61974C0071
OPINION OF MR ADVOCATE-GENERAL WARNER
DELIVERED ON 22 APRIL 1975
My Lords,
It appears that for many years fruit imported into the Netherlands, for the most part citrus fruit, has been sold by auction in Rotterdam. Currently, about 75 % of the citrus fruit so imported is disposed of at those auctions. Nine importers established in the Netherlands regularly sell at the auctions. Some 350 wholesalers attend as buyers.
Since 1952 the conduct of the auctions has been governed by the provisions of an Agreement made in that year between the two applicants in this case, who are respectively an association of importers and an association of wholesalers of fruit. The Agreement has been amended many times.
On 25 July 1974 the Commission adopted a Decision in which it held that the Agreement contained a restriction that infringed Article 85 of the EEC Treaty. That Decision is challanged by the applicants on no fewer than 12 grounds. Having regard to the nature of some of those grounds, I must recount in some detail the events leading up to the Decision.
In 1968 an Amsterdam wholesaler, Messrs Govers en Zonen, complained to the Commission under Article 3 (2) (b) of Regulation No 17 that the Agreement contained restrictions infringing Article 85. As a result, the Commission, on 12 November 1969, served on the applicants and on their members a notice of objections under Article 2 of Regulation No 99/63/EEC. To this, it seems the applicants did not respond directly. They left it to their members to do so individually. But, on 2 January 1970, the applicants sent to the Commission a request under Article 2 (3) of Regulation No 26 for a decision that the Agreement satisfied the conditions of Article 2 (1) of that Regulation. That request (Annex VIII to the application) set out in detail the applicants' reasons for saying that the agreement satisfied those conditions.
Your Lordships will remember that Article 42 of the Treaty provides that:
‘The provisions of the Chapter relating to rules on competitions shall apply to production of and trade in agricultural products only to the extent determined by the Council within the framework of Article 43 (2) and (3) and in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 39.’
It was pursuant to that Article that the Council, on 4 April 1962, adopted Regulation No 26 (OJ 30 of 20. 4. 62) Article 1 of that Regulation provides:
‘From the entry into force of this Regulation, Articles 85 to 90 of the Treaty and provisions made in implementation thereof shall, subject to Article 2 below, apply to all agreements, decisions and practices referred to in Articles 85 (1) and 86 of the Treaty which relate to production of or trade in the products listed in Annex II to the Treaty;’
Article 2 (1) contains two sentences, of which the first is in these terms:—
‘Article 85 (1) of the Treaty shall not apply to such of the agreements, decisions und practices referred to in the preceding Article as form an integral part of a national market organization or are necessary for attainment of the objectives set out in Article 39 of the Treaty.’
The second sentence confers a particular exemption on certain ‘agreements, decisions and practices of farmers, farmers'associations, or associations of such associations.’ It has been the subject of controversy between learned writers, but it is not in point in this case.
The remaining paragraphs of Article 2 provide:
‘2.   After consulting the Member States and hearing the undertakings or associations of undertakings concerned and any other natural or legal person it considers appropriate, the Commission shall have sole power, subject to review by the Court of Justice, to determine, by decision which shall be published, which agreements, decisions and practices fulfil the conditions specified in paragraph 1.
3.   The Commission shall undertake such determination either on its own initiative or at the request of a competent authority of a Member State or of an interested undertaking or association of undertakings.
4.   The publication shall state the names of the parties and the main content of the decision; it shall have regard to the legitimate interest of undertakings in the protection of their business secrets.’
The contention of the applicants was, and indeed still is, that the agreement promoted three of the objectives set out in Article 39, viz. objective (c) ‘to stabilize markets’, objective (d) ‘to assure the availability of supplies’ and objective (e) ‘to ensure that supplies reach consumers at reasonable prices’.
On 6 April 1970 the Commission wrote to the applicants that their request under Article 2 of Regulation No 26 would be considered in the framework of the proceedings already initiated under Regulation No 17 and that, if the Commission were of opinion that the Agreement could not be exempted under that Article, it would give its reasons in the decision that it envisaged taking to put an end to the infringements of Article 85. The Commission accordingly invited the applicants to submit their observations on the objections formulated in the notice of 12 November 1969 (Annex XII to the Application).
This drew from the Applicants a letter dated 20 April 1970 (Annex XIII to the Application) in which they contended that it was improper for the Commission to deal with the proceedings under Regulation No 17 and those under Regulation No 26 together. They said that the proceedings under Regulation No 17 were against their members and not themselves and that, for this and other reasons, the two sets of proceedings should be kept distinct. It seems that the Commission never replied to this letter or to further letters written in May and August 1970 on behalf of the applicants or of their members asking that the proceedings be expedited. On 24 March 1971 the applicants wrote to Mr Mansholt, a Vice-President of the Commission, with copies to the Director-General of Agriculture and to the Director-General of Competition, protesting about the delays and asking for an interview (Annex IX to the Application). On 1 June 1971 the Director-General of Agriculture replied on behalf of the Commission that it had not yet made up its mind about the applicability of Article 2 of Regulation No 26 and suggesting that the applicants should contact the Head of Division responsible for competition in agriculture about an interview (Annex X to the Application). On 30 June 1971 the Director-General of Competition wrote to the applicants saying that the Commission did not consider that the Agreement fell within Article 2, setting out in detail its reasons for taking this view and giving the applicants an opportunity to comment on those reasons before the Commission took a final decision (Annex XI to the Application).
It appears that the applicants did not comment in writing but asked for an interview. This resulted in a meeting being held on 9 July 1971 under the chairmanship of the Head of Division responsible for competition in agriculture at which were also present representatives of the Directorate-General of Competition and of the Commission's Legal Service. The applicants say that the purpose of this meeting was to seek a solution acceptable both to the applicants and to the Commission. Its only concrete outcome, however, seems to have been an agreement to hold a further meeting under the chairmanship of a representative of the Directorate-General of Competition. This further meeting was fixed for 15 October 1971, and the Commission agreed that the time limit for the applicants to reply to the letter of 30 June 1971 should be extended to that date (see Annex I to the Defence).
The meeting was duly held on 15 October 1971 under the chairmanship of Mr Jaume, the then Director of Restrictive Practices and Dominant Positions. A letter written to him on 29 October 1971 on behalf of the applicants (Annex XVI to the Application) evinces that they hoped, by amendments to the Agreement, to meet the Commission's objections to its terms and that, in the light of the discussion at the meeting, they proposed to make certain amendments to it. The main effects, so far as I understand, of these amendments were to be as follows:
1.
To confine the restrictive provisions of the Agreement to fruit grown outside the Community;
2.
To open the Rotterdam auctions, subject to certain conditions, to importers established anywhere in the Community;
3.
To liberalize the requirements subject to which Dutch wholesalers were admitted to the auctions;
4.
To open the auctions to fruit arriving at Rotterdam otherwise than by sea or rail;
and
5.
To liberalize the provisions of the Agreement as to the cataloguing of fruit to be sold at the auctions.
In view of a contention advanced before the Court on behalf of the applicants, I should mention that the very terms of that letter make it clear that neither Mr Jaume nor anyone else on behalf of the Commission had committed himself at the meeting to the view that, if those amendments were made, the Commission's objections to the Agreement would disappear.
On 2 December 1971 Mr Jaume wrote to the applicants acknowledging their letter of 29 October and saying that the Agreement, even as amended, still contained an objectionable restriction in that, by the effect of its Articles 9 and 10, Dutch wholesalers, if they wished to be admitted to the auctions, were precluded from buying in other Member States for sale in the Dutch market fruit imported from third countries. This prevented competition to which Dutch importers could otherwise be subjected from importers in other Member States selling direct to Dutch wholesalers. Mr Jaume suggested that the applicants, if they wished the case to be disposed of swiftly, should amend Articles 9 and 10 by eliminating that restriction (Annex XVII to the application).
The applicants responded by a telex dated 16 December 1971, suggesting that Article 9 should be amended so as to make it easier for importers established in other Member States to sell at the auctions. This suggestion was discussed on 17 December 1971 between representatives of the applicants and Mr Jaume. Following that discussion, on 21 December 1971, Mr Jaume wrote to the applicants a letter (Annex VI to the Application) on which they found one of their grounds of complaint against the Commission's Decision. In that letter Mr Jaume expressed the view that, having regard to the amendment last proposed as well as to those set out in the applicants' letter of 29 October 1971, they should notify the new text of the Agreement with a view to obtaining exemption under Article 85 (3) of the Treaty. He added that, in his opinion, the only restriction on competition remaining in the new text, which was the prohibition on wholesalers attending the auctions from buying in other Member States fruit originating from third countries, could be the subject of exemption under Article 85 (3). He concluded that the proceedings could be brought to an end by a decision of the Commission based on such notification.
On 15 March 1972 the new text of the Agreement was adopted by the Applicants and on 21 April 1972 it was notified to the Commission under Article 4 of Regulation No 17. The applicants say that they were subsequently informed by telephone by someone in the Directorate-General of Competition that publication under Article 19 (3) of that Regulation would probably take place in October 1972 and that a decision of the Commission in application of Article 85 (3) could be expected towards the end of 1972.
It seems that by a letter dated 2 April 1973 (which is not in evidence) Mr Jaume informed the applicants that doubts had arisen about the applicability of Article 85 (3), in particular because it was doubtful whether the restriction in the Agreement conferred any advantage on consumers, and suggesting that that restriction should be abolished. To counter this the applicants submitted statistics designed to show that prices at the Rotterdam auctions were, on average, 13 % below corresponding prices in other Member States.
On 23 July 1973, having heard no more from the Commission, the applicants wrote to its President complaining of the manner in which the proceedings had been conducted and of the delay in reaching a decision.
They received a reply dated 6 November 1973 from the Director-General of Competition (Annex VII to the Application) saying that, at the time when Mr Jaume had expressed the view that Article 85 (3) might be applicable, he was relying entirely on what he had been told by the applicants themselves. Subsequent enquiries made of French and of German importers had suggested that the requirement that Dutch wholesalers should buy only at the Rotterdam auctions was not ‘indispensable’ in the sense of Article 85 (3). Hence the suggestion that that requirement should be abolished. That suggestion not having been followed, the Commission would shortly be sending a fresh notice of objections to the Applicants which would enable them once again to state their case and to counter the facts and arguments relied on by the Commission.
That fresh notice of objections (Annex 2 to the Defence) was sent to the applicants on 19 November 1973. It was signed by the Director-General of Competition himself and was directed to the Agreement as notified on 21 April 1972. It carefully set out the reasons why the Commission considered that the requirement or restriction in question was hit by Article 85 (1) of the Treaty and exempted neither by Article 2 (1) of Regulation No 26 nor by Article 85 (3) of the Treaty — and it punctiliously mentioned the applicants' rights to comment both in writing and orally on those reasons.
The applicants did not avail themselves of their rights to comment in writing. They sought another interview, which took place on 3 December 1973, and at which they proposed yet a further amendment to Article 9 of the Agreement. Under this amendment a Dutch wholesaler was to be permitted to buy fruit from an importer established in another Member State provided that that fruit had already been imported, cleared through customs and unloaded by such importer. There is no evidence as to how the representatives of the Commission reacted to this proposal at the time.
I infer from the applicants' pleadings that they subsequently sent a written memorandum to the Commission saying that the Agreement should now be considered as so amended and that the reasoning of the Commission contained in the notice of objections of 19 November 1973 was therefore obsolete. That memorandum is not however in evidence.
On 30 January 1974 there was a formal hearing under the chairmanship of a new Director of Restrictive Practices and Dominant Positions, Mr Jaume having retired. The minutes of this hearing are in evidence (Annex XIV to the Application). It was attended, on behalf of the Commission, by representatives both of the Directorate of Restrictive Practices and Dominant Positions and of the Directorate-General of Agriculture. It was also attended by representatives of the Member States, by representatives of the applicants — in particular by the late Mr J. J. A. Ellis who had acted for them as Counsel throughout — and by representatives of a number of Dutch fruit wholesalers who, like Messrs Govers en Zonen, eomplained about the Agreement.
I need not take up Your Lordships' time with a summary of that hearing, important though I think it was. I will mention only three points about it:
1.
that the chairman emphasized that the Commission had not yet made up its mind as to the proposed new Article 9: its decision would depend upon what was said at the hearing;
2.
that the chairman and the representative of one of the Member States (Ireland) questioned the representatives of the Applicants about the purpose of the requirement in the proposed new Article 9 that fruit should have been unloaded in another Member State before being bought by a Dutch wholesaler without going through the Rotterdam auctions; and
3.
that Mr Ellis was given a free rein to develop the applicants' case on every point, including the applicability of Article 2 (1) of Regulation No 26; on this, however, he said that he was content to rest on the arguments previously presented to the Commission on behalf of the applicants.
On 21 February 1974, the applicants formally amended Article 9 of the Agreement in the way they had proposed.
On 19 April 1974 they sent to the Commission a bundle of documents concerning a particular importation, which they described as ‘manifestly ficticious’ (Annex XXV to the Reply). Their purpose, in so doing, was, as I understand it, to justify the requirement, in Article 9 of the Agreement as amended, that fruit bought by a Dutch wholesaler from an importer in another Member State should first have been unloaded in that State.
There was, it seems, no reaction from the Commission to that communication, except an acknowledgement. So the applicants asked for another interview and this took place on 19 June 1974. There is no direct evidence as to what transpired at this interview, but I infer from a telex dated 24 June 1974 addressed by the applicants to the Commission (Annex XXVI to the Reply) that they proposed yet another amendment of Article 9, viz. the deletion of the requirement as to unloading.
By the time the Commission received that telex its Decision, which Your Lordships remember was dated 25 July 1974, was in draft. The proposal referred to in the telex is recorded in a footnote to the formal text of the Decision and the Decision states (in recital II (2)) that ‘Removal of the requirement that the fruit must have been unloaded in the other Member State makes no appreciable difference to’ the restrictive effects of the Agreement, 'since the ban on the marketing in the Netherlands of fruit from third countries imported by Dutch wholesalers themselves into another Member State remains unaffected thereby. It is therefore clear that Article 9 of the Agreement effectively restricts the freedom of supply of the wholesalers taking part in the Rotterdam auctions and that this restriction is particularly marked since those wholesalers are responsible for a major share of the distribution of citrus fruit intended for consumption in the Netherlands (OJ L 237 of 29. 8. 1974).
The recitals of the Decision are in four parts. Part I states the facts. Part II states the Commission's reasons for thinking that Article 85 (1) applies to the restriction. Part III states its reasons for thinking that Article 2 (1) of Regulation No 26 does not apply and Part IV its reasons for thinking that Article 85 (3) does not apply either. In the operative part, the Commission declares that the provisions of Article 9 of the Agreement constitute an infringement of Article 85 (1) of the Treaty; refuses the declaration claimed by the applicants that those provisions are within Article 85 (3) of the Treaty; orders the applicants and their members to bring to an end the infringements of the Treaty thus evinced; and declares that the Decision is addressed to the applicants and to their respective members, who are listed in an Annex to the Decision.
By application to this Court dated 22 September 1974 the applicants claimed that that Decision should be declared void. On 15 October 1974, my Lord the President ordered, on an application for interim relief made by the applicants, that the operation of the Commission's Decision should be suspended pending the Court's Judgment in the action but that, nonetheless, no penalty should in the meantime be imposed under the Agreement on any of the applicants' members; and he reserved the costs of the application for interim relief. On 23 October 1974 the Court ordered that the Vereniging de Fruitunie, a newly formed association of some 24 Dutch wholesalers of fruit who are opposed to the outstanding restriction in the Agreement, should be at liberty to intervene in the action in support of the Commission.
As I have said, the applicants challenge the Commission's Decision on 12 grounds. These are conveniently lettered from A to L in the Application and also in the Report for the Hearing. Your Lordships will remember that, at the hearing, Counsel for the applicants picked four of them for further discussion, saying that he would rest on the applicants' pleadings as regards the other eight. It so happened that Counsel for the Commission also thought those four grounds to be the most pertinent. I will say at once that, in my opinion, not a single one of those 12 grounds is sound. I must nonetheless advert to them seriatim.
The first five are procedural. They are these.
A —
The applicants contend that the Commission should have determined the question of the applicability or otherwise of Article 2 (1) of Regulation No 26 first, by a Decision separate from that concerning the applicability of Articles 85 (1) and (3) of the Treaty; and they contend that the procedure adopted by the Commission resulted in their not being properly heard on the question relating to Regulation No 26.
In my opinion, provided that the Commission observed the procedural requirements of Article 2 of Regulation No 26, for instance as to consultation with the Member States — a matter as to which there is no question in the present case — there was no reason why it should not publish its decision under that Article in the same document as its decision on the points directly concerning Article 85. It might have been better, perhaps, if it had expressly recorded the former decision in the operative part of the document as well as in the recitals, but the fact that it did not do so is of no consequence. The declaration that the restriction in the Agreement constitutes an infringement of Article 85 (1) necessarily imports that it is not exempted by Article 2 (1) of Regulation No 26.
Of the contention that the plaintiffs were denied a proper hearing on the question relating to Regulation No 26, I need only say, I think, that it appears to me plainly inconsistent with the facts, which I have rehearsed.
B —
The applicants contend that the Commission failed ever to send them a proper notice of objections. Of the notice dated 12 November 1969 they say that it was addressed to their members and not to themselves, and of that dated 19 November 1973, they say that it related to clause 9 of the Agreement as it stood before its amendment on 12 February 1974.
My Lords, I need not enter into the controversy about who were the addressees of the notice dated 12 November 1969, though it is only fair to the Commission to say that that notice was in fact received by the applicants and that its contents were known to them. The notice relied upon by the Commission is that dated 19 November 1973. The suggestion of the applicants that, because, after the receipt of that notice, they amended Article 9 of the Agreement in an endeavour to meet the Commission's objections, the Commission should have sent them a further notice dealing with the Agreement as so amended is manifestly misconceived.
C —
The applicants say that the Commission has known about the Rotterdam auctions ever since the EEC Treaty came into force and that it has, since 1961, used the prices obtained at those auctions as statistical material in its management of the common agricultural policy. That being so, the applicants contend, it was wrongful of the Commission to start objecting to the system in 1968 simply because one wholesaler complained about it, and even worse of it to continue using those prices as statistical material after doing so.
My Lords, it seems to me that there is no relevant nexus between, on the one hand, the use by the Commission of the prices obtained at the auctions as factual material to be taken into consideration in administering the common agricultural policy and, on the other hand, the fact that, following Messrs Govers & Zonen's complaint, the Commission initiated an enquiry into the compatibility of the provisions of the Agreememt governing those auctions with Article 85 of the Treaty. The Commission has never said that the auctions were, in themselves, illegal. Its Decision goes no further than to hold that a particular restriction on the freedom of wholesalers who attend the auctions to buy also elsewhere is illegal.
D —
The Applicants contend that the Commission was not entitled to depart from the ‘promise’ contained in Mr. Jaume's letter of 21 December 1971. They rely, in support of this contention, on the principle as to the ‘protection of confidence’ established by the Court's decision in Case 81/72, Commission v Council [1973] ECR 575.
But, my Lords, that case was concerned with a decision taken by the Council itself and as to which the Court found that both its antecedents and its terms made it clear that the Council intended thereby to bind itself. Here, in contrast, we have a letter written by an official who did not have the power to make any decision himself and in which he merely stated his own opinion. It would have been wiser of him, I think, expressly to have pointed out that that opinion could not bind his Director-General, let alone the Commission, but the fact that he did not do so cannot have the effect of entitling the applicants to treat that expression of opinion as if it were a decision of the Commission. Nor could it, as was suggested by Counsel for the applicants at the hearing, commit the Commission to an ‘agreement’ with the applicants. The letter in my view conferred on the applicants no rights whatever on which they are entitled to rely in this Court.
E —
The applicants contend that, in any event, the cumulative effect of the matters complained of by them under their grounds (A) to (D) is such that the Court should conclude that the proceedings before the Commission were irregular.
My Lords, four horses falling at a fence cannot add up to a horse that clears it. For the reasons I have stated, I do not think that any of the applicants' grounds (A) to (D) bears examination. Undoubtedly, the Commission was guilty, particularly in the earlier stages of the proceedings, of serious and largely unexplained delays. I think too, as I have already said, that Mr. Jaume might have expressed his letter of 21 December 1971 more cautiously. But none of this amounts to an ‘infringement of an essential procedural requirement’ within Article 173 of the Treaty. Nor of course does it amount to any of the other grounds upon which the Court may, under that Article, set aside a decision of the Commission.
The other seven grounds upon which the applicants challenge the Commission's Decision go to its substance. They are these.
F —
The applicants contend that, in so far as the Commission held that the restriction in Article 9 of the Agreement was not exempted by Article 2 of Regulation No 26, its Decision is vitiated by errors of fact and of law.
My Lords, I cannot see that, in this respect, the Commission made any material error of fact or of law. The argument of the applicants, as I understand it, is, in a nutshell, that the restriction has the effect of concentrating the supply of and demand for imported fruit at the Rotterdam auctions and that it thereby conduces to a more stable market, a more assured availability of supplies and more reasonable prices to the consumer. Remove the restriction, they say, and the resultant dispersal of supply and of demand would impair those advantages.
In my opinion there is a fallacy underlying that argument. The fallacy is that Article 2 confers on the parties to an agreement the right to claim exemption for any restriction it contains if only they can show that, in relation to the market in any agricultural product, the restriction conduces to the attainment of one or some of the objectives set out in Article 39 of the Treaty. The argument overlooks that the objectives set out in Article 39 are those of the common agricultural policy and that, as such, they relate to Community agriculture and are inseparable from each other. It also overlooks that Article 2 in terms requires that an agreement, in order to be exempt thereunder, must be ‘necessary for the attainment’ of those objectives. It follows in my opinion that an agreement cannot be exempted under that provision unless it is designed, either alone or in conjunction with other measures, to secure all those objectives, and is necessary for the purpose.
It is common ground that the Agreement in this case, applying as it does only to fruit grown outside the Community, cannot promote either of the first two objectives of the common agricultural policy, which are:
‘(a)
to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilization of the factors of production, in particular labour;’ and
‘(b)
thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture.’
Nor is it suggested that the Agreement forms part of a system other features of which are designed to achieve those objectives. There is a common organization of the market in fruit and vegetables, set up by Council Regulation (EEC) No 1035/72 of 18 May 1972, but the Agreement in no way fits into this. Even less does it bear any relation to the measures instituted by Council Regulation (EEC) No 2511/69 of 9 December 1969 for improving the production and marketing of Community citrus fruit. The Agreement in fact operates quite independently and, indeed, regardless of the common agricultural policy. It is significant, I think, that, as the Commission points out, nothing like it has been found ‘necessary’ in any other Member State.
I should add that to some extent the Commission's Decision on this part of the case is based on its evaluation of complex economic matters, such as the effect, if any, that the removal of the restriction would have on prices for citrus fruit in the Netherlands. In my opinion it would not be open to the Court, under Article 2 (2) of Regulation No 26, to substitute its judgment for that of the Commission on such matters: consider Cases 56 and58/64 Consten and Grundig v Commission [1966] ECR 347.
G —
The applicants contend that the Agreement, being one between trade associations, is not within Article 85. They point to the wording of that Article, which prohibits ‘all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States etc.’ and say that agreements between associations of undertakings are not comprised in that catalogue. Fortified by an opinion of Professor Haardt of the University of Leiden (Annex XXII to the Application) they say that under Dutch law, which governs it, the Agreement created no contractual relations between the undertakings that are members of the two associations parties to it. They liken the terms of the Agreement to the rules of a commodity exchange, which, they say, do not give rise to contractual rights and obligations as between those who buy and sell on such exchange. The analogy is appropriate enough, perhaps, as it seems that some at least of the auctions in question are held in a building called ‘the Rotterdam Fruit Exchange’.
But, my Lords, I would reject this contention both on principle and on authority.
In principle I would say that the answer to the question whether an agreement is within Article 85 does not depend upon whether it creates contractual relations between the undertakings that it affects. What matters is only whether it exists and effectively binds them. In some at least of our countries — certainly this is the position in England — parties are entitled to agree that an agreement between them shall not create legal relations but shall be binding in honour only. Such an agreement, sometimes . called a ‘gentlemen's agreement’, is outside the sphere of the law of contract. But it is not outside the sphere of competition law, for if it were that law could too easily be subverted. That the same is true in Community law is, I think, implicit in the Judgments of the Court in Cases 41, 44 and 45/69, the Quinine cases (Rec. 1970 at pp. 695-696, 757-758 and 802-804). In the instant case the fact is that the associations concerned (the applicants) in entering into the Agreement, can only have been acting on behalf of their members. Moreover, they saw to it that their members were effectively bound to comply with the Agreement by providing for penalties for those who transgressed, ranging from ‘a reprimand’, through ‘communication of the infringement to the parties bound by the Agreement’ and ‘a fine of up to Fl. 10000’, to ‘a prohibition in taking part in auctions for a certain period’ and finally ‘exclusion from auctions’ — see recital I (1) (h) of the Commission's Decision, the findings in which are not challenged.
The authority I have in mind is Case 67/63 SOREMA v High Authority [1964] ECR 161-162. The Court there held that an agreement entered into by an association of undertakings was within Article 65 of the ECSC Treaty, which is, so far as material, in the very same terms as Article 85 of the EEC Treaty.
Hand I —
The applicants contend that the Commission was wrong in holding that the restriction in Article 9 of the Agreement was susceptible of affecting trade between Member States and wrong in holding that it had as its object and effect the restriction of competition within the common market.
I propose to deal with these two contentions together, because the arguments on them largely overlap.
The applicants say firstly that, in practice there are only two kinds of transaction that wholesalers bound by the Agreement ever want to enter into but are precluded from entering into by the restriction. The first is the direct re-sale to Dutch retailers of surpluses bought at low prices from German importers. The other is the direct sale to such retailers of Spanish oranges bearing exclusive brands. The applicants say that both types of transaction are undesirable, the first because it disturbs the market and the second because the oranges in question are in fact of the same qualities as unbranded oranges sold at the auctions.
It seems to me, my Lords, that this argument wholly misses the point, for the question arising under Article 85 (1) of the Treaty is not whether the restriction prevents competition that is desirable or competition that is undesirable, but whether it restricts competition at all and, if so, whether in a way that may affect trade between Member States.
Moreover neither the Commission nor the Intervener accepts that the two kinds of transaction described by the applicants are the only ones that the restriction in practice prevents. They give instances of many others. Of these it will, I think, be enough if I recall two. The first is the sharing between a wholesaler in Maastricht and wholesalers in Liège and Aachen of trainloads of oranges imported direct from Spain. The other is the purchase by a Dutch wholesaler under long term contracts of fruit originating in third countries from an importer established in France (where the evidence shows that there are important fruit markets: one at Perpignan and the other at Rungis, near Paris.)
The applicants sought to counter the points thus made partly by emphasizing that nothing in the Agreement prevented a Dutch wholesaler from marketing fruit so imported through the Rotterdam auctions or prevented an importer established anywhere in the Community from selling at those auctions; and partly by emphasizing the narrow scope of the restriction: it did not apply to fruit grown within the Community; it did not apply to fruit in transit through the Netherlands; it did not apply to sales elsewhere than in the Netherlands or to sales to processing plants in the Netherlands; it did not apply to fruit already in free circulation in the Community (i.e. cleared through customs in another Member State); and it did not affect wholesalers (chain stores and others, representing some 25 % of the trade) who never wished to attend the auctions.
My Lords, it does not seem to me that all this overcomes the crucial difficulty in the applicants' way. The fact remains that, subject to one qualification, a Dutch wholesaler, whose business or main business is to sell to Dutch retailers, is precluded, if he ever wishes to buy on his own account at the auctions, from availing himself of any alternative source of supply in the Community of fruit originating from outside the Community. The qualification in question is that such a wholesaler may buy fruit that has already been cleared through customs in another Member State. But this is a privilege of little value. As the applicants themselves were at pains to underline in another context, importations of foreign fruit, in order to be economic, must be effected under long-term contracts.
In reliance on what was said by the Court in Cases 6 and 7/73 Commercial Solvents v Commission [1973] ECR 252-253, the Commission advanced an interesting argument to the effect that the restriction should be held susceptible of affecting trade between Member States even in so far as it prevents direct imports by Dutch wholesalers from third countries under transactions involving, at that stage, no one in any other Member State. For, said the Commission, such a wholesaler might want to re-sell to retailers in, say, the Netherlands, Belgium and Germany. The restriction, whilst it would not preclude him from re-selling to retailers in the last two countries, would prevent him from doing so to retailers in the Netherlands. This artificial closing to him of his own natural home market could frustrate the whole venture. It is not necessary, in order to decide the case in favour of the Commission, to accede to this perhaps somewhat theoretical argument. But no satisfactory answer to it was put forward by the applicants.
J —
As regards Article 85 (3), the Commission, in its Decision, accepted that the Rotterdam auctions might contribute to improving the distribution of fruit in the Netherlands, at all events in the case of those imported by sea from distant countries, and also accepted that, possibly, a fair share of the resulting benefit accrued to consumers. On that basis, it assumed in favour of the applicants that the Agreement passed the first two tests applicants that the Agreement passed the first two tests prescribed by that provision. But it held that the restriction was not ‘indispensable’ to the attainment of those objectives, so that it failed to pass the third test.
The applicants challenge this conclusion. They say first that the Commission underestimated the value of the benefits conferred by the Agreement on Dutch traders and consumers. Secondly they say that the Commission was wrong in holding that the restriction was not indispensable to secure those benefits.
Their argument, which extends to many pages, may, I think, fairly be summarized thus: they say that, in the absence of the restriction, the Dutch importers who sell at the auctions could not longer rely on their market and could therefore no longer risk committing themselves to the bulk long-term contracts that they now enter into, and that this would result, for wholesalers, in higher prices and less dependable supplies. In support of that argument, the applicants have put in an opinion of Professor Kreukniet of Leiden University (Annex XXI to the Application). Professor Kreukniet, besides being a professor of economics, has also been a member of, and is now consultant to, a committee charged with the duty of advising the Dutch Minister of the Economy on matters concerning competition law.
The Commission, however, takes a different view. It says that such advantages as are yielded by the concentration of supply and demand at the Rotterdam auctions arise naturally from Rotterdam's position as a great port, serving a densely populated hinterland with near-perfect communications. These advantages would not disappearwith the removal of the restriction, which merely piles an additional element of artificial concentration on that which would occur naturally.
My Lords, I do not think that it is for the Court to adjudicate on such arguments, which raise questions purely of economic judgment or opinion. I have referred already to the Consten and Grundig Case, where, in relation actually to Article 85 (3), the Court held that judicial review of the Commission's appreciation of such matters must be confined to an examination of the facts and of the legal propositions relied on by the Commission. It is no part of the function of the Court to make economic prognostications. The applicants' appeal to it on the present point is therefore, in my opinion, misconceived.
K —
As I have already mentioned, the Commission in its Decision (recital IV (4)) gave as its reason for rejecting the applicants' claim for exemption under Article 85 (3) that the restriction was not indispensable to the attainment of such advantages as flowed from the existence of the Rotterdam auctions. It added however:
‘It should nevertheless be pointed out that the Agreement, by causing a major concentration of the Dutch demand for citrus fruit at the Rotterdam auctions, eliminates or hinders direct competition on the Dutch market in respect of a substantial part of the supply of such fruits from sellers established in other EEC countries.’
The applicants challenge this conclusion. The arguments they adduce in so doing are however merely repetitive of some of the arguments advanced by them in support of their grounds (H) and (I), with which I have already dealt. That being so, and the point being in any case obiter so far as the Commission's Decision is concerned, I need not, I think, take up any more of Your Lordships' time with it.
L —
Lastly, the applicants compendiously contend that the Commission's Decision is insufficiently reasoned to comply with Article 190 of the Treaty. They make it plain, however, in their pleadings, that this is no more than an alternative way of formulating their complaints under heads (F), (G), (H), (I), (J) and (K). In my opinion the contention is little better than frivolous.
I am therefore of the opinion that this action should be dismissed with costs, such costs to include those of the application for interim relief.