Commission Decision

of 17 September 2001

relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement

(Cases COMP/34493 - DSD; COMP/37366 - Hofmann and DSD; COMP/37299 - Edelhoff and DSD; COMP/37291 - Rethmann and DSD; COMP/37288 - ARGE and five others and DSD; COMP/37287 - AWG and five others and DSD; COMP/37526 - Feldhaus and DSD; COMP/37254 - Nehlsen and DSD; COMP/37252 - Schönmackers and DSD; COMP/37250 - Altvater and DSD; COMP/37246 - DASS and DSD; COMP/37245 - Scheele and DSD; COMP/37244 - SAK and DSD; COMP/37243 - Fischer and DSD; COMP/37242 - Trienekens and DSD; COMP/37267 - Interseroh and DSD)

(notified under document number C(2001) 2672)

(Only the German text is authentic)

(Text with EEA relevance)

(2001/837/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area,

Having regard to Council Regulation No 17 of 6 February 1962, the First Regulation implementing Articles 85 and 86 of the Treaty(1), as last amended by Regulation (EC) No 1216/1999(2), and in particular Articles 2, 6 and 8 thereof,

Having regard to the applications for negative clearance and notifications for exemption of the agreements on which the DSD system is based which were submitted by DSD under Articles 2 and 4 of Regulation No 17 on 2 September 1992; to the supplementary applications for negative clearance and notifications for exemption of the Service Agreement submitted by the waste disposal undertakings Trienekens on 17 September 1998, Fischer on 17 September 1998, SAK on 18 September 1998, Scheele on 18 September 1998, DASS on 21 September 1998, Altvater on 21 September 1998, Schönmackers on 25 September 1998, Nehlsen on 28 September 1998, Feldhaus on 29 September 1998, Rethmann on 30 October 1998, Edelhoff on 6 November 1998, Hofmann on 4 January 1999, and by the waste disposal associations BVSE and VKS on 29 October 1999; and to the supplementary application for negative clearance and notification for exemption of the Guarantee Agreements submitted by the waste disposal service provider Interseroh on 9 October 1998,

Having regard to the decision of 25 October 1996 to initiate a proceeding in this case,

Having invited interested undertakings under Article 19(3) of Regulation No 17 to submit their observations(3),

After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,

Whereas:

A. THE FACTS

I. INTRODUCTION

(1) On 2 September 1992 Der Grüne Punkt - Duales System Deutschland AG (hereinafter called "DSD"), in Cologne, notified a number of agreements with a view to obtaining negative clearance or a decision granting exemption from the prohibition on restrictive practices. DSD operates in Germany a countrywide system for the collection and recovery of sales packaging. The system is designed to meet the requirements of the German Packaging Ordinance. The notification concerns those agreements (the Constitution or Statutes, the Service Agreement, the Trade Mark Agreement and the Guarantee Agreements) on which the operation of the system is based.

(2) Following publication of the notification pursuant to Article 19(3) of Regulation No 17, in a notice in which the Commission announced its intention of taking a favourable view of the agreements in question under Article 81, 13 sets of observations in all were received from interested third parties(4).

(3) Between September 1998 and January 1999 individual notifications of the Service Agreement were received from altogether 12 waste disposal firms having such agreements with DSD. Two joint notifications of the same agreement were also received, each from a waste disposal association acting on behalf of six waste disposal firms.

(4) The waste disposal firms submitting individual notifications were Friedrich Hofmann GmbH & Co, Entsorgung Edelhoff Süd GmbH, Rethmann Entsorgungswirtschaft GmbH & Co KG, Feldhaus Recycling GmbH & Co KG, Karl Nehlsen GmbH & Co KG, Schönmackers Umweltdienste GmbH & Co KG, Jacob Altvater GmbH & Co, DASS GmbH, Erwin Scheele GmbH & Co KG, SAK Sondershäuser Entsorgungs GmbH, Fischer Rohstoff Recycling Freudenstadt GmbH, and Trienekens GmbH.

(5) On 29 October 1998 the BVSE Bundesverband Sekundärrohstoffe und Entsorgung e.V. (Federal Association for Secondary Raw Materials and Waste Disposal (BVSE)) submitted a joint notification of the Service Agreement on behalf of ARGE Duales System Storman-Lauenburg; ART Abfallberatungs- und Verwertungs GmbH; Cordier Abfallentsorgung GmbH; Rudolf Fritsche GmbH; TWR Tenner Wertstoff Recycling GmbH; and Ostthüringer Recycling- und Handels-GmbH.

(6) Likewise on 29 October 1998 the VKS Verband Kommunale Abfallwirtschaft und Stadtreinigung (Association for Local Waste Management and Refuse Collection (VKS)) submitted a joint notification of the Service Agreement on behalf of AWG - Abfallwirtschafts-Gesellschaft Donau-Wald mbH; Betrieb für das Duale System im Saarland; Entsorgung Dortmund GmbH; ESG Entsorgungswirtschaft Soest GmbH; VIVO Gesellschaft für Abfallvermeidung; and USB Umweltservice Bochum GmbH.

(7) In addition, over 200 waste disposal firms have informed the Commission of the Service Agreement through the Bundesverband der Deutschen Entsorgungswirtschaft (Federal Association of the German Waste Disposal Business (BDE)). These waste-disposal firms are listed in the index attached to this Decision.

(8) On 9 October 1998 the firm Interseroh AG notified acceptance and guarantee agreements for the waste fractions paper and board, tinplate, aluminium, and other composites.

(9) On 3 August 2000 the Commission sent a statement of objections to DSD initiating proceedings under Article 82 of the EC Treaty. On 20 April 2001 the Commission adopted Decision 2001/463/EC(5) in which it found that DSD was engaging in conduct incompatible with the common market by requiring, under the first sentence of Article 4(1) and the first sentence of Article 5(1) of the Trade Mark Agreement, the payment of a license fee for the total quantity of sales packaging carrying the Green Dot trade mark put into circulation in Germany even where undertakings subject to the obligations arising out of the Packaging Ordinance:

(a) either use DSD's exemption service as referred to in Article 2 of the Trade Mark agreement,

- only for partial quantities,

- or do not use the said service but put into circulation in Germany uniformly designed packaging which is also in circulation in another Member State of the European Union or of the European Economic area and which participates in a take-back system using the Green Dot trade mark;

(b) provided the obligated undertakings prove that, in respect of the quantity or partial quantity for which they do not use the exemption service, they fulfil their Packaging Ordinance obligations through competing exemption systems or through self-management solutions.

(10) This Decision is concerned with the Constitution or Statutes, the Guarantee Agreements and the Service Agreements.

II. THE PACKAGING ORDINANCE

(11) On 12 June 1991 the Verordnung über die Vermeidung von Verpackungsabfällen (Ordinance on the Avoidance of Packaging Waste, or "Packaging Ordinance") was adopted in Germany. An amended version of the Ordinance entered into force on 28 August 1998. The Ordinance is intended to prevent or reduce the impact of packaging waste on the environment.

(12) The Packaging Ordinance is binding mainly on packaging manufacturers and distributors. A distinction is made in Section 3(1) between sales packaging, transport packaging and secondary packaging. Sales packaging is packaging which is provided as a sales unit and is used by the final consumer. "Sales packaging" within the meaning of the Ordinance may also be packaging used by the distributive trades, restaurants and other service providers which makes possible or supports the handing over of goods to final consumers (service packaging), or non-returnable crockery or non-returnable cutlery. Transport packaging is packaging which facilitates the transport of goods, which protects goods in transit between the manufacturer and the distributor against damage or which is used for reasons of safety of transportation and is used by the distributor. Secondary packaging is packaging which is used as an additional layer of packaging over sales packaging and which is not needed for reasons of hygiene, preservation or protection of the goods against damage or soiling for sale to the final consumer.

(13) The terms "manufacturer" and "distributor" are defined in Section 3(7) and (8) of the Packaging Ordinance. A manufacturer within the meaning of the Ordinance is someone who manufactures packaging, packaging materials or products from which packaging is directly made, or who imports packaging into the territory covered by the Ordinance. A distributor within the meaning of the Ordinance is someone who puts packaging, packaging materials or products from which packaging is made, or packaged goods, into circulation, regardless of the marketing stage. A distributor within the meaning of the Ordinance may also be the mail-order trade. Pursuant to the first sentence of Section 3(10) of the Packaging Ordinance, a final consumer is the purchaser who does not sell on the goods in the form in which they are delivered to him.

(14) The rules on sales packaging, secondary packaging and transport packaging differ. As far as sales packaging is concerned, Section 6(1) of the Packaging Ordinance provides that the distributor of sales packaging is obliged to take back from final consumers, free of charge, used, empty sales packaging at, or in the immediate vicinity of, the actual point of sale and to recover it in accordance with the quantitative requirements of the Annex to the Ordinance (the so-called self-management solution). The distributor must draw the attention of the private final consumer by means of clearly visible, legible labelling to the fact that the packaging may be returned (third sentence of Section 6(1)). The distributor's take-back obligation is limited to packaging of the type, shape and size, and to packaging of those goods, which the distributor carries in his range (fourth sentence of Section 6(1)). In the case of distributors with a sales area of less than 200 square metres, the take-back obligation applies only to packaging for the brands which the distributor puts into circulation (fifth sentence of Section 6(1)). A corresponding take-back obligation is also imposed on mail-order firms, which have, for example, to provide adequate facilities within a reasonable radius of the final consumer (sixth sentence of Section 6(1))(6).

(15) Germany stated in answer to questions put by the Commission that the quotas which have to be met are to be met exclusively by taking back sales packaging at, or in the immediate vicinity of, the actual point of sale and that any additional collections organised near private dwellings may not count towards these quotas. The Cologne Regional Court (Landgericht) has held, however, that the quota need not be met only via collections at the point of sale(7). Pursuant to Section 6(2) of the Packaging Ordinance, the packaging taken back by the distributor pursuant to subsection 1 must in turn be taken back by its manufacturer and (previous) distributors and must be reused, or within stated quotas recycled, outside the public waste-management system.

(16) Pursuant to Section 11 of the Packaging Ordinance, manufacturers and distributors may delegate responsibility for fulfilling all take-back and recovery obligations to third parties.

(17) Pursuant to the first sentence of Section 6(3) of the Packaging Ordinance, the take-back and recovery obligation does not apply to manufacturers and distributors participating in an extensive system which throughout the distributor's sales territory guarantees the regular collection of used sales packaging from the final consumer or in the vicinity of the final consumer. The system must likewise meet certain recovery quotas. There is no legal obligation to participate in such a system once it has been set up. Firms which do not participate continue to be subject to the individual take-back obligation. The scope of a system under Section 6(3) of the Packaging Ordinance is restricted to sales packaging collected from private final consumers(8). Private final consumers within the meaning of the Ordinance are, according to the second sentence of Section 3(10), private households and comparable sources of waste generation, in particular restaurants, hotels, canteens, government offices, barracks, hospitals, educational establishments, charitable organisations, the offices of professional people, agricultural holdings and craft enterprises, excluding print shops and other paper-using businesses, which can have their packaging material disposed of at the rate normally associated with private households using normal household containers for paper and board and lightweight packaging with a capacity no greater than 1100 litres for each material.

(18) Pursuant to paragraph 2 of point 4 of Annex I to the Packaging Ordinance, manufacturers and distributors have to make it known that they are participating in a system pursuant to Section 6(3) of the Packaging Ordinance by marking packaging or by other suitable means (e.g. by informing customers at the point of sale or by a package leaflet). The marking of packaging with a system mark in the absence of membership of the system is not punishable by a fine under the Packaging Ordinance(9).

(19) Recognition as an extensive system within the meaning of Section 6(3) of the Packaging Ordinance is granted by decision of the competent authority of the Land. The fourth sentence of Section 6(3) of the Packaging Ordinance provides that the system must be compatible with existing collection and recovery systems as employed by the local bodies responsible for waste collection. In practice, the recognition of a system by the competent Land authority is dependent on a "declaration of compatibility" being issued by the relevant body. This means that municipal and rural district authorities must endorse the agreement concluded in their territory between the system operator and the collector.

(20) In an annex to the Ordinance, the quantitative conditions for recognition are laid down. Before the Ordinance was amended, these collection and sorting quotas were defined by reference to the total amount of packaging material in the source area (i.e. the Land). Thus, for example, as of 1 July 1995 80 % of all packaging material had to be covered by the collection system. From the materials collected, 90 % of glass, tinplate and aluminium and 80 % of paper and board, plastics and composite packaging had to be sorted out into a quality suitable for recycling. During the period from 1993 until 30 June 1995 reduced quota requirements applied.

(21) Once the Packaging Ordinance was amended, this absolute calculation method was converted into an individual-system-based calculation method (i.e. one covering the sales packaging fed into a given system). In future, moreover, those manufacturers and distributors who do not participate in a system pursuant to Section 6(3) of the Packaging Ordinance also have to meet these quantitative requirements. Since 1 January 2000, 75 % of packaging made of glass, 70 % of packaging made of tinplate, paper and board, and 60 % of packaging made of composites must be recovered both by the operators of extensive systems within the meaning of Section 6(3) of the Ordinance as regards packaging for which manufacturers and distributors participate in their system and by manufacturers and distributors who opt for a self-management solution. At least 60 % of packaging made of plastic must be recovered, and at least 60 % of this quota must be recovered using processes whereby new, physically identical material is produced or the plastic remains available for another material use (so-called reusable material process). Packaging made of material for which no specific recovery methods are prescribed is to be recycled as far as is technically possible and economically reasonable. In the case of a self-management solution, compliance with the take-back and recovery requirements must be certified by an independent expert on the basis of verifiable documents (paragraph 1 of point 2 of Annex I). An exemption system must furnish verifiable evidence of the quantities collected and recovered. At the request of the competent authority, the evidence must be confirmed by an independent expert's report (paragraph 4 of point 3 of Annex I).

(22) Germany has indicated that a simultaneous combination of the self-management solution and participation in a Section 6(3) system is possible and that therefore participation in a Section 6(3) system with a certain quantity of a packaging product is also possible. In the interests of the consumer and of the authorities, however, a degree of transparency must be brought about as to which packaging is subject to the take-back obligation at or in the immediate vicinity of the shop and which is not. Germany has also confirmed that, pursuant to the Packaging Ordinance, the final consumer is free to decide whether to leave the packaging in the shop or return it to the shop later, or to take it to a disposal point near his home(10).

(23) Where the distributor and the manufacturer do not fulfil the obligations laid down in the first sentence of Section 6(1) and the first sentence of Section 6(2) of the Packaging Ordinance by taking back packaging at the point of sale, they have to ensure, pursuant to the ninth sentence of Section 6(1), read in conjunction with the fourth sentence of Section 6(2), of the Ordinance that it is taken back using a system pursuant to subsection 3. Germany has further indicated in this connection that a self-manager who has not met his recovery quota is required to participate in a Section 6(3) system with the amount of packaging that is necessary in order to meet the quota.

(24) For transport packaging and secondary packaging there are similar take-back obligations. However, there is no possibility of release from these obligations by way of participation in a system. Nor are there any take-back and quota requirements. Distributors who offer goods in secondary packaging are obliged to remove it when handing goods over to final consumers or to make available at the point of sale facilities where final consumers can return the secondary packaging free of charge. If the final consumer leaves the goods in their secondary packaging, it is treated as sales packaging for the purposes of the Packaging Ordinance.

(25) In response to questions put by the Commission, Germany declared back in 1993 that Section 6(3) of the Packaging Ordinance would no be interpreted as meaning that the establishment of only one system was possible. The Packaging Ordinance allowed the setting-up of additional disposal systems for sales packaging. It was not the legislator's intention that only one system should be created in Germany or in each Land.

(26) According to the explanatory memorandum to the amended version of the Packaging Ordinance, one of its basic aims is to enhance competition. This is to be achieved, inter alia, by henceforth putting collection, sorting and recovery services out to competitive tender and by selling packaging intended for recovery under competitive conditions. Moreover, the costs associated with the collection, sorting and recovery or disposal of each packaging material are to be published. The explanatory memorandum also states that competition between several "dual" systems is to be facilitated. The recycling requirements are now to be expressed in terms of the volumes brought into the system, which will make it very much easier to set up competing systems. Greater competition should create the potential for cost savings among manufacturers and in the distributive trades(11).

III. THE COLLECTION AND RECOVERY SYSTEM OPERATED BY DSD

(27) DSD is the only undertaking in Germany which operates an extensive system for the collection and recovery of sales packaging within the meaning of Section 6(3) of the Packaging Ordinance. At the beginning of 1993, DSD was recognised by all competent authorities in the German Länder. The system has been in operation since 1992 and has been fully operational since 1993. It is called a "dual" system as the collection and recovery of packaging is effected outside the public waste disposal system and is operated by a private undertaking.

(28) Besides DSD there are a few other undertakings which organise the collection and recovery of sales packaging. However, these undertakings are not extensive systems within the meaning of Section 6(3) of the Packaging Ordinance. They operate as a third undertaking within the meaning of Section 6(1) and (2) read in conjunction with Section 11 of the Packaging Ordinance. In other words, they fulfil directly the take-back obligations of manufacturers or distributors of sales packaging. A large number of other undertakings collect and recover transport packaging.

(29) DSD is financed by fees from undertakings belonging to the system. By this means, the undertaking acquires the right, against payment of a fee, to use the Green Dot trade mark on its sales packaging and, as an actual service, exemption from the obligation to take back such packaging.

(30)

>TABLE>

(31) DSD does not perform the task of collection itself but employs local (public or private) collecting companies. DSD has concluded so-called Service Agreements with those undertakings. There are 546 collection districts. Some collectors are DSD contractors for more than one district. DSD has concluded agreements with 537 collectors in all. Some of the collectors are in turn integrated into larger groups of companies. Under the Service Agreement, the collector has the exclusive task of collecting and sorting used sales packaging in a certain district. The system covers private households and certain business enterprises. The collector does not necessarily collect and sort all packaging himself, subcontractors often being used for the collection and sorting of certain materials.

(32) The system established by DSD collects used sales packaging made from all kinds of materials. The packaging is deposited either in containers placed close to private households or in plastic bags or bins which have been distributed to individual households. The receptacles used for collection are the property of the collector(12). Sorting the collected material is the responsibility of the collector. Usually the sorting is done by specialised undertakings. The collector takes all packaging put into the containers, regardless of whether or not it bears the Green Dot mark. Other objects put into the containers will also be recovered if they are suitable or will be sorted as waste. Together with sales packaging made of paper and board collectors usually also collect old printed matter (newspapers and magazines). This makes up the larger part (about 75 %) of the paper and board collected. The collection of printed matter is not part of the DSD system and is not paid for by DSD.

(33) Once the material has been sorted it is conveyed to a recovery plant either directly by the collector or with the help of third parties, or handed over to so-called guarantee companies. These guarantee companies have given DSD an assurance that they will recover the used packaging. The guarantee companies are organised by the industries producing the relevant packaging materials, or else are undertakings specially created for the purpose of marketing and recovering the collected materials. The quotas imposed must be recycled. Any additional volumes are to be recovered by other processes wherever technically possible and economically reasonable. If no form of recovery is available which is technically end economically reasonable, these volumes may be disposed of in a manner considered environmentally sound.

(34) The system operated by DSD does not collect all sales packaging within the meaning of the Packaging Ordinance but only that arising in private households and comparable sources of waste generation. Transport packaging is not collected. This restriction of the range of DSD's activities has been ordered by the Federal Cartel Office. The Office has objected several times to attempts by DSD to extend the range of its activities.

(35) In October 1992 DSD announced plans to start collecting sales packaging which ends up at large enterprises and industrial installations. After the Federal Cartel Office had objected that this would lead to the exclusion from the market of those collectors which are not DSD contractors, the project was abandoned. The Federal Cartel Office expressed the view in this case that the individual Länder decisions which obliged DSD to engage in the behaviour in question could not prevent the Office from stopping these activities. In a settlement of the case, it was agreed that DSD may collect from the following premises on the same pattern (in terms of intervals) as for private households: restaurants, canteens, hospitals, government offices, educational establishments, barracks, offices of liberal professions and craft enterprises, excluding printers and other paper-using enterprises, which have containers not larger than 1100 litres for each material.

(36) In a second case the Federal Cartel Office issued a prohibition order on 24 June 1993 against a project whereby DSD extended its range of activities to sales packaging which is not sold in retail outlets and to transport packaging. The subject of the order was DSD's plan to collect, via a subsidiary, sales packaging and transport packaging made of paper and board or plastic accumulating at large commercial and industrial installations. The Federal Cartel Office saw the bundling of the demand for collection services as a restraint of competition within the meaning of Section 1 of the German Law prohibiting Restraints of Competition. DSD has not appealed against the order.

IV. THE AGREEMENTS

(37) This Decision is concerned with DSD's Constitution or Statutes, with the standard agreement with waste disposal firms in its original form and in the form given it by the first, second, third and fourth amendments, and with the agreements concluded with guarantee companies. The agreements have been amended several times in the course of this proceeding.

1. THE CONSTITUTION

(38) DSD was set up on 28 September 1990. In 1997 it was converted into public limited company form under the name Der Grüne Punkt - Duales System Deutschland Aktiengesellschaft. The preamble to the Constitution or Statutes (Satzung) of the company states that traders, bottlers and packers, manufacturers of packaging and suppliers of packaging material have decided to set up a privately organised take-back system in which used sales packaging is collected outside the public waste disposal system from points in the vicinity of households. This "dual" system consists of several inseparable components: the establishment of a collection system reaching the final consumer, guarantees of acceptance and recovery and contracts for recovery, the marking of all packaging within the system with the Green Dot trade mark, and the financing of the system by means of a fee charged for the use of the Green Dot trade mark. The preamble to the Constitution originally included an undertaking on the part of traders that they would stock only packaging carrying the Green Dot. There is no such clause in the version notified.

(39) The Constitution states that the object of the company is the organisation and operation of a dual waste disposal system through measures for the avoidance of waste and especially packaging waste, the collection and sorting of secondary raw materials, and the raising of the necessary financial resources. A shareholders' resolution of 19 October 1992 replaced the term "sales packaging" which had originally been used by the term "packaging".

(40) Membership of the company is open to all German and foreign undertakings. In 1998 DSD had 552 shareholders. The shareholders are firms in the distributive trades, bottlers and packers, manufacturers of packaging and suppliers of packaging material. Waste disposal firms, however, lent DSD more than DEM 700 million when DSD experienced a financial crisis in 1993, and some of this has since been converted into sleeping partners' holdings.

(41) The Constitution provides that there is to be a supervisory board composed of an equal number of representatives of the distributive trades, bottlers and packers, and manufacturers of packaging and suppliers of packaging material. The present board is made up of three representatives of each group and three representatives of waste disposal firms.

2. THE SERVICE AGREEMENT

(42) The relationship between DSD and the collectors is governed by a standard agreement, the Agreement on the Establishment and Operation of a System for the Collection and Sorting of Used Sales Packaging, known as the Service Agreement (Leistungsvertrag). Since it was originally notified the agreement has been amended several times, by the first, second, third and fourth amendments. With a few exceptions, Service Agreements were concluded for the first time between January 1992 and January 1993. Not all collectors have agreed to all the amendments made to the Agreement, so that in some cases the version in force is an earlier one.

(43) In January 2000 there were 537 Service Agreements between DSD and collectors, of which 502 incorporated the fourth amendment, 10 were as amended by the third amendment only, six were as amended by the second amendment, 18 were as amended by the first amendment, and one was in the form of the original Agreement.

(44) Section 1 of the Service Agreement provides that the collector has the exclusive task of setting up and operating a system of the kind defined in Section 6(3) of the Packaging Ordinance in a designated district. Any further functions which DSD takes on as a result of changes in the Packaging Ordinance, or the amendment or enactment of other legislation, are likewise entrusted by DSD exclusively to the collector as part of the package of activities for the designated district. Point 2(1) of the third amendment, which was left intact by the fourth amendment, states that the parties agree that all sales packaging left at the collection points belonging to DSD and covered by the system is to be collected and where necessary sorted and brought for recovery only in accordance with the Agreement. Collection must take place at or in the vicinity of the final consumer's home; the collector is free to determine the detailed arrangements. The collector may act through subcontractors. However, a provision introduced by the third amendment provides that the arrangements made by collectors are to be replaced by a system of bins installed directly at households by 31 December 1999, except in the case of glass.

(45) The Service Agreement provides that the collector takes ownership and possession of the used sales packaging at the time of collection or at the time when the final consumer places it in a container used for collection. DSD never acquires ownership of the reusable materials recovered or to be recovered.

(46) For each class of material DSD undertakes to conclude agreements with suitable guarantors (guarantee companies), who will ensure recovery on a long-term basis.

(47) The Service Agreement originally provided that the collector was not entitled to market the collected materials himself. He was to pass them free of charge to guarantors designated by DSD. In comments sent to DSD the Commission objected to this "zero interface" principle, on the ground that it infringed Article 81(1)(a) of the EC Treaty. Competition was restricted because collectors were restricted in their relations with third parties, and although they were owners of the materials were prevented from exploiting them commercially themselves. Following talks with the Commission DSD put an end to the zero interface system.

(48) The Agreement now provides that from 1 January 1996 the collector has a choice between marketing glass, paper and board, tinplate and aluminium alone (which is known as self-marketing) or together with a guarantee company (modified self-marketing), or continuing to pass the materials to a guarantee company (guarantor marketing). The collector's choice binds him until the expiry of the Service Contract. He may indicate a separate choice for separate waste fractions. But plastics and composite packaging (drinks cartons and other composite packaging) must be passed on to a guarantor.

(49) If the collector opts for self-marketing, he has the right and the obligation to recover and market the material collected in his own name and for his own account and risk. If the collector defaults, DSD is entitled to organise collection either itself or through a third party. The collector has to give DSD security, the amount of which is determined on the basis of the potential costs of recovery. DSD can make use of the security only in the event of the insolvency of the collector. If the collector opts for modified self-marketing, he is entitled to recover the materials jointly with a guarantor. The collector and the guarantor are jointly and severally liable for the performance of the duty to recover the material. If the collector opts for guarantor marketing, he must place the collected and sorted material at the disposal of a guarantor designated by DSD.

(50) Even in the event of self-marketing or modified self-marketing, the collector has to designate a guarantor to coordinate a volume flow record. The collector has to conclude an agreement with the guarantor regarding the keeping of this record, and the agreement must be approved by DSD. The collector must supply the guarantor with uniform and complete documentation showing the progress of the waste from collection to the recovery of the reusable materials. Either party may end the agreement at the end of a calendar year, following six months' notice.

(51) For collecting and sorting each packaging material the collector receives a payment, which is generally based on weight. The payment is calculated taking account of the costs of disposing of waste that has to be removed from the materials collected, and of the overall success rate, which is measured by the volume collected in relation to the number of inhabitants. The payment is adjusted by means of a price variation clause. The Service Contract originally included a clause stating that a collector who opted for self-marketing or modified self-marketing was to pay a flat-rate sum of DEM 1,25 per head of population per year to DSD, in consideration of the revenue he earned from recovery; but this clause has been removed, in fulfilment of a commitment given by DSD to the Commission (see recital 70).

(52) Following the fourth amendment, the notified Service Agreement was to run until the end of 2004 or 2007; under the third amendment, it was to run until the end of 2003 or, if an option to extend was exercised, until the end of 2005. The older variants usually provided that the Agreement could be terminated for the first time at the end of the year 2002 or 2003, and could be extended for another five years. On the basis of the fourth amendment in any event, therefore, the total duration of the Service Agreements was as a rule about 15 years.

(53) In comments made to the parties notifying the Service Agreements the Commission objected to their duration. The collectors argued that long-term agreements were necessary primarily in order to enable them to plan and invest securely so as to be able to implement the Agreement. The investment needed was essentially in collection and transport vehicles, collection bins and containers, and sorting facilities and equipment for used sales packaging. In terms of volume, collectors had to invest particularly heavily in sorting plants using separation equipment which was very costly owing to the technology required. There are now about 400 sorting plants, most of which were built in the years 1992 to 1995. According to information supplied by the collectors and the BDE, the collectors concerned have invested or are in the process of investing some DEM 10 billion altogether over the lifetime of the Agreement. Long-term agreements, it was argued, were indispensable, especially in order to ensure secure planning and investment so that collectors could recoup this investment, which was exceptional in the industry. In the initial stages DSD was the collectors' only customer for used sales packaging collection services, and collectors could afford to undertake the necessary investment only on the basis of clear and reliable planning and amortisation.

(54) In order to establish whether such long-term exclusive agreements were indeed necessary in order to recoup the investment required, the Commission made various measurements. It conducted an industry-wide survey investigating the extent, the scale and the date of the investment carried out or still to be carried out by the collectors, especially in respect of the relatively capital-intensive sorting plants. It considered that for purposes of the enquiry the 24 collectors who sought individual exemption of their Service Agreements could be regarded as sufficiently representative of the industry, and it subjected them to a detailed individual investigation looking at the conditions for recovery of the investment. For this purpose an economic investment and profitability study was conducted into the data and forecasts submitted by these collectors regarding the investment carried out or still to be carried out and the turnovers and costs achieved or forecast during the lifetime of the agreement, account being taken of any alternative uses and residual values.

(55) The individual investigation of the collectors studied in detail led to the conclusion that an exclusive agreement running until the end of 2007 was not indispensable in order to recoup the investment actually being carried out by the collectors. The results suggested rather that if the Service Agreements were to run until the end of 2003 collectors would have sufficient time to achieve an economically satisfactory redemption of their investment. The Commission informed the applicants of this finding, and the applicants then set a termination date of 31 December 2003 for the Agreements in the event that the Commission ultimately exempted them. This change was made between August 1999 and January 2000.

(56) The Service Agreements do not tie the collectors exclusively to DSD; they leave them free to supply similar services to other customers. DSD has also given the Commission the commitment set out in recital 71.

(57) DSD initially claimed that where third parties wished to make use of the collection facilities of collectors contracted to DSD they had to have DSD's authorisation. This was the subject of a complaint lodged under Article 82 of the EC Treaty by the competing Vereinigung für Wertstoffrecycling mbH (Association for the Recycling of Reusable Materials (VfW)), and of an action brought before the Cologne Regional Court. DSD had argued that VfW could not without DSD's consent make use of collection facilities for reusable materials set up as part of the DSD system, or have them used by VfW's own collectors. The Commission indicated that Article 82 of the EC Treaty might be applicable.

(58) After the Commission put forward its view, DSD stated that it would not seek to restrict use in this way either in the particular case of VfW or in comparable cases; it has given the Commission a commitment to that effect, which is set out in recital 72.

(59) Annex 1 to the third amendment, which was left intact by the fourth amendment, lists collection points which are to be served in addition to private households. DSD states that the enumeration of these collection points is not part of the notification.

3. THE GUARANTEE AGREEMENTS

(60) The Guarantee Agreement governs the legal relations between DSD and the undertakings that accept and recover the collected sales packaging. These firms guarantee the recovery of the collected materials on a long-term basis, irrespective of market conditions at any one time. In the beginning guarantees of recovery were given for specific waste fractions by the producer industries; these guarantees in some cases tended to be theoretical. DSD subsequently concluded agreements with individual guarantors, the "guarantee companies". For paper and board there are three guarantee companies; and for glass, aluminium, tinplate and composite cartons there is one each.

(61) The Guarantee Agreements initially provided that DSD was to require the collectors to deliver these materials to the guarantee companies free of charge, which was known as the "zero interface" (Schnittstelle Null) principle. This clause mirrored the clause in the Service Agreements already referred to. After the Commission objected to these arrangements too, the Guarantee Agreements were either terminated or amended to match the amended provisions in the Service Agreements (see recital 47).

(62) At present there are Guarantee Agreements for the following materials, which are largely identical in substance. For paper and board, there are agreements with Interseroh AG; with VfW; with Gesellschaft für PapierRecycling (GespaRec); with Deutsche Gesellschaft für Wertstoffverwertung mbH (DGW); with Papier- und Kunststoffverwertungs GmbH (IPK); and with Recostra SA. For glass there is an agreement with Gesellschaft für Glasrecycling und Abfallvermeidung mbH (GGA). For aluminium there are agreements with Interseroh AG; with DGW; with IPK; with VfW; and with Deutsche Aluminium Verpackung Recycling GmbH (DAVR). For tinplate there are agreements with Interseroh AG; with Rasselstein Hoesch GmbH; with DGW; with IPK; with VfW; with Entsorgungs- und Beratungsgesellschaft für die deutsche Recyclingwirtschaft mbH & Co KG (GEBR); and with Thyssen Sonnenberg GmbH. For composite drinks cartons there is an agreement with Recarton GmbH. For other composite packaging there is an agreement with Interseroh AG. The Guarantee Agreements generally run until 31 December 2003.

(63) Where a collector has opted for marketing through a guarantor, the guarantee company is obliged to accept all sorted sales packaging from that collector which meets certain sorting quality requirements. In modified self-marketing, the guarantee company organises marketing and recovery jointly with the collector; the guarantee company is liable alongside the collector for proper recovery.

(64) The guarantee company is obliged to supply evidence of the recovery of the materials, and to draw up a volume flow record every year. The guarantee company must draw up such records even for collectors who market their own materials. It may charge for this service.

(65) To ensure that the process of notification between collectors and guarantee companies is neutral in competition terms, DSD has given the commitments in recitals 73 and 75.

(66) The Guarantee Agreements contain no exclusivity clauses. DSD is free to conclude agreements with several guarantee companies for the same waste fraction. DSD has stated that it is generally prepared to conclude a guarantee agreement with any undertaking that meets the relevant requirements. DSD has given a commitment to that effect, which is set out in recital 74.

(67) DSD did not notify an agreement regarding the recovery of plastic packaging concluded with Deutsche Gesellschaft für Kunststoffrecycling GmbH (DKR) because DKR is a company associated with DSD. DSD holds 49,6 % of the shares, while the remaining 50,4 % is owned by a number of chemicals manufacturers acting through a holding company.

(68) The agreements setting up guarantee companies are outside the scope of this Decision.

V. COMMITMENTS GIVEN BY DSD

(69) DSD has submitted a number of commitments to the Commission in connection with the agreements which are the subject of this proceeding.

(a) The Service Agreement

(70) DSD undertakes no later than 30 September 1997 to amend the clauses in contracts with collectors on the marketing of sorted materials (second sentence of point 3.4.5 of the third amendment of the Service Agreement) so that collectors who take full advantage of the marketing right are not treated more favourably than collectors who exercise this possibility only in respect of a part of the materials available for marketing.

(71) DSD will not oblige collectors to work exclusively for DSD. DSD further undertakes to refrain from obliging collectors to use containers or other facilities for the collection of used sales packaging exclusively for the performance of the Service Agreement. This will not apply where the use of the collection containers or other facilities by third parties is incompatible with the permission given by the public authorities, or where the Packaging Ordinance or other legislation determines otherwise, or where for other reasons it would be unreasonable to permit them to be used (for example in the case of dangerous substances or contaminants). The use of collection containers and other facilities by third parties may be allowed for when settling accounts with the collector.

(72) DSD is prepared to refrain from seeking to restrict use in the manner referred to in the judgment of the Cologne Regional Court of 18 March 1997 in particular case of VfW and in comparable cases. DSD may however pursue claims for information and settlement against collectors in a contractual relationship with DSD.

(b) The Guarantee Agreements

(73) Knowledge acquired by DSD in preparing the records of deliveries for recycling required by the Packaging Ordinance may not be used for purposes of market information. Where necessary, records are to be rendered anonymous in an appropriate fashion. For sorted materials in the glass, tinplate, aluminium and paper and board fractions DSD may not ask for further evidence of delivery for recycling than proof of delivery to an undertaking authorised by national law to recover or to trade in these materials within the European Community or the EEA, unless there is reasonable doubt of proper compliance with the requirements of the Packaging Ordinance.

(74) DSD is in principle prepared to accept anyone who satisfies the relevant requirements as a guarantor for a waste fraction.

(75) DSD is in principle prepared to render references to undertakings in volume flow records anonymous, provided this is accepted by the Länder in their capacity as exempting authorities.

VI. OBSERVATIONS SUBMITTED BY THIRD PARTIES

(76) Following the publication of a notice under Article 19(3) of Regulation No 17 and Article 3 of Protocol No 21 to the EEA Agreement, the Commission received observations from 13 interested parties. The observations were concerned mainly with the Service Agreement and the Trade Mark Agreement. The Trade Mark Agreement is outside the scope of this Decision.

(77) On the Service Agreement, it was submitted that in practice, and contrary to the commitment referred to in recital 71, DSD did not allow third parties unimpeded access to the collection facilities of the parties to the Service Agreement. This led the Commission to explain its understanding of this commitment to DSD once again, where upon DSD gave a supplementary commitment (see recital 72). Some observations concerned the planned duration of the Service Agreements; these strengthened the Commission in its view that the doubts it had already expressed to DSD regarding the indispensability of the planned duration of the Agreements ought to be renewed, and led to an adjustment to the duration of the Agreements. Some observations also suggested that when the Service Agreements expired fresh agreements should be awarded by competitive tender. As has been explained, the amended Packaging Ordinance makes provision for this. Other observations argued that the "zero interface" in the Service Agreements should be removed for plastics and plastic composites too.

(78) The Commission has carefully considered the observations submitted to it by interested parties, and has addressed them in this Decision wherever necessary and appropriate.

B. LEGAL ASSESSMENT

I. ARTICLE 81(1) OF THE EC TREATY AND ARTICLE 53(1) OF THE EEA AGREEMENT

(79) All agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market are prohibited as incompatible with the common market.

1. AGREEMENTS BETWEEN UNDERTAKINGS

(80) DSD has operated under its Constitution (known in German as the Gesellschaftsvertrag, and from 1997, when DSD became a public limited company, as the Satzung). The preamble to the present Constitution states that traders, bottlers and packers, and manufacturers of packaging and suppliers of packaging material have decided to set up an organisation to act as a vehicle for the establishment of a dual collection system. According to the Constitution membership of the company is open to any domestic or foreign undertaking. DSD's Constitution is therefore an agreement between undertakings.

(81) With a view to the provision of services, DSD itself concludes Service Agreements with collectors and Guarantee Agreements with guarantee companies. The Service Agreement which DSD concludes with collectors and the Guarantee Agreement which DSD concludes with guarantee companies are likewise agreements between undertakings.

2. RESTRICTION OF COMPETITION

2.1. Relevant markets

(82) In what follows the markets relevant to an assessment of the agreements which are the subject of this proceeding are defined both in terms of the service involved and in terms of geographic area.

2.1.1. The relevant product market

(83) The relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer by reason of their characteristics, their prices and their intended use.

(84) The object of DSD is to organise and operate what is termed a dual private take-back system for used packaging. The agreements on which the DSD system is based produce economic effects at various levels at which value added is created. It will be shown here that for the assessment of the Constitution, the Service Agreement and the Guarantee Agreement under Article 81(1) there are separate and independent relevant markets.

2.1.1.1. The market in the organisation of the take-back and recovery of household packaging waste

(85) The Commission considered the definition of the relevant market in the organisation of the take-back and recovery of used sales packaging collected from private final consumers in Decision 2001/463/EC. For purposes of this Decision, therefore, it will be sufficient to refer to the discussion there.

(86) Nor need any final ruling be given here as to which of the two conceivable market definitions contained in that Decision should be applied. As will be explained below, the agreements under consideration do not restrict competition within the meaning of Article 81(1) of the Treaty in any event, regardless of which market definition is applied. It is not necessary to decide the precise definition of the market in the organisation of the take-back and recovery of used sales packaging collected from private final consumers (hereinafter referred to as "household packaging waste") in Germany.

2.1.1.2. The market in the collection and sorting of household packaging waste

(87) In the case of the collectors who collect, transport and sort used sales packaging on behalf of DSD, the relevant market is the market in the collection and sorting of household packaging waste. For the present at any rate this forms one market. Collecting sales packaging and sorting it according to its use are two different activities, and the infrastructure needed is different too. They have to be classed together, however, mainly because the market is shaped by the demand exerted by DSD, and because DSD has in the past purchased both services together. Demand on this market originates with exemption systems and with the manufacturers and distributors bound by the Packaging Ordinance and the firms responsible for organisation under Section 11 of the Packaging Ordinance. If Germany's view prevails (see recital 15), self-management arrangements will exert demand only on the margin of this market, particularly in respect of collection points deemed equivalent to private households, or in the case of delivery to the final consumer.

(88) The market in the collection and sorting of household packaging waste is a market separate from the collection from households of items other than sales packaging, that is to say essentially the traditional household and residual waste collection, and likewise separate from collection from non-household-related sources in industry and large commercial enterprises.

Distinction from household and residual waste

(89) With the enactment of the Packaging Ordinance the collection of used sales packaging from households (including small businesses which were comparable in terms of the logistics of collection) was separated from the traditional household refuse collection, and responsibility for the organisation of this sales packaging collection was taken away from the public waste management system. Collecting firms now had the opportunity to collect and sort used packaging for their own account; until then they had done so only as agents of public authorities and under their supervision.

(90) Household and residual waste continued to be collected under the responsibility of the local authorities who had an obligation to remove it. The market in the collection and sorting of household packaging waste is distinguished from that market by a substantially broader service profile. Unlike the traditional household and residual waste collection, this operation itself adds value, through the sorting of sales packaging into different materials in accordance with specific instructions and the delivery of the sorted materials for further recycling. A collector who takes on the task of sorting used packaging usually has to undertake extensive investment in order to set up proper sorting facilities. The investment is demand-specific, and cannot rapidly be used for other types of collection. Collection services for sales packaging and collection services for the remaining household and residual waste are not functional substitutes in the short term.

Distinction from collection from industry and large commercial enterprises

(91) The market in the collection and sorting of household packaging waste is distinguished from collection from non-household collection points in industry and large commercial enterprises especially by the different logistical requirements of collection, with regard to such things as the number of collection points that have to be cleared, the average volume to be collected from each point, the containers required, or the intensity of the collection schedule.

(92) In industry and large commercial enterprises the number of collection points is relatively limited, and they can be cleared separately by different collectors, because the volume to be collected is fairly large. In the case of final consumers, on the other hand, waste has to be collected direct from all households in the local authority's area, apart from a few cases where it may be brought by the public to a single collection centre. Collection from final consumers therefore displays clear network effects, i.e. effects of both scale and scope.

(93) These specific supply conditions have the consequence that for logistical reasons collection points at households, if they are to be served at optimum cost, have usually to be served by only a limited number of collectors. A further and decisive factor is that as a rule only one container can be placed at each collection point for each type of material (such as glass, paper or lightweight packaging), for reasons of space and the established habits of final consumers. The specific supply conditions are also the main reason why there is usually only one household refuse or reusable materials collection from households, which is carried out by just one collector.

(94) But this does not apply to non-household collections from industry and large commercial enterprises. Here firms conclude individual waste-disposal contracts with collectors. From their point of view it is of no great importance whether what has to be collected is sales packaging, other materials or waste. Indeed there is some tendency among big companies to look for comprehensive waste disposal arrangements for the whole company, which may very well be operating in several places. Even before the Packaging Ordinance entered into force, therefore, waste collection from large commercial and industrial firms was already organised on competitive lines, and unlike collection from households it presents no special logistical difficulties. In addition, the sales packaging to be collected from final consumers differs greatly from that which accumulates in industry and large commercial enterprises in terms of the materials, reusable or otherwise, which it contains. Tinplate, aluminium and plastic composites are collected almost entirely from private households, where they usually appear in the lightweight packaging fraction and have to be sorted subsequently. Sorting takes place in relatively capital-intensive sorting plants using technical facilities which are not needed for the sorting of packaging from industry and large commercial enterprises.

(95) Thus collection services for household packaging waste and for sales packaging which accumulates in industry and large commercial enterprises are not functional substitutes either.

Conclusion

(96) The Commission is satisfied that the collection services which DSD obtains from collectors constitute a market in the collection and sorting of household packaging waste. This market is separate from traditional household and residual waste disposal and from collection from commercial and industrial firms. There is no need to settle here whether the relevant market could be further differentiated by individual material fractions, such as glass or paper and board, or into its component value-adding functions, such as collection itself, transport and sorting, as this would not change the assessment under Article 81(1).

2.1.1.3. Markets in recovery services and secondary raw materials

(97) DSD plays a role on the markets in recovery services and secondary raw materials with respect to glass, paper and board, tinplate, aluminium, plastics, and composite drinks cartons and other composite packaging; it does so by organising the delivery of reusable materials covered by the system for recovery by guarantee companies, in accordance with the requirements of the Packaging Ordinance, on a long-term basis independently of the market conditions of the moment. The guarantee companies give DSD the assurance that the reusable materials prepared by the collectors will be recovered in accordance with the Packaging Ordinance.

(98) The Commission takes the view that the secondary raw materials which are prepared for recovery in the DSD system divide into separate markets in the separate reusable fractions, some of which, such as those in glass or paper, existed before the Packaging Ordinance was enacted and DSD was set up.

(99) However, the definition of the relevant product markets in recovery services and secondary raw materials need not be settled here, because even if a narrower market definition is accepted the assessment of the agreements on any of these markets would not change the overall assessment for competition purposes under Article 81(1) (see below). In particular, there is no need to settle whether the mere organisation of the guarantee of recovery of a specific material by a guarantee company is a product market separate from the downstream recovery of that material, or from the offer for sale of secondary raw materials.

2.1.2. Relevant geographic market

(100) The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas.

(101) The objective supply and demand conditions on the relevant markets covered by the DSD system continue to exhibit considerable variations between Member States. This is due not least to the fact that this is a sector which used to be, and in some areas still is, to a large extent regulated and organised by the State.

(102) Although the waste-management sector is becoming increasingly internationalised, it is still the case that supply and demand continue to be organised at national level, in particular as regards waste-management services for used sales packaging. One major factor is that the legal provisions that regulate the disposal of packaging are still very different from one country to another. This is true not only of the statutory requirements governing extensive take-back and exemption systems and the collection, sorting and recovery quotas to be met, but also of the commercial freedom of action which private undertakings enjoy, e.g. regarding the collection and sorting of sales packaging under their own responsibility. This is one of the reasons why the take-back and exemption system operated by DSD is restricted to Germany, and the Service Agreements needed to put the system into practice have been concluded entirely on a domestic basis.

(103) It must be assumed, therefore, that the objective supply and demand conditions on the relevant markets in this case differ on a continuing basis from those in other parts of the common market. Consequently, when the Community competition rules have to be to applied to these two product markets within the DSD system, namely the market in the organisation of the take-back and recovery of household packaging waste and the market in the collection and sorting of household packaging waste, the relevant geographic market is that of the Federal Republic of Germany. As far as the markets in recovery services and secondary raw materials are concerned, however, it will not be necessary to define the geographic market.

2.2. Restriction of competition by DSD's Constitution on the market in the organisation of the take-back and recovery of household packaging waste

(104) At the present time DSD is the only undertaking on the market in the organisation of the take-back and recovery of household packaging waste in Germany to offer an extensive system that provides exemption from the obligation to take back and recover sales packaging. DSD is thus the vehicle through which the shareholders and other undertakings who conclude Trade Mark Agreements with DSD secure exemption from their take-back and recovery obligation.

(105) The setting up of the company along the lines laid down in DSD's Constitution was therefore a vital condition if participation in an extensive system was to be offered as a means of securing exemption from a company's take-back and recovery obligation; a business that wishes to secure such exemption can join the system by concluding a bilateral contract, namely a Trade Mark Agreement, with DSD.

(106) DSD's Constitution contains no exclusivity clauses. The shareholders are free to enter into contracts with organisations competing with DSD, or with firms providing services to DSD. In the original version of the preamble to the Constitution traders undertook to stock only packaging that carried the Green Dot trade mark; but this obligation is no longer present in the version notified.

(107) Thus the Constitution does not occasion any appreciable restriction of competition within the meaning of Article 81(1) on the market in the organisation of the take-back and recovery of household packaging waste. This is why the question of the precise definition of the market need not be settled. Nor is it necessary to consider whether these agreements affect trade between Member States.

Conclusion

(108) The Commission concludes that the setting-up of DSD in accordance with its Constitution does not constitute a restriction of competition within the meaning of Article 81(1). This does not mean that market activities arising out of the operation of such a system can never be caught by Article 81.

2.3. Restriction of competition on the market in recovery services and secondary raw materials

(109) DSD plays a role on the markets in recovery services and secondary raw materials with respect to glass, paper and board, tinplate, aluminium, plastics, and composite drinks cartons and other composite packaging, by organising the recycling of reusable materials from the sales packaging covered by the system, which is necessary in order to obtain exemption by the responsible Land authorities. Rules on this aspect are to be found in both the Service Agreement and the Guarantee Agreement.

2.3.1. Restriction of competition by the Service Contract

(110) As explained in recital 47, DSD has abolished the system of the "zero interface". There is consequently no longer any appreciable restriction of competition on the relevant market in respect of the glass, paper and board, tinplate and aluminium fractions. For the present, in view of the special circumstances that obtain when an exemption system of this kind is being set up for the first time, the Commission is prepared to allow the clause requiring collectors to commit themselves to one or other form of marketing of the materials collected until the termination of the Service Agreement. The Commission takes the view, however, that after the current Service Agreements expire on 31 December 2003 markets in recovery services and secondary raw materials will be sufficiently well established, and that under future agreements it should be possible to opt for a form of marketing of materials for a substantially shorter time.

(111) For plastics and composite packaging containing plastics (composite drinks cartons and other composite packing), the Service Agreement continues to prevent the collector from marketing the sorted materials himself. These materials must be passed on to a guarantee company. Whether or not this exception is admissible is a question that has to be determined in the specific circumstances that obtain where a functioning market is being established in the recovery of plastics from household packaging waste.

(112) Until the enactment of the Packaging Ordinance and the setting up of DSD, plastic and composite packaging accumulating in households, unlike other materials such as glass or paper, was not collected and recovered separately; it was collected along with the ordinary household waste (see recital 89). The Packaging Ordinance, on grounds of environmental policy, launched the collection and recovery of plastic and composite packaging, thereby introducing a new area for business activity.

(113) But the plastic sales packaging and the composite packaging containing plastics which are collected and sorted in the DSD system has a market price which is invariably negative, so that at present these materials can be recovered in accordance with the Packaging Ordinance only against payment by DSD. In the past, indeed, this negative market price has at times meant that plastics intended for recovery have been steered into cheaper disposal channels that were not in accordance with the Packaging Ordinance, and as a result DSD has had to take corrective and monitoring measures. One of those measures is the maintenance for the time being of the zero interface for plastics and composite packaging.

(114) In view of the exceptional circumstances and conditions surrounding the establishment of a new, functioning market in the recovery of sorted plastic and composite packaging, the Commission is satisfied that the temporary maintenance of the zero interface for plastics for the lifetime of the Service Agreements, that is to say until 2003, is not a restriction of competition. This assessment is rendered easier by the fact that in accordance with the amended Packaging Ordinance DSD is to put the contracts for the recovery of plastics out to competitive tender.

(115) The Service Contract originally included a clause stating that a collector who opted for self-marketing or modified self-marketing was to pay a flat-rate sum of DEM 1,25 per head of population per year to DSD, in consideration of the revenue he earned from recovery; but this clause has been removed, in fulfilment of a commitment given by DSD to the Commission (see recital 70).

(116) The Commission therefore concludes that the relevant provisions of the Service Agreement do not lead to any appreciable restriction of competition on the markets in recovery services and secondary raw materials downstream from the collection and sorting of used sales packaging, and consequently are not caught by Article 81(1).

2.3.2. Restriction of competition by the Guarantee Agreements

(117) As explained in recital 61, the acceptance and guarantee agreements for the various materials originally included arrangements which corresponded to those in the Service Agreements imposing a requirement to surrender the prepared materials. These arrangements have been deleted or amended.

(118) The Guarantee Agreements running until the end of 2003 contain no exclusivity clauses. DSD is therefore free to conclude agreements with more than one guarantee company. DSD has given the Commission a commitment that it will accept any would-be guarantor who satisfies the necessary conditions (see recital 74). The Commission accordingly concludes that any undertaking that objectively meets the requirements for guarantors and requests guarantee company status from DSD will be admitted as a guarantee company within a reasonable time.

(119) Concern had been expressed that the process of notification between collectors and guarantee companies might not be neutral in competition terms, and DSD has sought to dispel any doubt by giving a commitment that any knowledge it acquires in preparing the records of deliveries for recycling required by the Packaging Ordinance will not be used for purposes of market information; where necessary, records are to be rendered anonymous in an appropriate fashion (see recital 73). DSD has also agreed to render references to undertakings in volume flow records anonymous, provided this is accepted by the Länder in their capacity as exempting authorities (see recital 75).

(120) The Commission therefore concludes that the relevant provisions of the guarantee agreements do not appreciably restrict competition on the relevant product market in recovery services and secondary raw materials, and consequently are not caught by Article 81(1).

2.4. Restriction of competition by the Service Agreement on the market in the collection and sorting of household packaging waste

(121) The Packaging Ordinance lays down requirements for the extensive take-back and exemption systems referred to in Section 6(3); for the practical implementation of these requirements DSD has concluded a standard Service Agreement with collectors. Section 1 of the Service Agreement provides that the collector takes sole responsibility for setting up and operating a system of the kind defined in Section 6(3) of the Packaging Ordinance in a designated district (see recital 44). In what follows this exclusivity clause will be examined to establish whether or not it is compatible with Article 81(1) of the EC Treaty.

(a) The collector enjoys exclusivity

(122) DSD undertakes to purchase collection and sorting services exclusively from one collector in the designated area in the lifetime of the Agreement; given DSD's commanding market position as a purchaser (see recital 30), this means that other providers of collection and sorting services for household packaging waste are to a great extent prevented from offering their services.

(123) By entrusting these services to just one collector in a designated area, DSD is restricting its own freedom of action with regard to the purchase of collection services for used sales packaging. The restriction has the effect that competing providers of collection and sorting services for household packaging waste are unable to offer their services to the leading purchaser of such services, so that competition between collectors is appreciably restricted in the designated area. The restriction is reinforced by the fact that even where though it would theoretically be possible to collect different reusable materials separately and independently of one another (essentially glass, paper and board, and light packaging), DSD with very few exceptions refrains from entrusting them to different contractors.

(124) The result is that DSD undertakes for the entire lifetime of the agreement to purchase collection and sorting services of this kind exclusively from the appointed collector in the designated area in question. This restricts competition on the market in the collection and sorting of household packaging waste, since during the lifetime of the agreement no other collector can conclude a Service Agreement with DSD, so that the excluded collectors are deprived of the possibility of doing business with the leading purchaser. This is so even though the excluded collectors may operate as subcontractors to a DSD collector for the collection or sorting of specific reusable materials or waste fractions.

Appreciable restriction

(125) The exclusive agreement between DSD and the collectors will be caught by Article 81(1) of the EC Treaty only if it affects competition appreciably. Whether or not the restriction is appreciable will be determined primarily by the position of the parties to the agreement on the relevant market and by the duration of the exclusive obligation.

(126) DSD has concluded standard Service Agreements including the exclusivity clause described in recital 44 for more than 500 designated areas, and has thus set up a network for the collection and sorting of household packaging waste which covers the whole of Germany. DSD consequently has a network of similar agreements covering the whole of the relevant geographic market.

(127) DSD is at present the only undertaking in Germany with an extensive take-back system for household packaging waste, and is therefore the purchaser of reference for such collection services throughout the country and in any particular designated area. In the years 1996 to 1998 the obligation to take back and recover was discharged by joining the DSD system in respect of about 70 % of the sales packaging put into circulation in Germany (see recital 30). On the market under consideration here, that is to say the market in the collection and sorting of household packaging waste, DSD accounts for at least 80 % of demand. DSD is the sole reference purchaser of collection services of this kind, while the supply side is characterised by a large number of suppliers, some of them operating only on a regional basis.

(128) On the supply side, as explained in recital 93, it has also to be borne in mind that primarily for reasons of spatial organisation and collection logistics it is unlikely at present that an additional collection system for private final consumers will be set up alongside that already established by DSD, which might otherwise give the excluded collectors an alternative customer for their services. Given the infrastructure bottleneck at the point of collection from households, it is surely more realistic to suppose that a potentially competing exemption system or self-management arrangement would cooperate with those collectors who already provided collection services for DSD under a Service Agreement. There are only a few particular collection points deemed equivalent to private households, such as hospitals or canteens, which subject to certain conditions relating to collection logistics and types of packaging might conceivably be able to entrust the work to other collectors, which would involve installing additional containers for the purpose. But the scope which may remain for collectors to do business in this way is still of comparatively limited economic importance on the relevant market. It is unlikely, therefore, that any appreciable new opportunities for excluded collectors will arise during the lifetime of the Agreement in the designated area.

(129) In an assessment of the effect of these exclusivity obligations on competition, a decisive factor is their duration. The exclusivity clause described is contained in the successive versions of the standard Service Agreements, which now run until the end of 2003.

(130) Most of the agreements were first concluded in 1992: the exclusivity arrangement is an unusually long-lasting one. Its effect is to exclude other service providers who were not selected as service contractors in the first round of Service Contracts from offering their services at central level, and consequently affects their capacity to offer their services at all in the long term.

Effect on trade between Member States

(131) DSD has concluded Service Agreements with an exclusivity clause for more than 500 designated areas, and in this way has set up a countrywide disposal network for the collection and sorting of household packaging waste. For the duration of the Agreements access to the market is rendered difficult for collectors, especially those from other Member States of the European Economic Area, on a long-term basis. The exclusivity clauses have a strong adverse effect on foreign collectors' scope for establishing themselves on the relevant market. The exclusivity clause in the Service Agreements may therefore appreciably affect trade between Member States.

Finding

(132) Consideration of the exclusivity clause in the Service Agreement has shown, therefore, that access to the relevant market by domestic and foreign collectors is greatly obstructed; this goes a considerable way towards partitioning off a substantial part of the common market. Article 81(1) of the EC Treaty is therefore applicable to the exclusivity clause in the Service Agreement.

(b) Access to the collectors' facilities

(133) As already explained in recital 93, the infrastructure for collection in the vicinity of households forms a bottleneck, so that it is especially important in terms of competition law that competitors with DSD should have free and unimpeded access to these facilities, and indeed following publication of a notice under Article 19(3) of Regulation No 17, objections were put forward regarding this aspect on competition grounds; in what follows, therefore, the Service Agreement is examined in this light. There would be a restriction of competition caught by Article 81(1) especially if the Service Agreement was so designed that it excluded competitors with DSD from access to the collection infrastructure.

(134) The Service Agreements do not confer any exclusivity on DSD, so that collectors are free to offer their services to competitors with DSD. In the commitment set out in recital 71, DSD has confirmed that no exclusivity obligation in DSD's favour will be imposed. In the same commitment DSD has also undertaken not to ask collectors to use containers or other facilities for the collection and sorting of used sales packaging exclusively for the performance of their Service Agreement with DSD.

(135) Point 2.1 of the third amending agreement, left intact by the fourth amending agreement, likewise confers no exclusivity on DSD. It refers only to the sales packaging to be allocated to the DSD system. This is the packaging covered by the DSD system, rather than all sales packaging which might be covered by an exemption system in accordance with Section 6(3) of the Packaging Ordinance.

(136) Originally, as has been explained in recital 57, DSD had claimed that joint use of DSD collectors' collection facilities by third parties should be possible only if DSD had authorised it. The Commission told DSD that conduct aimed at ensuring that third parties could make joint use of containers and other collection facilities belonging to collectors contracted to DSD only if DSD had authorised such joint use might be interpreted as obstruction of competitors constituting abuse of a dominant position within the meaning of Article 82 of the EC Treaty.

(137) After the Commission stated this view, DSD withdrew its claim that third parties ought to be entitled to make joint use of DSD collectors' collection or other facilities only with DSD's permission, and gave a commitment to that effect, which is set out in recital 72.

(138) There would also be a difficulty if DSD were to demand payment for such use directly from third parties, or to claim that it ought to have a say in the negotiation by collectors and third parties of an appropriate payment for the joint use of collection containers. But DSD, and other parties with agreements with the collectors, are free in their own dealings with the collectors to seek to ensure that no services demonstrably provided for third parties are charged to DSD, and where appropriate to negotiate an appropriate reduction in payment with the collectors.

(139) It does not, therefore, follow from the Service agreement that competitors with DSD are denied access to the collection infrastructure, so that there is no restriction of competition here within the meaning of Article 81(1).

(c) Conclusion

(140) Consideration of the exclusivity clause in the Service Agreement has shown, therefore, that access to the relevant market by domestic and foreign collectors is greatly obstructed; this goes a considerable way towards partitioning off a substantial part of the common market. Article 81(1) of the EC Treaty is therefore applicable to the exclusivity clause in the Service Agreement.

II. ARTICLE 81(3) OF THE EC TREATY AND ARTICLE 53(3) OF THE EEA AGREEMENT

(141) As the exclusivity clause in the Service Agreements between DSD and collectors is caught by Article 81(1) of the EC Treaty, it has now to be established whether it satisfies the tests of Article 81(3).

1. IMPROVING THE PRODUCTION OR DISTRIBUTION OF GOODS OR PROMOTING TECHNICAL OR ECONOMIC PROGRESS

(142) Any positive effects brought about by the exclusivity clause in the Service Agreements, which is caught by Article 81(1), must be weighed against the restrictive effects of the agreements.

(143) DSD is currently the only extensive take-back and exemption system for used sales packaging; according to its objects, it seeks to give effect to national and Community environmental policy with regard to the prevention, recycling and recovery of waste packaging. The Service Agreement is therefore intended to implement the objectives of the German Packaging Ordinance and of Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste(13). This legislation is aimed at preventing or reducing the impact of waste packaging on the environment, thus providing a high level of environmental protection.

(144) The Service Agreements concluded by DSD and the collectors provide for practical steps to implement these environmental objectives in the collection and sorting of used sales packaging collected from households and equivalent collection points. Such agreements are essential if DSD is to meet the targets and obligations it has assumed in connection with the operation of the system. To this end the Service Agreements require the establishment of logistical arrangements for collection and sorting which involve substantial investment (see recital 53). Regular collection from private final consumers of used sales packaging differentiated into specified reusable materials, and subsequent sorting or preparation for full recovery, gives direct practical effect to environmental objectives.

(145) The exclusivity clause in the Service Agreements between DSD and collectors makes it possible for the parties to plan the provision of services on a long-term basis and to organise it reliably. The necessary investment can be carried out and recouped over an economically reasonable period (see recital 54). There are positive network effects in the collection of household packaging waste, and substantial scale and scope advantages can be achieved, so that to entrust collection to a single collector for the duration of the agreement produces gains in efficiency. At the same time DSD, the purchaser of the service, is given the assurance that its requirements can be met on a regular and reliable basis, in a sensitive area which was previously organised under public law.

(146) It can be accepted, therefore, that the exclusivity clause in the Service Agreements contributes to improving the production of goods and to promoting technical or economic progress.

2. BENEFIT TO CONSUMERS

(147) The Service Agreements have the effect of guaranteeing extensive collection from private final consumers of sales packaging within the DSD system, differentiated into reusable materials. This is in line with the methods of waste collection that final consumers are already familiar with, and can therefore be regarded as especially consumer-friendly.

(148) As a result of the scale and scope advantages achievable, many of the manufacturers and distributors who are under an obligation to take back and recover packaging can be expected to make cost savings if they discharge their obligation by taking part in an extensive system, rather than seeking to meet their obligation individually. It can be accepted that the cost savings made over the lifetime of the agreement will be passed on to consumers, and also that consumers will likewise benefit as a result of the improvement in environmental quality sought, essentially the reduction in the volume of packaging(14).

(149) The Commission accordingly concludes that the Service Agreements do comprise advantages for consumers, and that consumers are allowed a faire share of the resulting benefit.

3. THE RESTRICTION IS INDISPENSABLE

(150) The Commission has studied the exclusivity clause in the Service Agreements, which run until the end of 2003, and has come to the conclusion that until that time the clause is indispensable.

(151) The assessment of whether or not the exclusivity clause is indispensable has to consider the economic and legal framework in which the agreement was concluded. In order to set up the system, substantial investment was needed in the establishment of logistical arrangements for the collection and of used sales packaging which had not existed in the same form hitherto. This investment had to be carried out by the collectors contracted to DSD under Service Agreements.

(152) On grounds of management and efficiency, and especially in order to ensure that the collection service vital to the success of the system as a whole would be provided on a regular and reliable basis, the system operator DSD decided to entrust collection to only one firm in each of the approximately 500 designated areas for the lifetime of the Agreement. The relatively short time allowed for implementation by the drafters of the Ordinance and the need to reach an understanding with the local authorities also militated in favour of selective agreements with collectors.

(153) But a decisive consideration for the assessment of the indispensability of the exclusivity clause is the fact that the investment required by the Service Agreement has to be planned and carried out in security. Collectors have to invest in collection vehicles, bins and containers, and sorting facilities.

(154) As explained in recital 52, most of the Service Agreements initially notified were to run until the end of 2005 or 2007. It was argued that long-term contracts were indispensable in order to pay off the investments carried out under the Service Agreement or still to be carried out before its expiry, especially in the logistics of collection and sorting.

(155) On the basis of comprehensive calculations of investment and profitability, the Commission has studied the question whether the Service Agreements had to run for so long in order to recoup the planned volume of investment, and has concluded that an exclusive agreement running up to the end of 2005 or 2007 was not indispensable (see recital 55). The results of this investigation suggested rather that if the Service Agreements were to run until the end of 2003 collectors would have sufficient time to achieve an economically satisfactory redemption of their investment, so that a longer lifetime was not indispensable. The parties then stated that they would be prepared to set a termination date of 31 December 2003 for the Agreements.

(156) The Commission accepts, therefore, that without an exclusivity clause running until 2003 it would not have been possible to set up a countrywide system of collection, and especially sorting, at least on the desired scale, in the same time and with the same assurance of a reliable collection service, and DSD would consequently have been unable to establish the required extensive take-back and exemption system. In view of the special circumstances surrounding the implementation of the objectives of the Packaging Ordinance, involving the setting up for the first time of an extensive take-back and exemption system, the Commission concludes that an exclusivity clause running up to the end of 2003 is indeed indispensable. Any Service Agreements between DSD and collectors with a lifetime running beyond 31 December 2003 do not satisfy the tests laid down in Article 81(3) of the EC Treaty for exemption from the ban on restrictive practices.

(157) The Commission takes the view, however, that from that time onward the DSD system will have to be regarded as fully established, and that conditions in waste management as a whole and in the collection and sorting of used sales packaging will be such that long-term exclusivity obligations will no longer be indispensable. For future service agreements, therefore, the Commission considers that a lifetime of up to three years, but not more, will generally be reasonable and economically justified.

4. COMPETITION IS NOT ELIMINATED

(158) Regardless of DSD's position on the relevant markets, the exclusivity clause in the Service Agreements is not likely to eliminate competition on the market in the collection and sorting of household packaging waste.

(159) In the first place, collectors excluded by DSD remain free to offer their services to firms wishing to manage their own waste. Such arrangements are possible at least in respect of certain combinations of sales packaging and collection points on the margins of the market (see recital 87).

(160) Ultimately, however, the assessment of the question whether competition can be eliminated turns on the conditions of supply on the market in question. As explained in recitals 92 and 93, the supply side of the market in the collection and sorting of household packaging waste is characterised by marked network effects, that is to say effects of scale and scope, which means that it is economically advantageous to entrust the task to one collector in each designated area, at least within any one exemption system. In addition, there are considerations of spatial economics, collection logistics and traditions of waste collection established among consumers which make it economically difficult in many cases to duplicate the arrangements for collection from households.

(161) The conditions of supply specific to the relevant market also explain why the amended Packaging Ordinance requires operators of dual exemption and take-back systems to award collection services by competitive tender (see recital 26). The Ordinance here takes account of the fact that supply-side competition on this market is governed by special factors, and that tendering will ensure that there is competition at least to secure designated areas.

(162) Because of the special conditions of supply on the relevant market, the containers used for collecting used sales packaging from households often form a bottleneck in terms of competition. Realistically it is to be expected that competing exemption schemes and some self-management arrangements will often work together with the collector currently carrying out collection for DSD. Free and unimpeded access to the collection infrastructure set up by collectors contracted to DSD under a Service Agreement is therefore a vital condition of more intense demand-side competition for collection and sorting services for household packaging waste, and more intense competition on the upstream market in the organisation of the take-back and recovery of household packaging waste.

(163) As explained in recital 56, the Service Agreements do not tie the collector exclusively to DSD. Collectors are free to offer their services to others. DSD has also given the Commission the commitments set out in recitals 71 and 72, in which it agrees to refrain from requiring collectors to use containers or other facilities for the collection of used sales packaging solely for purposes of the Service Agreement. Nor will DSD seek to restrain third parties from using DSD collectors' collection facilities.

Obligations attached

(164) Although DSD has already given commitments regarding the joint use of collection facilities by competitors, the Commission considers it necessary to attach obligations to this Decision in view of the vital importance of unimpeded access to the collection infrastructure for competition on a market characterised by special supply conditions and in view of the qualifications contained in the commitment set out in recital 71. The aim is to ensure that the anticipated effects on competition do in fact take place and that the tests for exemption in Article 81(3) are accordingly satisfied.

(165) DSD considers that the obligations that the Commission proposes to attach to the Decision go well beyond the commitments that DSD and the Commission had previously agreed; that they are not compatible with the German Packaging Ordinance, at least as a general rule; and that at least in some cases they are unreasonable on other grounds.

- Incompatible with the Packaging Ordinance

(166) DSD argues that the Packaging Ordinance does not allow self-managers to collect in the vicinity of the final consumer. The Commission therefore cannot seek to make it possible for them to do so by requiring DSD to allow joint use.

(167) It is a matter of debate in Germany whether self-managers must reach their quotas entirely through collection at the point of sale (see recital 15). It is not disputed, however, that even self-managers must collect packaging from the vicinity of the final consumer if the goods are delivered to the final consumer's address, as is the case for example with mail order or deliveries by small traders (see recital 14). In any event, the Packaging Ordinance does not require DSD to impose prohibitions on the collectors contracted to it in order to enforce public-law rules on self-management arrangements, and compliance with the obligation attached to this Decision will not in any way compel DSD to infringe the Packaging Ordinance.

(168) DSD argues that joint use of receptacles by competing systems would not be compatible with the principle of responsibility for one's own product introduced when the Packaging Ordinance was amended. Systems must fulfil the recovery quotas for the packaging taking part in them. It would not ordinarily be possible simply to allocate packaging to one or other system while complying with the polluter-pays principle.

(169) The Commission does not see that any provision of the Packaging Ordinance prevents the joint use of receptacles. No such interpretation follows either from the court judgments cited by DSD(15) or from the observations submitted by Germany(16). It is true that since the amendment of the Packaging Ordinance, systems must meet their recovery quotas only in respect of the packaging taking part in them, rather than in respect of the total volume of certain packaging materials (see recital 21). But the purpose of this provision, and one of the main objectives of the amendment, is to promote competition, not just by requiring that collection services be put out to tender, but also by improving the scope for competition between different collection systems(17).

(170) Volumes of packaging can be allocated to different systems on a polluter-pays basis if they are shared by means of quotas. DSD and the collectors already do this for paper and board, where newspapers and periodicals are also collected in the receptacles belonging to collectors contracted to DSD (see recital 32).

(171) It should be added that when the Packaging Ordinance is being interpreted account must be taken of the importance of the joint use of collection infrastructure for the emergence of competition (recital 164). This is not only because the promotion of greater competition is one of the main objectives of the amendment to the Packaging Ordinance, but also because any interpretation of the Packaging Ordinance must have regard to the European competition rules.

- Unreasonable

(172) In DSD's view, joint use would be unreasonable on other grounds too, in some cases at least. It would make it more difficult to draw up volume flow records; DSD collectors' employees would be endangered by packaging which had held dangerous substances; DSD would be disadvantaged at the settlement stage; and quite proper requests for information could not be met.

(173) Volume flow records are based on evidence of the volumes of packaging recovered (see recital 21). It is not necessary to show that these volumes consist of packaging actually taking part in the system. Allocation by quotas, therefore, would not make volume flow records any more difficult to prepare.

(174) A DSD collector would decide what use should be made of the receptacles belonging to him, and would conclude any agreements necessary for the purpose, and would consequently be in a position to take whatever steps were needed to prevent any danger to his employees.

(175) The obligations attached to this Decision do not prevent DSD from reducing its payments to a collector where the collector allows his collection containers to be used by third parties. Nor do they prevent DSD from requiring information on this point. The second obligation is intended not to prevent a demand for information, but rather to ensure that when the volume flow record is being drawn up the volumes collected for competitors are properly credited to them.

Interim finding

(176) On the basis of the commitments given by DSD and the obligations attached to this Decision the Commission is satisfied that free and unimpeded access to the collection infrastructure is possible without restriction. There