneration is, what risks it bears in relation, for example, to the loss of newspapers, delayed payments or the bankruptcy of the retailer or the bankruptcy of the publisher.
AMP's position has to be seen not just in relation to one publisher but in the context that it claims to be the agent of all the other publishers on the same terms. This is not, as AMP submits, necessarily fatal. It is, however, relevant that a large number of publishers is involved. The Commission says that AMP has a commercial contact with 471 publishers. It is not easy to see AMP as being part of the economic unit of such a large number of undertakings.
This factor, AMP's role in the distribution and its assumption of risk are some pointers to its being an independent trader. This is not a question of labels but of reality (Case 26/76 Metro). None the less it is of some relevance that the contracts with the foreign publishers (the terms of which so far as relevant are basically accepted by those Belgian publishers who enter into a written agreement) provide for an exclusivity of sale to AMP. It is necessary to consider whether the oral agreements which are made are on the same terms. Moreover the retailer, in the general conditions for retailers, is referred to as the wholesaler's (i.e. AMP's) ‘client’, though AMP insists that the retailers are to be seen as parts of an agency relationship with the publishers and therefore themselves part of the publisher's economic unit. The fact that publishers agree to take back unsold copies, and are only paid eventually for the net retail sales, is not in my view conclusive that the relationship is one of agency as appears to be contended. It may be classified as one of seller and repurchaser. It is also relevant to consider the differences between AMP's role merely as a carrier for the publisher of those titles which the publisher does not consign to AMP under the arrangements referred to and AMP's role under those arrangements.
(iv)
The fact that a selective distribution agreement may be admissible for newspapers obviously does not mean that all such agreements are admissible within Article 85. It is necessary to ascertain whether the conditions adopted go beyond what is objectively needed for a proper distribution system or whether they impinge on competition to an unacceptable extent. As it was put in the Court's judgment in Case 107/82 AEG v Commission [1983] ECR 3151 at p. 3194, ‘The limitations inherent in a selective distribution system are, however, acceptable only on condition that their aim is in fact an improvement in competition in the sense above mentioned. Otherwise they would have no justification inasmuch as their sole effect would be to reduce price competition’.
In the Salonia case the Court stressed that it is for the national court to assess in the light of the factors to which it referred ‘whether genuine conditions exist which are capable of justifying the application, in the context of the agreement with which it is concerned, of the contested selective distribution criterion’.
It is suggested by AMP that that case recognized not only that qualitative, but also that quantitative, criteria may be adopted.
I do not so read it. In paragraph 24 the Court referred to the judgment in Metro which had accepted that selective distribution systems constituted an aspect of competition which accords with Article 85(1) ‘provided that retailers are chosen on the basis of objective criteria of a qualitative nature relating to the capacity of the retailer and his staff and the suitability of his trading premises in connection with the requirements for the distribution of the product and that the said criteria are laid down uniformly for all potential retailers and are not applied in a discriminatory fashion’.
It is true that in paragraph 27 and in the ruling, the Court omitted the word ‘qualitative’ and approved agreements by which ‘authorized retailers are selected on the basis of objective criteria relating to the capacity of the retailer and his staff and the suitability of his trading premises in connection with the requirements for the distribution of the product’. That case was, however, concerned with the criterion that a licence should only be granted to persons who ‘possess the aptitude to pursue the occupation of a newsagent’ which was clearly a qualitative criterion. It does not seem to me that the Court was intending to depart from the test laid down in Metro, which was in any event, referred to again in AEG at para. 35. In the latter judgment the Court found unlawful a refusal to approve distributors who satisfy the ‘qualitative criteria mentioned above’. Moreover, in Case 99/79 Laucóme v Etos [1980] ECR 2511 at p. 2536, the Court said ‘It follows that, in principle, a selective distribution network admission to which is made subject to conditions going beyond simple, objective qualitative selection falls within the prohibition laid down by Article 85 (1) especially when it is based on quantitative selection criteria’. Accordingly in my view only qualitative criteria may be adopted as long as they are justified, and are not phrased or applied in a discriminatory way. Quantitative criteria inevitably are capable of leading to a restriction of competition even by retailers who from a qualitative point of view are suitable for selection.
It may be that quantitative criteria could be found acceptable for the purposes of an exemption, granted by, and only by, the Commission, under Article 85 (3), but as I read the judgments of the Court, they are not to be accepted for the purposes of deciding that an agreement is outside Article 85(1).
Although it is for the national court to decide which criteria are acceptable it seems to me that the requirement that 350 titles should be held is a quantitative criterion which is unacceptable. Indeed it may be arguable that it falls within Article 85 (1)(e) of the Treaty and is bad on that account also. On the face of it the requirement that outlets must be more than a fixed minimum distance apart is a quantitative criterion also, as is the requirement limiting outlets by reference to the number of inhabitants. Whether it could be shown in a particular case that the viability and efficiency of the outlet depended on others being a particular distance away is a different question; as a general provision it seems to me that it goes too far.
The criterion of suitability of premises and of professional capacity on the face of it are of a qualitative nature though it must be considered whether they require more than is needed for the distribution of newspapers, since the cases do not decide that all qualitative criteria are justifiable, but only those which are supported by objective factors. The question is whether what is laid down is justified in relation to the sale of newspapers and not generally in relation to other products or other specific products.
It is also for the national court to consider whether these criteria have been applied uniformly and without discrimination. AMP insists that the exception made for Lecture générale was an isolated case granted under the previous regime. The national judge did not accept this for the purposes of the reference. If it be right that this is not an isolated case and that other exceptions have been, or are likely to be, granted because of the relationships between AMP and Lecture générale then the application of the condition is likely to be in breach of Article 85 (AEG judgment para. 39).
(v)
The cumulative effect of so many exclusive agreements, even if only in respect of specific titles so that a publisher may not necessarily have to supply all his titles to AMP, is also a factor to be taken into account (Case 23/67 Brasserie de Haecht v Wilkin [1967] ECR 407, p. 415).
(vi)
AMP is entitled to emphasize that, even if there exists a concerted practice which is aimed at or which does hinder or prevent competition within the common market, it must still be shown that it may affect trade between Member States. In Case 56/65 Société technique minière v Maschinenbau Ulm [1966] ECR 235 the Court held that, ‘for this requirement to be fulfilled it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States’. This again is a question of fact for the national court, but it is relevant to bear in mind that AMP imports most of the newspapers and periodicals which are imported into Belgium (put at 34% of the total publications available in Belgium) and to consider what proportion those newspapers coming from other Member States constitute of the total sales by retailers in Belgium. It is also necessary to consider, as the Court indicated in the Salonia judgment at para. 15, that a restriction on competition in national newspapers may have an effect on the distribution of publications coming from other Member States.
Article 86
(i)
So far as Article 86 is concerned there is not shown to be one publisher itself, or several publishers together, occupying a dominant position in relation to the distribution of newspapers and periodicals. I would accept the submission of AMP that the mere fact that a large number of publishers who act separately, but who taken together in total dominate the market, is not sufficient to constitute a breach of Article 86.
On the other hand it remains to be investigated whether it can be seen that AMP itself occupies a dominant position on the market, which it abuses.
(ii)
In the lengthy pleadings and exhibits there is much discussion as to what is the relevant market and what is AMP's share of that market. AMP contends that the relevant market is the supply of newspapers and periodicals in Belgium by whatever means. The Commission and Binon reject this. In their submissions the relevant market is the distribution of newspapers and periodicals through retail outlets supplied by a wholesaler who obtains his supplies from the publisher. Subscription copies, delivery by roundsmen, direct sales by the publisher to the retailer should be excluded. What is the relevant market for the purposes of Article 86 is largely for the national court to decide, but it seems to me that it cannot be said as a matter of law, a priori, that the relevant market for present purposes cannot be the distribution of newspapers through a wholesaler and a retailer, or that subscriptions and other methods of distribution must as a matter of law be included.
(iii)
AMP contests on any view that its share of the market is as high as the referring judge has accepted. If subscriptions are included in the relevant market it was in 1982 approximately 23% of the Belgian publications, 51% of the foreign publications; if they are excluded the figures are 32% and 65% respectively. This again is a pure question of fact, though even on AMP's figures it has a substantial share of the market, albeit there exist, as AMP alleges, 10 other independent wholesale distributors.
(iv)
AMP's position has to be seen both in relation to publishers and to retailers in order to decide whether its economic strength enables it to prevent competition by giving it power to behave to an appreciable extent independently of its competitors, its customers and of consumers. (Case 27/76 United Brands v Commission [1978] ECR 207; Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461 and Case 31/80 L'Oréal, see above)
(v)
If on all the evidence the court concluded that AMP had imposed these terms on the publishers in order that it might control both the number of outlets and their location in its own interests, and to preserve or extend its own dominant position in the market of distributing newspapers and periodicals, then this would constitute a breach of Article 86 of the Treaty.
In dealing with these questions the national court should have regard to the Court's judgment in Case 322/81 NV Michelin v Commission [1983] ECR 3461 particularly at paragraphs 55, 57 and 103.
The second question
The second question asks whether it is compatible (a) with Article 85 (b) with Article 86 for a single undertaking which is responsible for the distribution of more than 50% of foreign publications to impose conditions (i) on publishers and (ii) on retailers which enable that undertaking (1) to rescind the contract or refuse distribution if the publisher supplies non-approved retailers directly, or (2) to withdraw approval if the retailer deals with the publications other than by retail sale.
If AMP is not a commercial agent but is acting as an independent concern, then it seems to me that, subject to any exception being granted by the Commission under Article 85 (3), an agreement with a publisher in another Member State (or a concerted practice) by which AMP secures exclusive rights of sale and which provides that AMP may automatically withdraw supplies from any retailer who deals with the publication other than by retail sale at a fixed price is in breach of Article 85 of the Treaty. On the facts stated in the reference as to AMP's virtual monopoly of the market, it is difficult to see how it can be said that it does not restrain competition within the common market or affect trade between Member States. Whether such a restriction imposed on foreign publishers affects such trade is a matter to be investigated by the national court.
The terms of the agreement with the foreign publisher which prevent him from delivering direct to any retailer, and of the rules preventing the retailer from dealing with the newspapers other than by retail sale, and which thus prevent him from selling to other retailers, are on the face of it clearly capable of amounting to an abuse of a dominant position (Article 86 (b) and (c) of the Treaty). It is to be borne in mind that AMP has the right to refuse retailers who meet objective conditions laid down in the criteria and no sales may be made either to these or to other existing retailers. It is for the national court to decide whether the object and effect of these provisions is to increase the control, or to preserve the monopoly, which AMP has or whether they can be shown to be a necessary part of the distribution system without which it could not operate. In this regard AMP clearly is in a position to control the number of retail outlets and thereby access to the trade, which as the Commission has pointed out, the Belgian Government has not thought it necessary to regulate.
In this respect it is to be noted that, as in other aspects of the case where the question arises as to whether AMP is in a dominant position, AMP does not deny that it is but merely says that the question is an open one.
If again these rules were applied in a discriminatory way, with exemption being granted to Lecture générale, then there would be clear evidence of an abuse of a dominant position.
The third question
The third question asks, in substance, whether it is compatible for AMP to reserve the right to fix and maintain retail prices. This question may be based on a misunderstanding since it is apparently the publisher who fixes the prices and AMP which enforces their observance. That does not, however in my view, affect the question of principle. The fixing of selling prices is specifically referred to in paragraph 1 (a) of Article 85 as being a prohibited practice.
In the present case the lawfulness of this provision does not seem to be directly in issue between the parties since there is no suggestion that Binon wishes to sell at other than the fixed price. The Federal Republic of Germany has argued strongly in favour of a system of retail price maintenance for the newspaper and magazine industry. Whether those arguments are of equal force for both newspapers and magazines may be a question, since different considerations may apply to the distribution of the expensive, so-called ‘glossy’, magazines from those relevant to daily or weekly newspapers. The question in any event is an important and a delicate one. It seems to me, however, that many of the arguments advanced may have more relevance to an application for an exemption under Article 85 (3) than to the issue which arises under Article 85 (1).
If AMP is a commercial agent, then the question does not arise. If it is not, then it seems to me that the retail price maintenance clauses are prima facie not compatible with Article 85 if they may affect trade between Member States. If contrary to what is said by AMP, the prices are fixed by AMP then this is capable, if it is found that AMP occupies a dominant position, of amounting to an abuse of that position. Whether it is so it is for the national court to decide.
It is in any event to be noted that much of the Federal Republic's argument is based on national legislation which does not seem to come directly into play so far as this question is concerned. It is also to be noted that in Article 86 (a) the prices fixed, in order to violate the Article, must be unfair.
The fourth question
The fourth question asks, again in substance, whether it is compatible for AMP, in which Hachette holds an important part of the share capital, to apply less strict criteria to Lecture générale SA, a retailer in which both AMP and Hachette have a financial stake.
AMP accepts that a selective distribution system otherwise complying with Article 85 may be applied in a way which is incompatible with the Article on the basis of the Court's judgment in AEG. It argues, however, on the basis of that judgment that mere isolated exceptions do not amount to such an unlawful method of application. In any event it is said that the exemption referred to was granted before the present arrangements came into force, and at a time when the distance criteria were less precise than they are now.
In principle this seems to me to be right. The question remains, however, whether these were merely isolated exemptions (or there was one isolated exemption) in the past. If AMP does, or is shown to be intending to, apply less restrictive criteria to Lecture générale then that would constitute an abusive application of the system and be in breach of Article 85. It would also, in my view, constitute an abuse of a dominant position within Article 86. It is plainly no answer, as seems to be suggested, that Lecture générale can waive the protection which the distance provision gives it, unless others can do the same. Nor is it an answer that such relaxation can be made if it is solely in AMP's financial interest.
On the basis of these considerations in my opinion the questions referred should be answered on the following lines:
(1)
(a)
(i)
For a group of undertakings operating on the same market, which is a substantial part of the common market, to entrust, whether by agreement or by a concerted practice, the distribution of their newspapers and magazines to a specialist undertaking is capable of falling within the prohibition laid down in Article 85 of the EEC Treaty.
(ii)
For that specialist undertaking to impose on such other undertakings, or to apply, terms in order to, or in such a way as to, preserve or extend its own dominant position on the market falls within the prohibition laid down in Article 86 of the EEC Treaty in so far as it may affect trade between Member States.
(b)
(i)
Selective distribution systems are compatible with Article 85 (1) and Article 86 provided that resellers are chosen on the basis of objective criteria of a qualitative nature relating to the qualifications of the reseller and his staff and the suitability of his trading premises so long as they are objectively justified by the requirements of the distribution of the product in question and that such conditions are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion.
(ii)
In principle, a selective distribution network, admission to which is made subject to conditions going beyond these objective qualitative criteria, falls within the prohibition laid down in Article 85 (1) and Article 86, particularly when it is based on quantitative selection criteria.
(iii)
A general criterion based on the distance of one sales outlet from another and a criterion requiring a minimum number of inhabitants per sales outlet are such prohibited quantitative criteria.
(2)
(a)
Contracts for the distribution in one Member State of newspapers and periodicals from other Member States, which the distributor undertaking requires both publishers and retailers to sign and which are drawn up so as to enable that undertaking (i) to demand rescission of the contract or to refuse distribution of the publications in question if the publisher under contract supplies certain non-approved retailers directly, or (ii) to withdraw approval from retailers who reassign or resell or effect any sale other than a retail sale or any hire or loan, are contrary to Article 85 (1) if they have as their object or effect the prevention, restriction or distortion of competition within the common market.
(b)
(i)
If the distributor undertaking is in a dominant position within the meaning of Article 86, the fact of requiring publishers and retailers to sign such contracts constitutes an abuse of the dominant position contrary to Article 86.
(ii)
A market share in excess of 50% is a strong, but not necessarily conclusive, indication that an undertaking is in a dominant position in the sense that it enjoys a position of economic strength which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers.
(3)
The imposition of fixed retail prices within a distribution system falls prima facie within the prohibition laid down in Article 85 (1) if it may affect trade between Member States. If the distributor undertaking is in a dominant position, it qualifies as an abuse of such position contrary to Article 86 for it to fix unfair retail prices for the products which it distributes.
(4)
If it is established that, in the selective distribution system which it operates, a distributor undertaking applies less strict criteria for approval to one retailer than to others, such practice amounts to a discriminatory application of conditions of admission to the system and is contrary to Article 85 and (if the distributor undertaking is in a dominant position) Article 86. In deciding whether such discrimination takes place it is relevant to have regard to the fact that the distributor undertaking and a company associated with it both own shares in that retailer.
The costs of the parties to the main proceedings fall to be dealt with by the national court. No order should be made as to the costs of the Federal Republic of Germany and of the Commission.